Budget 2025: Ambitious Spending, But Is Guyana Investing in Its People? by Dr. Ramesh Gampat

Budget 2025: Massive Spending, Under-Prioritizing Human Capital Investment

Dr. Ramesh Gampat

February 7, 2025

Introduction

Budget 2025 (B25) is a comprehensive, well-laid-out document. It is impressive how the Ministry of Finance/Bureau of Statistics assembled data for 2024 so quickly.  Less than a month after the old year ended, they gathered the data necessary to prepare the budget. The six Appendices at the end of the document are data-rich and a gold mine for those interested in quantitative analysis. For example, Appendix I contains data on electricity generation, population growth rate, net migration rate, crude birth rate, crude death rate, infant mortality rate, and under-5 mortality rate. Appendix II has data on GDP and its sectoral breakdown from 2012 to 2024. In general, data in these Appendices and elsewhere are final and are rarely, if ever, revised. Few countries manage the astounding feat of generating final GDP data in the first month of the new year. The speed with which the data are produced and the failure to revise them raise questions about their reliability.

I would like to see a list, probably as another Appendix to the budget document, of all significant infrastructural projects since 2020, when each began, estimated date of completion, estimated costs, an annual breakdown of expenditure, and all related documents (project, monitoring, evaluation, and so forth), links to documents, when the project was approved, and names of the contractor involved with the project. This will help to assuage concerns over transparency and accountability.

The PPP frequently emphasizes its budgets as the “biggest ever,” a recurring theme in Budget Speech documents. There are two possible explanations. First, the PPP’s long-standing socialist economic and political philosophy has historically favored large-scale capital projects, a common feature of socialist regimes, though many have resulted in costly, underutilized investments. This focus has often come at the expense of prioritizing health and education. Second, beyond economic reasoning, there is a political motive: showcasing ambitious infrastructure projects as a tangible demonstration of commitment to development—one that emphasizes physical expansion over direct investment in human capital.

Before proceeding, I’d like to note that this essay supplements what I wrote about the budget in a letter to Stabroek News on 25 January.

Structure of Budget 2025

The introduction to B25 is mostly about criticizing the APNU+AFC Government and praising the current PPP Government “in achieving, restoring, and safeguarding democracy in Guyana” (1.3: 1).2 The PPP highlighted some of its achievements in “the short space of four years,” including:

• Reversed and reduced over 200 punitive taxes and fees therefore reducing the burden on the Guyanese People by more than $40 billion annually
• Removed excise taxes on gasoline and diesel, saving consumers $90 billion per annum
• Created over 60,000 new jobs, across all sectors of the economy
• Distributed over 40,000 house lots and issued over 10,000 new titles and transports, and
• Transformed the face of the country, with public investment projects such as new highways, roads, bridges, schools, and hospitals, and private investment projects such as new ports, hotels, restaurants, offices, factories, warehouses, and showrooms, everywhere for all to see

Upgrading and expanding Guyana’s physical infrastructure is commendable and a prerequisite to facilitate rapid growth, structural changes, and diversification. The speed at which this is done, the extent to which there are synergies among roads and bridges, the quality of materials used, the quality of workmanship, and corruption – all of these raise serious questions about the durability of the physical infrastructure. Then there is the serious threat of sea level rise, which can flood a large portion of the coastal plain in the coming three decades or so: why is the PPP Government investing so heavily in the coastal plain?

Of course, it would be ill-advice not to develop public infrastructure on the narrow coastal plain where some 85-90 percent of the country’s population lives and where a significant fraction of the non-oil economy’s productive capacity is located. Rather than a single-minded focus on the narrow coastal plain, a more balanced approach to investment in public physical infrastructure on both the coastal plain and higher ground inland is a sound “insurance policy.”

The next major section of B25 is called “Developments in the Domestic Economy in 2024,” followed by “Sectoral Development and the Agenda for 2025.” The Appendices contain valuable data on various socio-economic indicators. Appendix VII contains an important table called “Actual and Projected Natural Resource Fund: Inflows and Outflows.” Inflows into the NRF comprise petroleum revenue deposits, which include the government’s share of oil profits and royalties, and nominal return, comprising interest income and capital gains. It is somewhat puzzling (revealing?) that the major component of petroleum revenue deposits is called “Government Share of Profit Oil” and not “Guyana’s Share of Profit Oil.” Oil profits belong to Guyana and its citizens and not the government, whether the PPP or the PNC. This grave anomaly must be corrected.

