What exactly is Guyana’s approach to transferring the benefits of its oil wealth to every man, woman and child? Indeed, there have been massive investments in education and health care, but should those funds be redirected into monthly or annual payouts?
Would those cheques be enough to give the poor an entry point out of poverty?
This was one of the key policy positions addressed by the Minister of Natural Resources, Vickram Bharrat, when he appeared as the inaugural guest for Starting Point – the Oil & Gas Edition on September 28. During that episode, the government official was asked to address perspectives in the public domain that, instead of increased spending on roads, bridges and highways, that same revenue could be transferred to the citizens.
Minister Bharrat’s position stood on three legs. The first being that cash transfers, be it for $1 million on a monthly or quarterly basis, are not sustainable. The official contended that there are not enough oil revenues at this time to support such a payout, especially when placed alongside national priorities.
His second point was that a direct payout of $500,000, for example, on a monthly or quarterly basis, could dampen the labour market and affect productivity. He added that it could even be a disincentive for encouraging people to work and study. The minister believes, therefore, that such an approach would not work and that it is a failed model. Minister Bharrat contended that Guyana needs to keep its focus on building out its productive sectors, which will outlive oil, while also arming citizens with the skills needed to reap long-term benefits.
He was keen to clarify later in the interview that the government remains open to cash transfers, but strategically. Importantly, he stressed that transfers will not be the government’s only recourse for ensuring direct and indirect benefits touch the lives of citizens.
It was unfortunate that some news entities not only disregarded the minister’s clarification but presented his comments as though it represented a somersault on the government’s position on providing targeted cash transfers.
At a press engagement on October 2, Vice President Dr. Bharrat Jagdeo said he took note of the “injustice that was done to Minister Vickram Bharrat, where the focus was that he said something to the effect that cash transfers are a failed model. And then a number of hostile forces to us extended the meaning of that…to create the interpretation, that we are backing away from all the commitments we made in the election period and before the election.”
Setting the record straight, Dr. Jagdeo, who is responsible for oil sector policy, outlined the government’s approach to transferring the benefits of the oil wealth to citizens.
The model for government is as follows:
1) Crucial investments in education
During President Ali’s first term, investments moved from $53 billion to $185 billion. This covered the costs for 8 CXC subjects for every student, the abolition of tuition fees at the University of Guyana, the continuation of the Because We Care cash grant, support for approximately 30,000 GOAL scholarship awardees, and school feeding programmes.
2) Massive investments in healthcare
Transfers from oil have been used to support the construction of 12 new hospitals and 25 health centres, along with upgrades to 400 health facilities.
3) Employment opportunities
Over the last five years, the government has used oil revenues to support the creation of 60,000 new jobs.
4) Ownership
The government has pushed a massive housing drive, allocating over 53,000 house lots, expending over $300 billion in the sector.
5) Social Security
The administration has prioritized investments in recreational spaces along with modern technology for crime-fighting efforts.
6) Transfers
These fiscal transfers take the form of higher pensions, helping people with disability and of course, the direct transfer that was done last year where every Guyanese 18 and older received $100,000.
Evidently, Guyana does not have a tunnel vision approach to the transfer of benefits from the oil sector, nor is it designed to be a “cash transfer” model.
“It’s a different model with various elements that will change people’s lives for the better. That is the model the PPP and the government are pushing,” the Vice President said.
HISTORICAL CONTEXT & EARLY WARNINGS
I have followed the discourse on Guyana’s oil and gas industry and can attest that the perspectives on cash transfers have been cautionary, as they have been diverse.
When the idea was first introduced by economist and Stabroek News columnist, Professor Clive Thomas, he had recommended that the David Granger administration make an annual transfer of $1 million to households.
While the Alliance For Change (AFC) supported this, the APNU was opposed. Specifically, former President David Granger had said, “there was no evidential basis for the suggestion.” (See link to full report: https://dpi.gov.gy/cash-transfer-proposal-to-be-discussed-following-recommendations-from-department-of-energy/)
Granger’s Finance Minister, Winston Jordan, had said the money should be used to fund projects and programmes that would generate long-term income for citizens. He even summed up his belief with the adage, “Give a man a fish and you feed him for a day. Teach a man to fish and you feed him for a lifetime.” (See link: https://kaieteurnewsonline.com/2018/08/10/jordan-opposed-to-direct-cash-transfers-of-oil-money-to-every-household/)
Even back then, experts who were advising Guyana at the time warned about overreliance on direct cash transfers. In a 2020 interview with OilNOW, Chatham House expert, Dr. Valerie Marcel, underscored the need for countries like Guyana to be calculated in using cash transfers, even adding that it should not be done across the board.
The industry expert warned that cash transfers run the risk of being used as a political bribe, as a means of saying “vote for me next time.” If done improperly, she warned that it could even cause inflation.
“What I also think it does, is it diverts money that could be otherwise spent on much-needed infrastructure and health care. So, if the government gives too much of the oil rent in cash transfers it has less to commit to critical projects,” the Chatham House Consultant had told OilNOW. (https://oilnow.gy/featured/cash-transfers-for-the-needy-chatham-house-expert/)
Her words of wisdom were also shared by the Center for Global Development, a decades-old nonprofit think tank based in Washington, DC, and London which has studied this topic.
In a 2015 publication, the agency said it reviewed cases spanning Asia, Latin America, the Middle East, and Africa. It found that well-designed initiatives that distribute cash directly to families can have tremendous development effects. But these are dependent on a number of factors, such as the conditions tied to the transfers, to ensure they serve their intended purpose.
Overall, the agency warned that “Cash transfers are no magic bullet.”
“They do not work in isolation, and no single formula fits all circumstances. Their design must reflect each country’s objectives, poverty profile, and fiscal and skills constraints, as well as its political and social environment. In other words, successful cash transfer schemes are tailor-made, not mass-produced.” (See link for full report: https://www.cgdev.org/sites/default/files/oil-to-cash-full-text.PDF)
Guyana, based on the plans outlined by its authorities, have clearly outlined a tailor-made model that extends greater opportunities for wealth creation but will ensure lasting benefits for decades to come.