Published: 19th of January, 2023Last updated: January 19, 2023 at 19:34 pm
Guyana started pumping oil in late 2019, and to date (January 2023) has earned more than US$2 billion from oil revenues and royalties. That translates to roughly GY$420,000,000,000.00. This breaks down to roughly GY$525,000 per person using the generous population estimate of 800,000. Production data produced by the Ministry of Natural Resources show that Guyana recorded its highest output level in November 2022, reaching 389,000 barrels of oil per day. But production rate is climbing and Guyana is projected to produce more than 600,000 barrels of oil in 2023.
If the government executes a one-time cash transfer utilizing just one-fifth of the oil revenues earned so far directly to the citizens, it would give each citizen $100,000.00 comfortably as a bonus this year. As oil revenues increase, the government could consider supporting the adult population with a monthly Universal Basic Income.
However, President Ali in a statement this Tuesday (17th of Jan 2023) said that direct cash transfers of Guyana’s windfall oil wealth is not the way to go. In fact, he commented that direct transfer to every household would be the “worse thing to do.”
According to an article on the oilnow.gy website, “The President explained that doling out cash in that manner would be one of the worst things the government could do, and the quickest way to afflict Guyana with the dreaded Dutch Disease.”
But nothing could be farther from the truth. Transferring oil revenues directly to the pockets of citizens doesn’t accelerate Dutch disease, it slows it down.
The experiences of Norway, Chile and Botswana illustrate that the ability to avoid the natural resource curse is dependent on the optimised use of anticipated windfalls. The effects of the natural resource curse can be best mitigated by the following solutions: (1) sound fiscal and monetary policies; (2) economic diversification; (3) natural resource funds; (4) transparency, accountability and public involvement and (5) direct distribution to the population.Source
Universal Basic Income is a very successful financial model in which the government guarantees a monthly or yearly income for citizens. This has been proven to reduce poverty, promote financial stability, and stimulate the economy. The drawback is that it is costly. However, Guyana’s oil revenues empowers the government to provide a Universal Basic Income for Guyanese. Opponents of UBI argue that it encourages laziness and wastage, but several successful experiments in the United States have demonstrated that it makes citizens more productive and happy.
“The revenue that comes from the oil sector has nothing to do with the Dutch Disease. It is what do you do with that revenue,” Ali said. “How do you use that revenue in the building out of the economy? How do you use that revenue in building prosperity in the country? How do you use that revenue in building out infrastructure, building up the social sector, health care, education? How do you use that revenue in building a diversified economy that functions on a broad economic platform that supports growth, that supports revenue streams that are much larger?”Source
While all of the above are good ways to utilize Guyana’s oil wealth and should be focused on aggressively, direct cash transfer to every citizen wouldn’t hurt the economy. In fact, it would help to stimulate it. Remember, this money gets pumped back into the economy, stimulating economic growth and prosperity.
We must take into consideration the fact that Guyana’s oil wealth belongs to every citizen, and some amount of it should be disbursed to the citizens so that they can decide for themselves how to spend it. A handful of politicians controlling all the country’s oil revenues is both distasteful and dangerous.