“The Largest Budget Ever”

Budget 2025 is massive: $1.38 trillion dollar (US$6.63 billion) or 20.6 percent larger than the previous year. It is 3.4 times as large as in 2021, which was when the PPP Government gained full control over the budget, its amount, and pattern of spending. As another indicator of size, Budget 2025 is 62.6 percent of non-oil GDP, up from 57.4 percent in the previous year, which is why B25 can only be described as “massive” or as a “spending spree.”

The document called “Budget 2025 At a Glance” says it is “The Largest Ever[,] Fully Financed without No New Taxes.” The government will be spending more than it collects in taxes, various kinds of revenue (rents, royalties, carbon credit flows, fees, fines, etc.), import and export duties, and external grants. Such unprecedented spending inevitably comes with a rising fiscal deficit, which is the difference between revenue and expenditure.

The PPP assumed office in August 2020 and gained complete control over the budget and spending pattern in 2021. In 2020, the APNU+AFC government operated without an approved budget for the first seven months due to the dissolution of Parliament in December 2019. The year was also marked by extraordinary challenges, including the COVID-19 pandemic, which necessitated increased government spending. The fiscal deficit for the year ultimately rose from G$29,926.2 million to G$90 billion, which is probably the most significant increase (growth of 201.2 percent) in the current century, driven by a combination of pandemic-related expenditures, revenue losses from tax reforms introduced in the PPP/C budget, and increased spending in the latter half of the year.

Growth of the fiscal deficit fell rapidly thereafter, reaching 30.5 percent in 2023, but then jumped to 85.5 percent in the following year and is expected to contract by 15.6 percent this year. In terms of dollar amount, the fiscal deficit rose from G$114,848.9 million to (3)  G$376,408.5 million in 2024 and is projected to fall to G$317,845.9. The fiscal hole in 2022 is expected to be 2.8 times as large as 2021, down from 3.0 in the previous year. 4

How large is the fiscal deficit in relation to non-oil GDP? Since most, if not all, of Central Government spending is done in the non-oil economy and since more than 85 percent of oil GDP is siphoned off by oil companies, the relative size of the fiscal deficit must be gauged by non-oil GDP. In 2019, the fiscal deficit was a mere 2.8 percent of non-oil GDP, which rose to 10.2 percent in 2021 and expanded to 18.8 percent in 2024. The “red” statistic is expected to fall to 14.4 percent in 2025. Such a high deficit relative to GDP raises a red flag about the sustainability of massive Central Government spending. See Figure 1 for a visual presentation of the fiscal deficit, both in millions of Guyana dollars and as a percent of Non-oil GDP.

How is the fiscal deficit financed? By borrowing domestically and from abroad. In 2024 and prior years, domestic borrowing was used to fund most of the fiscal deficit: 76.3 percent in 2023 and 75.4 percent in the following year. The current year, 2025, breaks that pattern radically: 94.3 percent of the fiscal gap will be closed by external borrowing. In other words, “The Largest Ever” Central Government spending is made possible mainly by borrowing from abroad and drawdowns from the NRF (more on later).

Figure 1. Fiscal Deficit: Amount and Percent of Non-Oil GDP

Note: Fiscal deficit as % of non-oil GDP is graphed on the right axis; in dollar amounts, on the left axis Source: Budget Document, 2022, 2024, 2025

A rapidly rising fiscal deficit and borrowing to finance it raise an essential question: what is happening to the public debt? The latter has two parts: domestic and external public debt. The external debt stock (EDS) expanded by 1.2 percent in 2020 and by 5.5 percent in the following year. This external liability aggregate has been growing rapidly during the current PPP Government. It is expected to grow by 64.8 percent this year, up from 26.1 percent in the previous year. In 2021, the EDS was US$1.4 billion, but it is projected to rise to 3.7 billion by 2025. That is, the EDS in the latter year will be 2.7 times as large as in the former. There is another startling fact: Guyana’s external debt stock in 0225 will be the largest ever! Fortunately, most of the EDS is long-term in nature.

