(Reuters, 21.Jan.2020) — As the former British colony begins its first significant oil production this year, it is wary of avoiding the mistakes made in oil-dependent economies such as Angola, Nigeria and its economically collapsing neighbor Venezuela.
Winston Jordan, an economist and career public servant, also cited Guyana’s own history of economic crisis in the 1980s for turning down overtures to finance infrastructure and development before oil money started flowing.
“At the IMF meetings, I was bombarded, at the IDB meetings, I’m bombarded with people telling you how much money they can lend you,” he said in an interview on Wednesday in his Georgetown office, referring to the International Monetary Fund and Inter-American Development Bank.
He declined to name the specific institutions, saying only that “quite a few banks, quite a few middlemen” offered loans of between $500 million and $2 billion.
During the oil boom years, Venezuela borrowed more than $50 billion from China through loans that were repaid in oil shipments, a practice later replicated in Ecuador. The arrangements were criticized for lack of transparency.
A consortium led by Exxon Mobil has discovered more than 6 billion barrels of oil and gas off Guyana, a find that could transform the impoverished country’s agriculture- and mining-dependent economy.
With fewer than 800,000 inhabitants, Guyana is seen as a test for whether oil revenue can spur sustainable development in a country lacking strong institutions.
Other petrostates have seen crude sales lead to corruption and debt-fueled spending binges, often described as the “resource curse.”
Guyana in the early 1980s defaulted on foreign debt, fueling an economic crisis characterized by chronic shortages of consumer goods. Following economic austerity and debt relief, the economy began recovering in the 1990s.
“I much rather that we slowly ramp up,” Jordan said. “We will avoid resource curse.”
Legislation this year established that Guyana’s oil revenue will flow to a sovereign wealth fund, and withdrawals must fund specific projects rather than day-to-day expenses. Committees to oversee the fund have not been formed because the opposition and the private sector have not named representatives, Jordan said.
The opposition People’s Progressive Party has said President David Granger’s government overstepped its authority by forming the fund, given its “caretaker” status after losing a 2018 no-confidence vote. The opposition is promising a new sovereign wealth fund “insulated from political interference.”
By Luc Cohen. Additional reporting by Neil Marks; Editing by Bernadette Baum