Flush with oil revenue, Guyana improves infrastructure
Flush with oil revenue, Guyana improves infrastructure

Guyana's oil revenue has fired up the economy to dizzying heights. The International Monetary Fund (IMF) expects Guyana to have the world's fastest-growing economy during 2023, predicting that the gross domestic product (GDP) will expand by a whopping 37.2% this year. The World Bank (WB) projects double-digit gross domestic product (GDP) growth this year and in the near future. But rapid economic growth and growing business and job opportunities have not yet lessened the woes of the poorest Guyanese as much or as quickly as they want, which is now a deeply divisive issue. Some say pulling the poor out of poverty is an emerging reality; others dismiss this as a pipe dream.

The ruling People's Progressive Party (PPP) government, its supporters and international organizations forecast significant gains for all as the oil-powered economy accelerates. They expect Guyana to soon be one of the wealthiest nations in Latin America and the Caribbean and believe plummeting poverty levels are almost inevitable. But the main political opposition, A Partnership for National Unity (APNU) party and its champions, bemoan unequal distribution of wealth along racial lines, a soaring cost of living and persistent poverty under what they call a racist, uncaring, incompetent and corrupt regime.

President Dr Irfaan Ali clearly defined his government's approach at the International Energy Conference and Expo Guyana last February. He outlined an aggressive drive to initiate and push development projects under a Low Carbon Development Strategy that balances the thriving oil industry with environmental security. "Oil and gas is not the answer. It will give us much-needed revenue to catalyze the other sectors…When we speak about the development, transformation and positioning of Guyana, it is not guesswork. It calls for big thinking," the President asserted.

Guyana puts oil money to work

This approach has yielded many standout benefits. Guyana has put oil money to work with a wide range of development and infrastructural projects and investments in agriculture, education and health. As a result, citizens can see new infrastructure being built across the country, from bridges to roads, along with several hospitals earmarked for construction. The government also has channelled oil profits back into key sectors of its economy; the most significant was an allocation of more than US$ 650 M to construct several road networks, bridges and drainage works in 2023.

Education enhancement is another standout benefit. Guyana has invested substantially in expanding the local skills pool, especially up-skilling Guyanese for oil industry jobs. The nation is improving teaching practices, student achievement and increasing technology competency in schools. A flagship initiative-the Guyana Online Academy of Learning (GOAL) scholarship programme-has been providing affordable and accessible education since 2021.

Boosting entrepreneurship is another success, particularly by supporting small and medium-sized enterprises through training, access to finance, and business development support. Petro-dollars underpin initiatives to increase local investment, attract foreign direct investment and stimulate economic growth. These include tax exemptions and holidays, import duty waivers, and investment allowances.

Oil money also provides financial leverage for transformational projects like the gas-to-energy and airport rehabilitation projects. In terms of direct benefits, oil funds enabled the government to implement cash grant programs to provide relief and support to vulnerable groups affected by the COVID-19 pandemic, flooding, and job losses in the sugar industry.

Guyana is also using oil revenues to develop better legal and institutional frameworks, and raise the capacity of key institutions to manage the oil and gas sector so that there are more economic and social benefits for the country. This has strengthened laws and regulations for health, safety and environmental protection, improved technical, advisory and capacity measures, and transparency and governance.

Distribute oil wealth transparently and fairly

But critics contend that these are superficial advances that mask serious flaws. For example, the opposition leader, Aubrey Norton, contends that the country's oil revenues need to be distributed fairly and transparently. In his 2023 New Year address, Norton encapsulated many critics' views by stating, "This state of affairs must now be described for what it is: incompetence resulting in a national failure, disgrace and impoverishment of our people while the PPP elite, friends and family enrich themselves at the expense of our people…" The influential Guyana Public Service Union (GPSU) issued a condemnatory release on the 2023 budget. "Government's insensitivity to the plight of public sector workers, pensioners and the destitute is visible…only 1.7% of this year's GY$781.9 B budget directly affords them any relief …," the union argued. Critics say oil money has not reached public servants, who comprise the bulk of the public working class.

Analyses from international institutions suggest that the poverty situation is improving, but there is still a very long way to go. For example, according to the World Bank (WB), poverty in Guyana, measured using the upper-middle income poverty line (US$5.50 per day in 2011 PPP), has dropped from close to 61 per cent in 2006 to around 48 per cent in 2019. But poverty was still among the highest in the Latin America and Caribbean (LAC) region. Unemployment is about 16.5%, and the latest figures indicate that GDP per capita is only US$6,609.

Reputable international institutions state that poverty persists in Guyana despite the oil bonanza due to rising living costs. Food prices have increased since the onset of the Ukraine conflict; there was a 9 % jump in food prices in July 2022, plus higher costs for gas and other fuels, transport, and housing. As a result, inflation averaged 6.4% in 2022, and higher living costs disproportionately affected the poor and vulnerable. Further, several crucial Government agencies and services - such as health care, public transport, national insurance and other services - need to be modernized and expanded, but there has been little progress in this area so far.

As an oil-producing nation rich in natural resources and fertile agricultural land, Guyana still has great potential to alleviate poverty and achieve economic growth despite its internal political and racial challenges. The recent surge in investment and development has provided opportunities for job creation and infrastructure improvements, and with the right policies and investments, Guyana can minimize poverty and become a prosperous, inclusive society.