The domestic debt stock (DDS) contracted by 0.8 percent in 2020, rose to 42.1 percent in 2022 and contracted for the next two years. It is expected to expand by 25.9 percent this year., a rate that is twice as fast as the previous year. In terms of dollar amount, the DDS stood at G$17.4 billion in 2020, jumped to G$32.9 billion the following year, and is expected to reach G$56.5 in 2025. That is, the DDS in the latter year will be 2.4 times as large as in 2021.

Natural Resources Fund

In recognition of the need to effectively manage the economy and the expected revenue windfall, the Government considered it necessary to strengthen sound public financial management to create legislation to establish an SWF ahead of first oil.  After a series of consultations with various stakeholders, including the private sector and civil society, the Natural Resource Fund (NRF) was established by the Natural Resource Fund Act 2019 to manage the natural resource wealth of Guyana for the present and future benefit of the people and the sustainable development of the country. The objectives of the NRF are to:

• Ensure that volatility in natural resource revenues does not lead to volatile public spending.
• Ensure that natural resource revenues do not lead to a loss of economic competitiveness.
• Fairly transfer natural resource wealth across generations to ensure that future generations benefit from natural resource wealth and
• Use natural resource wealth to finance national development priorities, including any initiative aimed at realizing an inclusive green economy.

There were no withdrawals from the NRF in 2020 and 2021. Withdrawals began the following year, and a total of US$3.196 billion was taken out at the end of 2024. Another US$2.464 billion will be withdrawn by the end of 2025 so that US$5.660 billion will be taken out since 2022. Withdrawals in 2025 will be 4.1 times as large as in 2022. As a share of the yearly closing balance, withdrawals increased from 47.8 percent in 2022 to an expected 76.4 percent in 2025 but are projected to decline thereafter, reaching 56.0 percent in 2028. As a share of net inflows (all inflows[1] less outflows), withdrawals rose from 47.8 percent in 2022 to an expected 95.1 percent in 2025 and are projected to contract thereafter, reaching 74.0 in 2028. It is interesting to observe that almost all of the inflows in 2025 will be taken out (inflows, US$2.591 billion, outflows, US$2.464 billion).

Figure 2 shows year-end closing balance of the NRF in millions, while Figure 3 shows deposits (Guyana’s share of oil profit, royalites and interests), both in millions of USD.

Figure 2. NRF: Year-end Closing Balance, US$M

Source: Budget Document, 2022, 2024, 2025

Figure 3. NRF: Inflows and Outflows, US$M

Source: Budget Document, 2022, 2024, 2025

Drawdowns from the Natural Resources Fund will finance 37.1 percent of Central Government Spending (TCGE), up from a quarter in 2023 and 27.8 percent in 2024.

Inflation: Not A Problem

Judging from coverage in the local press, including Stabroek News very impressive cost of living series, inflation is taking a huge bite off peoples’ meagre wages and income, but that’s not what the Ministry of Finance and the Bureau of Statistics say, as we shall see shortly.

Lest it be forgotten, the Consumer Price Index (CPI) is produced only for Georgetown but not for other parts of the country.  It is possible that inflation – positive changes in the CPI – could be higher in other urban areas and especially in rural areas and the hinterland.  Th empirics of inflation in Guyana is dated and no study has been done in the last two decades or so. In the meantime, the economy has changed in fundamental ways, consumer tastes and preferences have changed in major ways, Guyanese have more disposable income, expectations of inflation have changed, and corruption has become a far more serious problem that adds to cost of production.  The bottom line is that while we have an educated idea of the causes of inflation, it is difficult to say the extent to which any given factor, say, imported consumer fuel inflation.

Consumption of imported consumer goods, including food items, is widespread throughout Guyana.  Transportation and storage costs are higher in rural areas and the hinterland – imported commodities have to be properly stored and transported from Georgetown to other areas.  According to Budget 2025, inflation was “estimated at 2.9 percent” (3.37: 16) at the end of 2024 and projected at 2.8 percent for 2025 (5.12:92).  That is, the government holds the position that inflation was not a problem in 2024 and will not be a problem this year.  Yet B25 says that there were “severe imported price pressures” (3.37: 16) last year.  Growth in the importation of consumption goods was driven mainly by more imports of other durables and food for final consumption, which grew by US$59.4 million and US$34.5 million, respectively (3.22:13).

