THIS year, Guyana has been on an impressive path of growth due to the rapid development of its oil and gas sector. As of last week, the Central Bank disclosed the third quarter windfall from oil production in the country was the biggest the nation has seen to date.

The third quarter inflows amounted to US$493.18 million. This included profit oil totaling US$442 million and royalties totaling US$51 million. The government most recently withdrew US$200 million in July. This made it the second withdrawal from the Natural Resource Fund (NRF), which has been used to support healthcare, education, and other investments.

Last year, a revised Natural Resource Fund Act 2021 was signed into law and included a clear formula to calculate the allowable withdrawals from the NRF each year. Moreover, the country is expecting around US$1.24 billion from oil in 2022, which means about US$998.5 million is projected to be accessible for the 2023 national budget to help finance development, avoid deficits and pay down debt.

This estimated revenue growth for Guyana was the subject of a report earlier this year from energy analysts at Rystad Energy, which concluded that 2022 would be a landmark year for Guyana in more ways than one.
The report found that government revenues from oil production could average US$3.6 billion per annum through 2030 as production accelerates. Rystad also forecasts that the government take will peak at US$16 billion per year in 2036 and average US$12.4 billion annually between 2031 and 2040. Cumulatively, this amounts to roughly US$157 billion in government revenue for Guyana by 2040.

Recent infrastructure investments and social advancements in Guyana are directly correlated with the rapid advancement of the oil and gas sector and offer a highly visible example of how oil revenues are being used to benefit Guyanese.

The government taking a second withdrawal from the NRF this past July was instrumental in financing the national development priorities it has for the country. The government is expected to withdraw US$207 million more from the oil fund in the last quarter, the third withdrawal this year.

Thanks in large part to oil revenues, government has also approved the Amaila Falls hydropower project after years of delays due to Guyana’s formerly uncertain financial situation. This project could be completed by 2030.
Another example is the Demerara Bridge, a development project being directly funded with oil revenues from the NRF to alleviate congestion and boost the local infrastructure. The government has made other efforts to address emerging congestion and busy streets by working on the roads from Ogle, East Coast Demerara to Eccles by joining the two corridors—a US$100 million project. The Minister of Finance Dr. Ashni Singh emphasised the importance of this project, “making of modern Guyana is well underway, and today’s generation of Guyanese are incredibly privileged not only to witness it but to be part of it.” The Demerara Bridge project is one of the largest infrastructure project to ever be financed by the government.

By using the NRF to finance part of these investments, Guyana is avoiding the kind of deficits and debts that frequently trap developing countries. Richard Rambarran, an economist, highlighted last month that Guyana, despite being a young oil producer, is demonstrating restraint in its oil fund management.

When comparing Guyana to other countries, Rambarran notes the stark difference in that “these countries obviously have to get the money from somewhere. So, they borrow, rack up debt or they then print more money to finance current expenditure and that can push you into an inflationary situation. So, the NRF and its early implementation in Guyana means we are already on the right path.”
Earlier this year, the government also increased funding to various ministries in the budget, including GYD$21 billion for infrastructural development in the new and existing housing schemes to improve and expand coastal and hinterland water supply.

Even more critical to uplifting Guyana is investing in the education sector. The supplementary budget was able to provide GYD$307 million for the sector towards facilitating the purchase of school furniture necessary for reopening of schools to providing the resources to construct a new primary school thanks to oil revenues.
These kinds of infrastructure and social investments are crucial to building long-term prosperity and indicate the government’s intention to use oil revenues to build a more sustainable Guyana for the future.