Governance and Transparency

Talking Dollars & Making Sense: Where Is Guyana’s Oil Money Going?

By

Rennie Parris, MBA

Welcome back to Talking Dollars & Making Sense. Today, we’re diving into the pressing question: Where is Guyana’s oil money going? Over the past five years, Guyana has earned US$6.5 billion from oil revenues, but the country could have received US$13 billion if the 2016 Petroleum Agreement had been more balanced. Let’s unpack where the money has gone, how it’s been managed, and whether it’s being used effectively for national development.

How Much Money Are We Talking About?

From 2020 to 2024, Guyana’s total capital into the Natural Resource Fund (NRF) were approximately US$6.5 billion, including US$246 million from investment income. Over the last three years, about 50% of these funds—or US$3.2 billion—has been spent by the government. However, despite this significant expenditure, it’s challenging to identify a single major national development project directly funded by these resources. So, where has all that money gone?

The Gas to Energy Project: A Case Study

One potential use of the NRF funds could have been the Gas to Energy project, a transformative initiative that could reduce electricity costs and boost industrial activity. The US$527 million loan provided by Exim Bank is funding part of this project; however, there’s no explicit allocation from the NRF to cover the rest of the project. This raises serious questions about how the NRF is being utilized.

Funding Other National Projects

Looking at other significant development projects, it becomes evident that loans, rather than NRF funds, are financing them. Here are some examples:

• New Demerara Bridge: US$260 million loan from China.
• Linden-Soesdyke Highway: US$200 million loan from the Islamic Development Bank.
• Wismar-Mackenzie Bridge: US$50 million from the Saudi Fund for Development (SFD).
• Housing Sector Project: US$100 million loan from SFD.
• Phase 2 of East Coast Road Project: US$192 million loan from China.
• East Bank-East Coast Demerara Road Linkage: US$50 million loan from India.
• Linden-Mabura Road Project: US$112 million loan from the Caribbean Development Bank.
• Paediatric and Maternity Hospital: US$165 million loan from UK Export Finance
• Strengthen Healthcare Network: US$97 million loan from Inter-American Development Bank (IDB)

Together, these loans amount to about US$1.8 billion. If loans are funding these vital projects, what exactly is the NRF money being used for?

What Does the NRF Act 2021 Say?

The NRF Act 2021, specifically Section 16(2), mandates that withdrawals from the fund must be for national development priorities identified in the annual budget and approved by Parliament. This provision ensures that spending aligns with strategic goals and is transparent. However, the lack of clarity about how US$3.2 billion has been allocated suggests a deviation from this requirement. Public trust depends on clear, tangible outcomes that align with the law’s intent.

Another issue that complicates transparency is the commingling of NRF funds with other inflows, such as tax revenue, into the nation’s consolidated fund. This practice makes it virtually impossible to determine what the NRF funds are specifically funding, which directly violates Section 9(f) of the NRF Act 2021. The Act emphasizes the need for clear and identifiable use of these funds to ensure they are used for the benefit of all Guyanese. Without this clarity, the purpose of the NRF is undermined, raising serious concerns about fiscal accountability.

Investment Returns: Falling Short

Let’s also look at the NRF’s investment returns. Section 9(f) of the NRF Act requires a real investment return in US dollars of 3% annually. Yet, over the past five years, the fund’s average nominal return was 2.3%. After accounting for U.S. inflation—3.6% as measured by the Personal Consumption Expenditures (PCE) price index—the real return was -1.3%. Falling 4.3% short of the required rate indicates poor financial management that could erode the fund’s value over time. Additionally, Section 23(2) of the Act limits the NRF’s investment options to bank deposits if the fund’s balance is less than three times the amount the government withdraws annually. Although the fund’s balance exceeds US$500 million, its size relative to government withdrawals restricts it to low-yield bank deposits. At this pace, the NRF is unlikely to diversify into higher-yield investments until 2030, further compounding the issue of low returns.

The Bigger Picture

Guyana’s oil revenue has immense potential to transform the country, but only if managed wisely. Transparency, accountability, and strategic investments are essential to ensure these funds benefit all Guyanese. Adhering to the NRF Act’s provisions is crucial to achieving this vision.

Looking Ahead

In the upcoming columns, I’ll unveil my Comprehensive National Development Plan for inclusive, long-term growth.

