Image Source: BBC News.
This article is based on a shorter analysis originally published in Global Americans’ “Weekly News Brief”.
Guyana has entered the oil and gas age, and neighboring Suriname is not far behind. This has allowed Guyana’s president Irfaan Ali to announce in October 2024 that Guyanese citizens at home and overseas aged 18 and above will each receive cash payments of around 100,000 Guyanese dollars ($480). In late November, Suriname’s President Chan Santokhi revealed a new program, “Royalties for Everyone” (RVI). He stated, “The RVI instrument means that every Surinamese who lives in our country receives a savings note worth $750 with an annual interest of 7 percent. The money will be paid out in the future from the royalty income of Block 58.” Block 58 is where France’s TotalEnergies and the U.S. company APA (formerly known as Apache) discovered massive oil reserves and plan to invest a little over $10 billion to produce up to 220,000 barrels of crude oil daily, starting in 2028.
Although the impact of Suriname’s oil boom has yet to be felt, Guyana’s boom is hard to miss. The Caribbean country’s oil production averaged 608,000 barrels per day for the first 10 months of the year, which is close to what the longer-established but mismanaged Venezuela is producing. The oil surge has factored large in giving Guyana one of the world’s fastest growth rates in the world. According to the IMF, Guyana’s growth rate expanded by 33 percent last year and will grow by 43.8 percent this year and another 14.7 percent next year. More than $2 billion in revenue is now projected to flow into the country’s sovereign wealth fund, the Natural Resource Fund (NRF), which was established in 2019.
The initiatives from the Guyanese and Surinamese governments are important as both countries have significant parts of their populations below the poverty line. According to the World Bank, although Guyana has reduced its poverty rate from 60.9 percent in 2006 to 48.4 percent in 2019, the government acknowledges there remains more to be done. The flow of oil wealth has probably improved those numbers and led to a wide range of upgrades in everything from increased spending on schools to harbors and roads.
Suriname also has its challenge with poverty. Data from a joint 2022 World Bank and Inter-American Development Bank report puts the country’s poverty rate at 17.5 percent. Moreover, Suriname is emerging from a lengthy economic downturn, which was marked by inflationary pressures, high unemployment and tight controls on social spending. The country also underwent an IMF program and a painful restructuring of its external debt.
Managing oil wealth is a considerable challenge, at which several countries have miserably failed. Examples of oil wealth inducing the “Dutch disease” (where oil becomes the mainstay of the economy to the detriment of other sectors and creates currency challenges) are numerous, including Angola, Nigeria, and Venezuela. Few countries have overcome the problem, with Norway being the most notable factor. In most cases the massive influx of oil wealth has put governing institutions under considerable stress, leading to largescale theft of oil revenues and poor decisions on white elephant projects. These are major pitfalls that face Guyana and Suriname in the management of their hydrocarbon wealth.
Both Guyana and Suriname are aware of the risks that come with oil/gas development and are seeking to improve governance measures. This has meant the creation of new institutions to help manage the newfound wealth. In Guyana, the Natural Resources Fund fulfills that role, with an emphasis on critical infrastructure, such as ports, roads, and schools (though there has been some criticism about not putting money aside for economic stabilization and intergenerational transfer).
Next door, the Santokhi government, which came into office in 2020, has re-committed the country to the Savings and Stabilization Fund Suriname (SSFS). This institution was legislated in 2017 but failed to operationalize due to Suriname’s economic problems under the previous administration.
Three things to consider from the Guyanese and Surinamese governments’ announcements. First, both governments have tough challenges ahead in tackling poverty. Indeed, Guyana has achieved a significant reduction in undernourishment levels, falling significantly from 9.5 percent in 2011 to 2.5 percent in 2021. It has also, through the Ministry of Amerindian Affairs, channeled funding into the Community Services Officers (CSO) program, which seeks to provide Amerindian youth new job skills. Other projects include better access to potable water, upgrades on healthcare, and promoting agricultural production with an eye to meeting domestic food needs as well as supporting export markets.
In contrast, Suriname’s long economic downturn has squeezed social spending and reduced energy subsidies, leaving the IMF in November 2024 to note: “Stronger efforts are needed to address the challenges in the execution of the social beneficiary program to ensure the benefits reach the intended beneficiaries, particularly in the country’s interior regions.”
Two, the management of natural resource wealth demands better institutions and governance than what both countries currently exhibit. According to the watchdog organization Transparency International, Guyana and Suriname are both rated 87th out of 180 countries, with their scores having been parked in the same area for several years. Simply stated, money must be spent more efficiently and with transparency. Indeed, the IMF noted of Suriname’s future oil prospects: “The government is putting in place new fiscal rules and transparently manage the upcoming oil wealth. Broader structural reforms are necessary to increase the efficiency, transparency, and accountability in the energy sector.”
Three, there is an important political factor. Suriname is to hold elections in May 2025. