Part 111
COUNTERARGUMENTS to the Economist Magazine Article by Alberto Miranda, in its March 26, 2022 edition, “Invest or Squander”, “Guyana’s tiny population braces for gusher of petrodollars…”
By and large, the author painted a negative picture with respect to how Guyana might utilise the oil and gas resources to manage the economy. To some, the general thrust of the article might be viewed as being offensive and worse, disrespectful.

The author posited that:
“It is unclear how the bonanza will affect the country. Will a sudden injection of petrodollars boost much-needed infrastructure and pull thousands out of poverty? Or will it be squandered or stolen?
This statement suggests that the author is highly misinformed or at best uninformed about the subject he has pronounced upon and evidently, failed in conducting proper research.
Had the author examined the subject matter thoroughly, and if he was really interested to find out, analyse, and report on how Guyana might utilise the monies from its oil and gas resources, he would have found out the following:

1) The government’s policy with respect to the use of the oil resources is abundantly clear, well-articulated and imbedded in its policy framework.
2) The Natural Resource Fund (NRF) Act is publicly available which the author could have consulted to inform his opinion in terms of how the fund will be utilised. To this end, the Act clearly states that “all withdrawals from the Fund shall be deposited into the Consolidated Fund and shall be used only to finance –
a) National development priorities including any initiative aimed at realising an inclusive green economy; and
b) Essential projects that are directly related to ameliorating the effect of a major natural disaster.
Further, if the author wanted to delve deeper to ascertain what those national development priorities might be, he could have consulted the National Development Strategy (1996), the revised Low Carbon Development Strategy (LCDS 2022), and the government’s 2020–2025 manifesto for greater details on the development agenda of the country.
The national development priorities are those capital projects such as investment in the country’s physical infrastructure such as road, bridges, port facilities, housing etc, a new (secondary) city, climate resilient infrastructure, energy infrastructure projects such as the Amaila Hydropower Project and the gas-to-energy project, social infrastructure development such as public health and education, programmes designed to improve human development, investing heavily in a comprehensive economic diversification programme with emphasis on the agriculture sector, regional food and nutrition security, and an energy security agenda for the region.
Budget 2022 demonstrates a manifestation of the government’s approach to achieving accelerated development of its development agenda, in particular, infrastructural development – where 40 per cent or $220B of the national budget accounts for capital expenditure which will be financed in part by $126B from the NRF. This is prudent use of the country’s oil resources instead of expending heavily on consumption expenditure, which is a recipe for bankruptcy, hyper-inflation and the paradoxical Dutch disease in the medium to long-term.
It is worthwhile to mention as well that the author (Miranda) would have been able to perform a better analysis or have a more informed opinion had he examined the NRF Act against the Santiago Principles for compliance with international best practices on the governance model of the fund, transparency and accountability, wherein the Act is largely in compliance with those principles.

PUBLIC EXPENDITURE ANALYSIS
Looking at the growth trend for current and capital expenditure for the period 2008 – 2022 (spanning 15 years), current expenditure increased from $78.5B in 2008 to $335B in 2022 or by 329 per cent or an average annual growth rate of 22 per cent. Capital expenditure on the other hand increased from $36 billion in 2008 to $218 billion in 2022 or by $182 billion, representing an increase of 505 per cent. This level of increase in capital expenditure alone represents almost 91 per cent of the total budget for 2022.

During the period 2008–2014, there were three instances that recorded marked decline in capital expenditure – for instance in 2008, capital expenditure declined by 16 per cent relative to the previous year, but recorded a sharp increase by 31 per cent in 2009. In 2010, capital expenditure declined by a mere one per cent; however, in 2013 capital expenditure declined by 11 per cent. This was largely due to a change in the political landscape for the first time where in 2011 following national elections, a minority government emerged and the Political Opposition had a one-seat majority in the National Assembly.
As a result, several budgets were re-engineered where sharp cuts were imposed by the Political Opposition. Due to the many deadlocks that characterised this period in Guyana’s political history, a snap election was called in 2015.
This also explained the starker decrease in capital expenditure by 40 per cent in 2015. In 2016, capital expenditure increased by 53 per cent but continued a downward trend in 2017 through 2020.

Moreover, during the period 2006 – 2014, capital expenditure accounted for 41 per cent of total expenditure in 2006 and 2007, and averaging 32.3 per cent for the period 2008–2012.
In 2015, this trend changed dramatically where there were notable increases in current expenditure as a percentage of the total expenditure versus capital expenditure as a percentage of the total budget, wherein capital expenditure for the period 2015 -2019 accounted for 21 per cent on average, the lowest average recorded over the past two decades.

During the period 2015 – 2022, budget allocations towards the economic sectors declined by 10.32 per cent in 2016 and 27 per cent in 2019, thus resulting in the underperformance of some of the major economic sectors during this period. This trend changed in 2020 where allocations towards the economic sectors increased by 24.46 per cent in 2020, 25.31 per cent in 2021 and 27 per cent in 2022.
In the infrastructure sector during this period there was a sharp increase of 146 per cent in 2016 largely because of a sharp decline by 19 per cent in 2015. In 2015, allocations increased by 24 per cent which then declined sharply by less than one per cent in 2018 and one per cent in 2019. This trend changed dramatically in 2020 with a 21 per cent increase in 2020, 38 per cent in 2021 and 91 per cent in 2022.
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