-by David Clarke

Guyana’s oil windfall has created unprecedented fiscal space, but with that comes a difficult question: how much should be saved, and how much should be invested?

As government ramps up spending on major infrastructure, economist Richard Rambarran says Guyana’s challenge is finding the balance between preserving wealth for the future and using it to transform the economy today.​

Debt reduction, macroeconomic management and institutional reforms, he argues, helped position the country to take advantage of the resource boom.

And while oil has become a major driver of growth, Rambarran says the story is not simply about petroleum.

“Guyana is not solely depending on oil growth. Yes, it is an important, extremely important part and component of our growth story at this juncture, but we are not solely dependent on our revenues and oil growth. If you examine what the growth figures are, the oil economy as against the non-oil economy, you would see that there has not been a single year where the non-oil economy has not grown and grown healthily,” he said.

The IDB has highlighted the need to calibrate spending, saving and investment to ensure the country’s fiscal position remains sustainable over the long term.

Rambarran argues that for a developing country, that does not necessarily mean putting as much oil revenue as possible into savings.

“However, it is extremely important in economies such as the Guyanese economy, such as other developing economies, that too much is not saved at the beginning of extraction. The reason for that is to ensure there is proper and continuous growth that can occur due to public investments,” he said.

According to Rambarran, that is the balancing act now facing Guyana, preserving a share of its finite natural-resource wealth while using today’s revenues to build productive capacity, improve connectivity and create opportunities for future generations.