AN Overview of Guyana’s Historic Political and Economic Landscape: How is Guyana different from Angola (a comparative analysis) And why Guyana will not go down the Angolan Route provided that “all other things being equal…”

HISTORIC ECONOMIC CONTEXT
Since achieving independence from Great Britain in 1966, Guyana’s economic performance has been inconsistent. Following a short period of economic growth between 1970 and 1975, Guyana’s accumulated GDP growth between 1976 and 1990 was -32.8 per cent, according to UN’s Economic Commission for Latin America and the Caribbean. This economic inconsistency persisted into recent years, which presents average GDP growth for Guyana compared with averages for the Latin America region. Source: (Corral et.al, 2009).

THE POLITICAL ECONOMY
Prior to 1992, Guyana was a centrally command, socialist type dictatorial regime, an economic system that plunged Guyana into bankruptcy, thus leading to economic and social hardships.

During this era, thousands of Guyanese fled the country in search of better opportunities elsewhere. This, by and large, explains the massive human capital deficit the country has currently where less than five per cent of the local labour force possess a tertiary level education.

Post 1992 when there was a regime change (the current government having been elected through a free and fair elections), and restoration of democracy, the economy at the time had just begun its transition to a free market economy, inter alia, the IMF economic reform programme.

From 1992 – 2014, Guyana suffered many periods, short and long in some cases, of political instability which largely stymied the country’s development and ability to achieve its true economic potential.

PERIODS OF POLITICAL INSTABILITY
* 1992 – 1997: there was a short period of street protests and violence after democracy was restored, following which the economy took off (short period of stability).

* 1997 – 2001: prolonged street protests and disruption.

* 2002 – 2003: prison break, crime wave spiralled out of control and politically-motivated disruptions

* 2004 – 2008: unrests, politically-motivated disruptions

* 2008 –2012: Lusignan, Lindo Creek, Bartica massacre, violence erupted when protesters blocked the Wismar Mckenzie bridge.

* *2011 – 2014: For the first time, a new political dispensation emerged following the 2011 elections where the government was a minority government and the political opposition controlled the National Assembly having had a one-seat majority. Under this dispensation, it was difficult for the government to obtain budget approvals; many major development projects were disapproved by the Opposition- controlled National Assembly. As a result, snap elections were held in 2015 which resulted in a win for the Opposition.

* *2015 – 2020: Though this period was relatively stable – that is, no violence, crime wave, unrest and disruption, the administration failed to implement any major development projects despite expending over $1.2 trillion in five years. Much of this was expended on current / consumption or non-productive expenditure.

Out of 29 years (1992-2021) since Guyana transitioned to a free market economy, there were several periods of political instability that hindered the country’s development, coming out of a bankrupt State. Thus, with all those years of instability combined, Guyana suffered from 17 years of political instability characterised as politically motivated disruption, unrest, violence and crime. In addition, despite having four years of stability (2015-2019), inter alia, a regime change, for the first time there was some amount of stability but with no substantive development and progress. These, altogether, gave rise to a total of some 21 years of stymied and disrupted progress and development of Guyana. Such was due to, arguably and evidently, imprudent fiscal and public financial management.

Additionally, almost every elections period – post results, violence and unrests ensued. This was the case for the 1992, 1997 and 2001 elections. The only elections that did not ensue in violence were 2006, 2011 and 2015. There is a rich body of academic literature on Guyana’s political and economic history which confirmed, empirically, that those periods of political instability were designed to, and to a large extent, led to the State becoming dysfunctional and ungovernable.

Despite the challenging political landscape described above, the government at the time (which is the current government) nonetheless managed to achieve the following:
> From 1992 – 2014 (22 years) since Guyana transitioned to a free market economy and restoration of democracy, the then government (which is now the current government) only had five years of stability out of 22 years in power in which Guyana moved from a bankrupt State, regarded as one of the poorest countries in the western hemisphere, to a GDP of US$4b by the end of 2020 from US$300m in 1992, representing 1,200 per cent growth in GDP, or 13 times 1992 GDP;

> Per capita income of over US$5,000 from less than US$300;

> Debt to GDP ratio of less than 50 per cent from a position of more than 100 per cent;

> Total public debt service of 30 per cent of revenue from a position of more than 100 per cent, International Reserve of more than three months’ worth of import cover (US$800m);

> More than 70 per cent of the population lifted out of poverty;

> By the time there was a regime change in 2015, that government inherited about $100b in liquid cash in the bank and by the time they left office in 2020, there was $100b deficit.
Comparing Public Financial (Expenditure) Management: The Fundamental Difference in Philosophy by Two Different Administrations:

The chart above tells an explicit story in the fundamental difference in philosophy by two different administrations – in their management of public expenditure and financial management in general. The chart essentially illustrates total public expenditure for the period 1992–2022. In 1992, current expenditure accounted for 84 per cent of total expenditure while capital expenditure accounted for a mere 16 per cent or less than 20 per cent. By the end of 2014, current expenditure accounted for 70 per cent of total expenditure while capital expenditure accounted for 30 per cent. Following the regime change 22 years later, in 2015 for the first time again since 1992, current expenditure increased substantially to 82 per cent and continued this trend into 2019. In 2020, following another regime change, there was a stark reverse in reallocation and re-alignment of the budget whereby 2022 current expenditure accounted for 61 per cent and capital expenditure accounted for 39 per cent of the total budget, which is in line with prudent and sustainable management of public finances to ensure long term stability and growth – that is, increased investments in capital expenditure to build out the economy, and thereby creating a sea of opportunities for sustained investments and job creation.

Though the data inputted in this chart is from 1992, it can be safely deduced that, if the implementation of the IMF’s economic reform programme began in the late 80s or early 90s, then prior to its implementation and the austerity measures then, current expenditure accounted for more than 90 per cent of total expenditure; quite an unsustainable model and recipe for bankruptcy. Thus, this explains the lack of development and progress, and largely how the economy ended up becoming a bankrupt State pre–1992.
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(The 2020 elections is a different matter and outside of the scope of this paper).
https://www.elibrary.imf.org/view/journals/002/2022/012/article-A001-en.xml.
https://www.trade.gov/country-commercial-guides/angola-oil-and-gas.
https://www.searchanddiscovery.com/documents/2015/70192koning/ndx_koning.pdf.
MPRA_paper_103145.pdf (uni-muenchen.de).