Feel free to share your thoughts, questions, or suggestions by reaching out to talkingdollarsgy@gmail.com. Let’s continue this important conversation together.

Until next time, let’s keep Talking Dollars & Making Sense.

Rennie Parris (CFA) is a Wharton MBA graduate and former investment strategist at APG Asset Management and JP Morgan. He writes monthly on Guyana’s economic transformation for the Guyana Business Journal.

Please share your thoughts and questions as we explore how to maximize our nation’s wealth. Until next time, please keep thinking critically about Guyana’s economic future. This column is part of our ongoing coverage of Guyana’s oil sector development. Please support the Guyana Business Journal and Magazine.

Talking Dollars & Making Sense

The 2025 Budget: A Vision for Progress or a Missed Opportunity?

By

Rennie Parris, MBA

Welcome back to Talking Dollars & Making Sense. Today, we’re diving into the highlights of Guyana’s 2025 Budget Speech, titled “A Secure, Prosperous, and Sustainable Guyana.” This article offers a quick overview of key elements of the budget and a breakdown of what it means for the average Guyanese citizen and the broader economy. Let’s get into it.

Key Takeaways

Capital Expenditure: Bigger Budgets, Same Old Challenges

• 2025 Budget Surge: The government increased capital expenditure by $92 billion, setting the 2025 allocation at $738 billion, despite ongoing deficiencies in project execution.
• Quantity Over Quality: The focus remains on increasing budgets without addressing the need for improved quality and efficiency in spending.
• Outdated Management Tactics: Instead of adopting strategic financial management, the government relies on the ineffective “buse-out” approach, leaving human capital deficiencies unresolved.

Tax Reforms: Marginal Gains, Missed Opportunities

• Relief for Workers: The 30% increase in the tax threshold to $130,000 and reduction of the personal tax rate from 28% to 25% provide marginal benefits to the working class.
• Broader Tax Base Needed: Effective tax reforms require increased investment in income tax enforcement, ensuring more taxpayers are brought into the system.
• Path to Meaningful Tax Cuts: A broader tax base would enable the government to further increase the tax threshold and reduce both personal and business income tax rates.

2025 Budget: Private Sector Growth Without Transparency

• Private Sector on the Rise: The 2025 Budget showcases the expansion of Guyana’s private sector, signaling economic progress.
• Inclusive Growth Questioned: The true inclusive growth remains unclear without detailed data segmentation.
• SMEs vs. Large Businesses: Disaggregating economic data to distinguish between small and medium enterprises (SMEs) and large corporations is crucial to understanding who truly benefits.

Capital Expenditure: Bigger Budgets, Same Old Challenges

The 2025 Budget has reached an unprecedented size, totaling $1.4 trillion, marking a 17% increase compared to the $1.2 trillion budget of 2024. The budget allocates a record-breaking $738 billion to capital expenditure, a bold move aimed at transforming infrastructure across the country. Projects range from improving transportation networks to upgrading educational and healthcare facilities. Yet, despite the lofty numbers, the same issues from previous years remain unresolved: delays, inefficiencies, and questionable quality in execution.

One glaring problem is the government’s reliance on a “buse-out” strategy – publicly reprimanding contractors – as a solution for poor project performance. This approach fails to address the underlying issues of capacity and expertise. Instead, a strategic Build, Borrow, Buy (BBB) framework could pave the way for sustainable progress. By hiring global talent – buy, leveraging expert consultants – borrow, and using world class experts to develop local talent – build, the government can create a foundation for better project management and execution.

The urgency to fix these systemic issues is heightened as Guyana’s infrastructure ambitions grow. According to the IMF Public Investment Management Assessment (PIMA), 41% of all capital expenditures are wasted due to inefficiencies, highlighting the critical need for structural reforms to prevent further waste and maximize the impact of these investments.

Reintroducing Free Tertiary Education

After removing free tertiary education three decades ago, the government has reinstated this critical policy, providing funding to the University of Guyana and technical and vocational institutions. This change makes higher education accessible to all, a welcome step that could empower more citizens to pursue opportunities previously out of reach.

While this policy shift is commendable, it must be accompanied by increased funding for these institutions. By hiring world-class instructors and enhancing research and development initiatives, the University of Guyana and other institutions can enhance its global profile and deliver impactful education. Free education is not just a cost but an investment in human capital that will yield long-term socioeconomic benefits.

