July 17, 2022
Dear Editor,
In a recent article it was reported that Vice President Jagdeo stated, among other things, that a larger share of its oil revenues sooner, would not benefit the country. In fact, if it comes in, he said, “…we can’t spend it all… (positing that) …it comes inflationary.” Certainly, if the money is not properly managed, inflation can be a probable outcome. However, saving the extra oil income now will not be inflationary, as it can be placed in the Natural Resource Fund (NRF) and these savings will earn interest in US dollars. So, the bigger share of oil now can earn interest income for the country. Not to do so now will only reflect poor management, as explained below.
Every extra dollar Guyana receives today is a good day for Guyana, for when interest rates are not zero, a dollar today is worth more than a dollar tomorrow. The evidence in Guyana today will show that interest rates are not zero; and more importantly, Guyana has relatively large interest payments on both the domestic and foreign debts. More specifically, in the 2021 Bank of Guyana Annual Report, it is recorded that the stock of the domestic debt at the end of 2021 is G$91,345 million, with total interest payments equal to G$2,787 million in 2021 (Table XV, Page 35). Similarly, the external public debt is US$1,393 million, with US$23.3 million as interest payments (Table XVII, page 36). Certainly, these interest payments are not zero; and therefore, using the oil money to pay down either the current domestic or foreign debt or both is a reasonable outcome for Guyana.
In particular, less domestic debt will reduce the interest payments on Treasury Bills and this will expand the pool of local funds that will now be available for private sector borrowing. Consequently, the private sector should encourage the Government to pay down the National Debt as they will have access to a larger pool of financial resources, hopefully, at competitive interest rates from the financial sector. With regard to the foreign debt, a similar payment arrangement can be applied to the foreign debt to reduce the debt service on loans from the multilateral agencies, including the Inter-American Development Bank, the Caribbean Development Bank, and the World Bank, among others. Such repayments will not be inflationary as the collected oil payments can be sent directly to these institutions. As an alternative, these funds can be saved for emergencies, such as an oil spill, the probability of which is not zero; or it can be used to finance the cost of natural disasters due to climate change.
Finally, good governance must include collecting in a timely manner all payments, especially payments for our non-renewable resources that are due to the Government and people of Guyana. To do otherwise and delay collecting the funds, especially when the future is unknown and the Government has been agreeing to the investor’s demands without any reservations, this can be both detrimental and costly for the Guyanese people. This must not happen and Guyana must do better in managing our financial and natural resources.
Sincerely,
C. Kenrick Hunte, Ph.D.
Professor and Former Ambassador
