Dr. Jagdeo warns against using oil money to hike salaries immediately

President Dr. Irfaan Ali has maintained in all his time as President, that Guyana must not be
allowed to make the mistakes other oil producing nations did when they saw a windfall in oil
revenues. He had noted also that When it comes to public servants’ salaries, the government’s
policy in this regard stands firm.
It was revealed that US$607M is sitting in the Natural Resource Fund, and while public servants
would have wanted and were deserving of salary increases higher than 7 per cent, using
Guyana’s oil revenues to steeply hike salaries at this time may be unsustainable. At a press
conference held at the Arthur Chung Conference Centre on Thursday, Vice President Dr. Bharrat
Jagdeo, told reporters that the government has seen other countries make this mistake all too
often. “When they had oil money or they got the windfall, what they got immediately, they
started paying themselves higher salaries, they started pushing up the current budget of the
country, and when the oil money goes, you’re stuck with those expenditures,” Dr. Jagdeo said
The former president named Trinidad and Tobago, as one nation which made this mistake. He
referred to the Inter-American Development Bank (IDB) examined the case of Trinidad and
Tobago in its 2018 report, The Dutch Disease Phenomenon and Lessons for Guyana: Trinidad
and Tobago’s Experience. He disclosed that authors of the report stated that after winning a
close 2001 elections, the Government of Trinidad and Tobago seemed to throw caution to the
wind, increasing transfers and subsidies fivefold between 2000 and 2010, then doubling their
2010 values by 2015. The country’s current spending was so “hand-to-mouth”, as the bank
described, that out of TT$284.1B in fiscal revenues collected between 1999 and 2015, the
government spent TT$283.9B on transfers and subsidies alone.
The report’s authors had wrote; “This component of government expenditure is not necessarily
productivity enhancing, especially if the subsidies are not well targeted or effective in either
diversifying the economic base or improving human capital.” As such, building on the
experience of Trinidad and Tobago, the IDB cautioned Guyana not to use up the state’s energy
sector fiscal revenues to increase transfers and subsidies at the expense of capital investment.
The report disclosed, “The Guyanese government must plan to avoid making such an error. In
parallel, it will have to put measures in place to build up its capacity to manage public sector
investments.”
The Vice President urged that this sort of top-heavy current spending that the IDB cautioned
against was actually practiced not too long ago in Guyana’s history – during APNU+AFC’s
2015-2020 term. The former president noted that in 2014, the last PPP/C government, the
Budget was $220B. The current budget, he said, was $138B while the capital budget was $81B.
He said that APNU+AFC took over in 2015, presenting budgets up to the 2019 fiscal year.
“Often, when we accuse the PNC/AFC/APNU/AFC of being a consumption-based party, a party
that does not prepare for the future, a party that taxes and spends, and spends in a particular
manner, people often judge us harshly, they say it’s just a labour, and so you do have to really
examine the numbers to see if this characterisation is an accurate one,” Dr. Jagdeo declared.

The Vice President said that the APNU+AFC grew the country’s current budget from $138B in
2014 to $231B in 2019, an increase of 67 per cent. The Vice President said the budget was for
rentals, vehicles, goods and services, among other things. He stressed that a lot of this was
financed through the administration’s imposition of 200 new taxes and fees across sectors,
amounting to about $40B more being taken out of taxpayers’ pockets. He reminded that this
move was reversed by President Ali promptly, upon the PPP/C’s assumption to office.
On the other hand, he said the APNU+AFC government spent less on infrastructure for the
future. Dr. Jagdeo stressed that a country cannot have long-term economic growth, if it does not
develop its infrastructure. “Expenditure over a five-year period declined on capital spending,
which is used to build infrastructure such as schools, hospitals, buildings, roads and sea
defences,” he noted. Dr. Jagdeo in listing the development of the capital budget over the years,
explained that it dropped by $42B, from $81B in 2014, to $39B in 2015, $52B in 2016, $56B in
2017, $59B in 2018, and $69B in 2019. He said that this APNU+AFC legacy, demonstrates its
philosophy of consumption-based governance.
Dr. Jagdeo reiterated that the PPP/C Government intends to use its oil revenues to build
infrastructure that facilitates Guyana’s economic transformation in the years to come. This is
why he said, the government’s 2022 agenda, to be partly financed by oil revenues, has given
public works an $88B capital budget, the largest of any ministry.