Inflation: Strategic Containment

The government “worked to strategically contain [rising] prices … Food prices … rose by 5.6 percent and contributed 2.8 percentage points of the overall rate. Within food, vegetables and vegetable products accounted for 1 percentage point, while meat, fish, and eggs and cereals and cereal products contributed 0.7 of a percentage point and 0.6 of a percentage point, respectively.” (ibid). There is some inconsistency in quoted passage: the data seems to mostly pertain to locally produced food products and less so to imported food projects, which, according to B25, was an important driver of inflation.

If inflation was less than 3 percent in 2024, why did the government “worked to strategically contain [rising] prices?” That question is not answered in B25. Instead, the document says that the “Government is firmly committed to “increasing disposable incomes and supporting a higher standard of living for all Guyanese” (3.39: 17) and proceeded to list numerous measures to “Easing the Cost of Living” in 2025.  These measures are extensive, laid out in eight pages, and placed into five (5) groups: (a) easing the cost of living; (b) supporting the vulnerable; (c) national insurance scheme; (d) improving business competitiveness; and (e)increasing disposable income (6.1 to 6.30: 95-102).  Table 1 at the end of this essay contains a summary of these measures which are estimated to cost G$240.50 billion or US$1.2 billion or 17.4 percent of TCGE.  Table 2 summaries the detail data in Table 1.

The costliest of these measures, which falls under the group called “Easing the Cost of Living,” is dubbed “Containing the Cost of Fuel.”  In place since March 2022, this measure is estimated to cost G$90 annually. The second costliest measure is the National Cash Grant which comes under “Increasing Disposable Income.”  Estimated to cost G$60 billion (US$287.77 million), the National Cash Grant of G$100,000 (about US$480) is available to all citizens 18 years and over.  At the end of 2024, 400,000 citizens registered for the grant.

Given the total costs and the amount per citizen, around 600,000 citizens are eligible for the grant.  With a population of about 1 million, it seems unlikely that 60 percent will be 18 years and older.  Perhaps that is why only 400,000 citizens have registered for the grant.  But here is also the issue of cost: how much will it cost to deliver the cash grant to beneficiaries and how long will it take?  We do not know and B25 mum about this, another example of the lack of transparency.

How will the money get to citizens? A citizen would have to make two trips to some center: one to register for the grant, and another to pick her check.  Since various cash transfers/grants have been in place for some time and are likely to continue into the future, Guyana should develop a national electronic funds transfer system like that of India’s National Electronic Funds Transfer (NEET), which is a nation-wide centralized system owned and operated by the Reserve Bank of India. Among other things, the NEET offers round-the-clock availability on all days of the year, near-real time funds transfer in a secure manner, a beneficiary does not have to go to a bank to make a deposit, positive confirmation to the remitter by SMS/e-mail on credit to beneficiary account, and so on.  Such a system would avoid trips, delays and frustrations, reduce administrative costs and corruption.  It is a fast, safe, efficient and less prone to corruption.

The five groups of measures noted above are commendable and consume 17.4 percent of Total Central Government Expenditure (TCGE) in 2025, as noted earlier.  A closer scrutiny will place them into three alternative categories: subsides, social welfare, and investment.  Based on my estimate, subsides will cost G$168.5 billion (US$808.15 million) or 70.1 percent of the total costs of the five groups of measures.  Investment will cost another G$42.5 billion (US$203.84 million) or 17.7 percent, and social welfare G$29.5 billion (US$141.49 million) or 12.3 percent.

Given the high cost of living and the large fraction of people living below the poverty-line, the social welfare measures are well targeted: pensioners, public assistance, a “one-off injection” into the National Insurance Scheme, and a universal health voucher “to help finance a basic menu of health tests” (para. 6.13:  98).  Since public health is free and billions dollars are poured into health care each year, the need for such a voucher would suggests that Guyana’s public health care system is still very basic and thus far away from what B25 says: “An extensive expansion and modernisation of the [health] sector has since been launched, aimed at making it a truly modern sector capable of delivering world class treatment and care to our citizens” (4.107: 39).