Tax Reforms: Marginal Gains, Missed Opportunities

Tax changes in the 2025 Budget aim to bring relief to workers by increasing the income tax threshold to $130,000 and lowering the lower-end tax rate to 25%. These measures are expected to provide modest financial relief for the working class, but the benefits could have been much greater if a more comprehensive approach were taken.

Guyana’s tax system remains heavily dependent on a narrow base. By strengthening tax enforcement and incorporating more taxpayers, the government could generate additional revenue to fund larger tax cuts. For instance, raising the minimum wage for public servants to align with the tax threshold would benefit employees without children and would give all public servant parents the opportunity to benefit from the monthly child tax exemption. In the subsequent budget, the monthly tax threshold should be raised to between $160,000 to $200,000. Similarly, introducing a child tax credit for low-income families who work in the private sector and make less than the tax threshold would directly address financial strain on those who need it most.

A broader tax base coupled with efficient spending could allow for more significant reductions in personal and corporate tax rates, spurring economic growth.

Private Sector Growth Without Transparency

Guyana’s private sector continues to expand, driven by increasing investments and opportunities. While this is a promising sign of economic progress, it raises questions about who truly benefits from this growth. Without clear data distinguishing the performance of small and medium enterprises (SMEs) versus large corporations, the narrative of inclusive growth remains unconvincing.

SMEs are crucial for fostering economic resilience and local job creation. However, many SMEs face barriers such as limited access to financing and regulatory hurdles.

Transparent reporting and data segmentation would enable policymakers to craft better interventions, ensuring that the private sector thrives equitably.

Borrowing and Resource Management

A key element of the 2025 Budget is its heavy reliance on the National Resource Fund (NRF). The government plans to withdraw the full US$2.5 billion allowed this year, bringing total withdrawals to approximately 62% of the fund’s inflows since its inception. While the NRF provides vital financial resources, this level of spending raises questions about sustainability.

The NRF was established to ensure that Guyana’s oil wealth benefits both present and future generations. However, spending such a substantial portion of its inflows within a few years risks depleting a crucial safety net. Without prudent fiscal discipline, the country could face challenges if oil revenues decline or if economic conditions shift unexpectedly.

Borrowing, when used prudently, can drive long-term economic growth by financing critical investments in infrastructure, human capital, and technology. However, inefficiencies in spending and project execution dilute the potential benefits.

The government must prioritize projects with high socioeconomic returns and implement stronger oversight mechanisms. Investments in human capital development can deliver sustainable growth.

As of the end of 2025, the national debt is projected to be US$7.6 billion. The rapid accumulation of national debt – up 4.3 times since 2020 – further underscores the need for a disciplined approach to fiscal management. Guyana’s oil wealth is a unique opportunity, but its benefits can only be realized through strategic and efficient use.

Final Thoughts

The 2025 Budget illustrates the government’s vision with significant spending in infrastructure, tax initiatives and one-off measures. However, execution and efficiency challenges remain starkly evident.

Notably, on the backdrop of an election year, the growth rate for non-interest current expenditure has outpaced that of capital expenditures for the first time in this government’s 4 ½ year tenure. This shift reflects measures such as the $100,000 one-off cash grant for Guyanese adults and the $10 billion one-off grant for senior citizens who do not qualify for old-age pensions. While these programs provide immediate relief, they highlight the increasing focus on short-term measures rather than long-term, transformative investments.

With oil wealth serving as a catalyst for development, this is Guyana’s moment to build a prosperous and inclusive future. Success will require bold decision-making, accountability, and a focus on empowering all citizens – especially those who are most vulnerable.

Let’s continue this conversation. Share your thoughts at talkingdollarsgy@gmail.com. In the subsequent articles, I will lay-out my comprehensive national development plan for inclusive growth.

Rennie Parris (CFA) is a Wharton MBA graduate and former investment strategist at APG Asset Management and JP Morgan. He writes monthly on Guyana’s economic transformation for the Guyana Business Journal.

Please share your thoughts and questions as we explore how to maximize our nation’s wealth. Until next time, please keep thinking critically about Guyana’s economic future. This column is part of our ongoing coverage of Guyana’s oil sector development. Please support the Guyana Business Journal and Magazine.