OPINION: The 2024 Jagdeo Budget Part 5: We are heading straight for the Dutch disease!

Last Updated on Thursday, 8 February 2024, 7:48 by Denis Chabrol

by Retired Read Admiral  Gary Best, LLB; LEC; PhD.

So much chatter in the budget about taking care of the Guyanese family, yet it challenges the protection of the earned oil revenues. It is irrefutable that independent management of Natural Resource Funds (NRFs) is the best practice. Therefore, the Guyana NRF requires standard rules of accountability throughout and not political accountability, except for the reporting of its performance to Parliament. The PPP has removed, and will further remove, from the Natural Resource Fund embedded guardrails set by the APNU+AFC to protect the fund and make it independent, while President Ali stands back and does nothing. Thus, making it clear to all that the National Resource Fund will be used to meet its political needs and not that of the people of Guyana. 

Importantly, the experience of many failed oil economies proves that spending the oil money as it comes in, is counterproductive to long term stability of any NRF due to the unpredictable nature of commodity prices. Instead, the majority of the fund, should be for investment, the interests from which is used for national development, at scale. Why is there a PPP rush to spend, and spend now? To the contrary, Parliament ought to be a considering a joint resolution for a minimum percentage value in the National Resource Fund that must remain as intergenerational savings and protected by a two thirds majority. This concept of building out the infrastructure now, at a rapid pace is, as Jagdeo loves to posit, is ‘pure nonsense.’ And where will the extra revenues come from to build out this infrastructure? Simple, the oil sector! 

The VP’s view that “even though some of these projects are financed from debt, they would pay back for themselves, like the gas to energy, but even if it didn’t the burden on the fiscal (sic) … would not make it unsustainable” points to the use of oil revenues to repay the gas to energy debt if it fails- not the interest from investing the oil revenues. Which government plans a mega project on the basis that it might fail. Only the PPP! The Jagdeo budget plans to sacrifice the inter-generational revenue (the saved-up money) in the National Resource Fund, if the gas to energy project fails in order to maintain a low debt to revenue/ GDP ratio. This PPP ‘management by chance’ of the economy puts at risk the livelihood of the Guyanese families and that of future Guyanese generations. Again, President Ali stands back and does nothing!

However, the real question that arises is why the private sector isn’t taking the risk and funding these mega ‘profitable’ projects? The answer is simple. The PPP is using taxpayers money to de-risk these projects. If they are successful, the private sector then takes over. If they fail, the ‘windfall oil revenues’ cover that bad investment. We, the taxpayers, cover the PPP’s bad investment. It is certainly not the duty of the PPP government to operate as the private sector, rather the Government is expected to create opportunities for growth and development of this sector. This is not economics for the development of the Guyanese. This is at its worst a façade, a fake move to transfer the nation’s wealth to the PPP elite, friends and families, and the contractor class.   

Justifying the high expenditure costs on health, the VP boldly asserts that “we are trying to tackle public health issues, but in a way that is finite, and the expenditure doesn’t become recurrent.” This is an amazing and magical delusion of the VP, even Houdini would be impressed. Health costs will never be finite and non-recurrent, simply because the Guyanese population is not static and new cases will always come up. This is another danger in this Jagdeo budget which presents a whole bunch of recurrent costs as non-recurrent. But, when its veil is pierced, the Guyanese family clearly sees the stage being set for recourse to Parliament for supplementary provisions. And where will the extra revenues come from? Simple, the oil revenues. 

Despite the attempt by the Jagdeo’ budget to kerfuffle the Guyanese family Shadow Finance Minister, Juretha Fernandes provided factual figures of decline in the non-oil sector, and correctly submitted, “the importance of protecting the development of the non-oil sector cannot be overstated …  and the fact that “we are witnessing the contraction of every sector … that is not directly dependent on oil, makes us a textbook example of the Dutch disease.” And the shadow Minister is correct! Of course, this is not good news for the VP, much less the PPP government. So, what was the PPP’s response? Attack the Shadow Minister. Shameful, to say the least! 

It is elementary economic theory that the Dutch disease occurs where a boom in a natural resource sector results in shrinking other non-resource sectors. This is exactly what is happening in the Guyanese economy. Another example of identifying the Dutch disease occurs where there is a tendency to use resource revenues to increase spending rather than investing in future growth. That is exactly what is happening in the Guyana economy. If the PPP government cared for the Guyanese family, as touted, this trillion-dollar budget would have recognized the potential for this Dutch disease and include measures to cure it, such as boosting the competitiveness of the affected sectors. 

It is the duty of the PPP government to build a better life for all Guyanese irrespective of any past indiscretions of previous governments. As a people, we must move past the practice of politics of retribution. And that’s what any good budget must aim for. Sadly, this Jagdeo budget fails to meet this essential mark. 

Further, if the PPP government is true to itself, true to the history of our country, true to the sacrifices all races made to create this beautiful Guyana, it would not have brought a budget in 2024 that threatens the very survival of the people that bult this nation. Democracy is for all, not some. The good life is for all, not some. The resources are for all, not some.  Justice and human dignity are for all, not some!

Dr Gary Best is a former Chief-of-Staff of the Guyana Defence Force, a Caribbean-trained lawyer and the holder of a Doctorate in International Relations. He is also a member of the Central Executive Committee of the opposition People’s National Congress Reform