The investment measures include reducing the cost of electricity, a one-off grant of $100,000 to newborn babies and various tax adjustment, among others. Subsides include abolition of bridge tolls, containing the cost of fuel, reduction of freight charges, improve business competitiveness, the national cash grant, among others. Subsidies are a fiscal burden, often require substantial government spending, which can divert resources from other important areas like education or healthcare, increasing fiscal deficits and potentially leading to unsustainable debt. Subsidies can distort market signals by encouraging overproduction or overconsumption of certain goods. This can reduce the efficiency of the economy, leading to resource misallocation (e.g., overuse of fossil fuels or inefficient farming practices). Subsidy programs can be poorly targeted, benefiting wealthier households or large businesses rather than the people who most need the help. They can also lead to corruption, as companies and individuals might exploit the system to obtain undue benefits.

On the other hand, proponents argue that subsidies can be a tool for poverty alleviation, economic development, and stability, especially in volatile or nascent sectors, while opponents warn that subsidies can lead to inefficient markets, fiscal strain, and the entrenchment of dependency, which may undermine long-term development.

Inflation: Causes

What other factor(s) drive inflation besides imported food prices? Mostly interestingly, B25, which was prepared by the Ministry of Finance (MoF), apparently take it that inflation in Guyana is a monetary phenomenon: “like 2024, monetary policy this year will remain focused on containing inflationary pressures and maintaining exchange rate stability” (5.12: 92).  There is no evidence that monetary factors are the main drivers of inflation and B25 even admitted that imported food prices are a major cause, as noted above.  Nor does it seem likely that upward fluctuating exchange rate contributes to inflation.  Mean cambio selling rate, which is the price individual Guyanese and businesses pay to buy FX, say USD, rose from G$213.61 per US$1 to G$217.24 from January to September 2024.  That’s an increase of 1.7 percent, which implies that the rising cost of the USD (exchange rate) is not a major source of inflation.

In other words, Budget 2025 says one thing explicitly and another implicitly: that imported consumer goods is a main driver of inflation in Guyana but also that monetary factors, such as money supply and monetization of the deficit, fuel the inflationary process.  Further, since the exchange rate has been stable, it does not contribute to inflation.  What is more likely is that inflationary pressure is broad-based and not limited to the food component of the CPI.

In sum, if, according to the MoF, inflation is not a problem, then there is no need for the government to “strategically … contain prices.” It does appear, however, that inflation in Guyana is quite likely underestimated, the data are questionable, and the Ministry of Finance is confused about the causes of inflation.  There is a dire need to foster a culture of local research, which is very difficult in a country that does not value research and data.

Investment in Human Capital

Ultimately, development is about people and thus about the enlargement of freedom and security; otherwise, it is useless. Given the dire shortage of human capital in a robustly growing economy, the relatively low level of functional literacy, and, more importantly, technical skills, investment in human capital should take center stage in any plan to grow and diversify the economy.

The data is most revealing. During the APNU+AFC administration, investment in education and health averaged 7.5 percent and 8.9 percent of TCGE, respectively. The current PPP administration invested less in education (average of 6.1 percent) and about the same more in health (9.0 percent). To put the issue differently, these two critical areas of human development and, thus, the motive force of economic growth received 16.3 percent of TCGE under the APNU+AFC Government and more than a percentage point less under the PPP Government (15.2 percent). This is unsurprising as the PPP has historically under-prioritized investment in human beings, especially health, nutrition, and education.

It is sub-optimal to invest large amounts of scarce public dollars (even if that does not amount to a large share of TCGE) in the hard (physical) and soft (systems, rules, norms) dimensions of the health and educational sectors if the trained and skilled personnel are not in place to deliver the services. There are numerous health facilities in the country, and the government is still building more, but access to quality public health is still a major problem, especially outside of urban areas. Many of these facilities do not have adequately trained medical personnel or at least a full complement. Many of those who work at these facilities, especially those in rural areas, are barely conversant in English.

