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What is Dutch Disease, and Why Guyana is at Risk

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12th of January, 2024. Guyana, South America. GSA News. Guyana News.

Last updated: January 17, 2024 at 23:42 pm

Managing a booming oil economy has its upsides, but it also has its challenges. It is a job which demands the ability to strike a delicate balance while satisfying the cries and demands of an increasingly privileged population. Guyana’s President, Dr. Irfaan Ali, mentored by veteran economist and longtime national leader, Dr. Bharrat Jagdeo, is in the hot seat saddled with the responsibility of transforming Guyana’s non-renewable oil resources into renewable, sustainable, long-term, economic success. And this is no walk in the park.

A Strengthening Currency

Already, the Guyana dollar is showing signs of strengthening against the US dollar as oil exports push Guyana’s GDP per capita through the roof. The appreciation of the country’s national currency is one of the benefits of a country whose economy has been propelled dramatically by oil exports, but it also has its downside. As Guyana’s Gross Domestic Product grows, so will the strength of its currency. And this is where Dutch Disease, also known as the resource curse, comes into play.

As the country’s currency strengthens, some local producers and exporters may find it difficult to stay in business as the cost of keeping their operations alive increase due to the steep rise of the local currency. The cost of labor will naturally increase with the strengthening of the currency and better labor laws which are part and parcel of the now “rich” country. Businesses may find it cheaper to import items which were once produced locally causing manufacturers and producers to go out of business. This in turn leads to unemployment which is a catalyst for crime and criminal activities.

Risk of Convulsions Within and Outside Invasions

A government managing an oil economy is always under scrutiny by the people and opposition political parties which are eager to wrest control of the country from them. Any little slip can lead to large scale and destructive opposition-led protests and the risk of a coup. The government in power has to work hard to win the hearts of people of all races, classes, and political affiliation in order to keep the country at peace.

While a booming oil economy puts the country at risk for convulsions within, it also puts it at risk for outside invasion. On this note, it didn’t take long after Guyana announced its oil finds for Venezuela to renew its once dormant claim of the Essequibo. Venezuela has repeatedly threatened a forceful takeover of the Essequibo since 2015 which Guyana has managed to stave off through diplomatic strength and strong international support. A growing oil economy demands that the government invests heavily in the country’s military to deter aggression and secure its borders. Guyana now has something to protect, and while having a strong military has its advantages, it also comes with a high price tag.

Over-privileged and Lazy Population

One of the symptoms of the resource curse is a sense of entitlement and reluctance to work from the general population. Many Guyanese seem to already think that the government owes them oil money and should throw the money into their laps without any efforts or merits on their part. And this is one of the most dangerous viruses to infect the minds of a country’s population. A feeling that the country is rich gives citizens a sense of entitlement and makes everyone want to work less and earn more which in turn leads to low productivity and consequently the degradation of the country’s economy.

In neighboring Venezuela, the Chavista government lavished the people with free electricity, free water, and grants from the oil wealth causing them to become less productive. This in turn contributed to the hyperinflation of the currency once oil production slowed down. In Guyana, President Ali has said that the Oil to Gas Project will reduce electricity costs by 50% and cooking gas by up to 70%. While this is a good move and will help to reduce cost of living, making it free would be a step in the wrong direction.


Gentrification is the process whereby transformative wealth attracts wealthy people into a once poor area, driving up the costs of buying and renting properties. Guyana’s oil wealth has attracted top level officials and investors from all around the world forcing the costs of buying and renting properties upwards in the capital city of Georgetown and its neighboring districts. This process gives little to no empathy to the common man, the student, or the worker who can’t afford the new prices. Gentrification makes it difficult for the average person to rent or buy properties in their own country and is part of the resource curse which the government must find solutions for.


A sudden influx of wealth into a country raises the risk of corruption and siphoning out of funds within the government. This puts added pressure on the President to monitor his ministers, contractors, and other government officials.

How You Can Help

As citizens of Guyana, we can all play a role in steering our country to success in the following ways:

  • Understand that the government has a difficult and delicate task in managing the country’s economy and transforming the oil wealth into long lasting economic success.
  • Be patient. Things take time and some changes do not happen overnight.
  • Share ideas with the government instead of unproductive and inconsiderate condemnation.
  • Work hard and a maintain a healthy standard of productivity.
  • Keep a close watch on your government and vote responsibly.
  • Promote democracy and respect for the rule of law.
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