Take the Suddie Hospital on the Essequibo Coast. We Essequibians have a well-known saying: “people goh deh fo dead. ” I am not saying that these facilities are completely useless. Rather, I am saying that they deliver sub-standard health services on an untimely basis. If the public health and education system were functioning as intended, there would not be thriving private health and education sectors. In general, people with serious medical conditions must “join de line” at Georgetown Public Hospital, which has a long wait time. Alternatively, they go to private facilities to get quality care and pay an exorbitant price for something that should be free, according to the Constitution. Those with even more serious health conditions travel abroad to get treatment.

It is of vast importance that the Government cease creating white elephants throughout the country and start focusing seriously on equipping existing facilities with adequately trained and skilled staff, adequate, well-maintained equipment, and trained technicians.

Conclusion

Budget 2025 is the biggest in the country’s history; it is a historic budget. It continues to devote massive amounts to physical infrastructure projects, a source of widespread corruption and frustration. Infrastructural projects are necessary to accelerate development, but the quality of these projects and their maintenance leave much to be desired, to say nothing about cost and time overruns. More than a third of the massive spending is made possible by offshoring funds from the NRF. Even so, the fiscal deficit is large and growing and is expected to be over 14 percent of Non-oil GDP this year. The result is a precipitous rise of the public debt stock, both domestic and external. A grave shortcoming of the massive budget is the under-investment in much-needed human capital, given the dire shortage of skilled and unskilled laborers.

GDP and inflation data are open to question, and inflation appears to be considerably underestimated. The MoF argues that imported consumer products and monetary factors are major drivers of inflation but offers no evidence. It is baffling that inflation is under 3 percent, but yet the government doles out cash grants and various forms of subsidies to help people cope with the high cost of living. Various subsidies, including the National Cash Grant, amount to G$168.5 billion (US$808.15 million) in 2025. Budget 2025 is not free of contradictions.

Finally, since cash grants are likely to continue in the future, it is strongly suggested that the government develop a national electronic payment system, much like India’s National Electronic Funds Transfer. It will be less costly to administer grants, safe, efficient, less frustrating, and less susceptible to corruption.

Endnotes

1. I thank Dr. Terrence Blackman for his helpful comments on an earlier version of this article.
2. All citations/references in this article refer to “Budget 2025,” unless otherwise noted. My approach is to cite the paragraph in Budget 2025, followed by the page number. For example, “(1.3: 1)” refers to paragraph 1.3, page 1.
3. Note that while the fiscal deficit tripled from 2019 to 2020, it expanded by 201.2 percent during period. The first part of the previous sentence refers to dollar amounts, the latter to rate of growth.
4. One notable feature of Guyana’s annual budget, regardless of whether the PNC or the PPP is in power, is that the fiscal deficit is underestimated. For example, Budget 2023 projected a fiscal deficit of G$92,048.65 million, which turned out to be G$167,031.12 million; and Budget 2024 projected a fiscal deficit of G$198,737.09 million, which turned to be G$291,916.13 million.
5. A deficit of 14.4 percent of Non-oil GDP in 2025 seems unlikely for two major reasons: the Non-oil economy is expected to grow by 13.8 percent in 2025, which is about the same as the previous year, and the tendency of the MoF/BoS to underestimate the deficit reported in the Budget.
6. Inflows = Guyana’s share of oil profit + royalties + interest income + capital gains
7. There are only a handful of studies of inflation in Guyana: (i) Syfox, Cloyd. 1992. “Inflation in Post-Independence Guyana.  A Quantitative Analysis.  In Transition, Issue 19: 48-70; (ii). Gampat, Ramesh. 1995. “Inflation in Post-Independence Guyana: A Note on Syfox.” In Transition, Issue 24: 89-97; (iii) Gampat, Ramesh. 2000. “Exploratory Models of Inflation, 1960-1990.  In Transition, Issue 90: 49-97; and (iv) Solomon, Cyril. 2013. “Inflation in a Small Open Economy: The Case of Guyana.” In Transition, 42(1): 26-40.

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Dr. Gampat brings a wealth of expertise to this discussion. He holds a PhD and MA in Economics from the New School for Social Research, New York, with a strong focus on econometrics, as well as a BA in Economics from the University of Guyana, where he graduated with distinction. His extensive background includes training in Advanced Negotiation (Harvard University), and Management Training (UNDP). With decades of experience in economic analysis and public policy, Dr. Gampat provides a rigorous and insightful examination of Budget 2025.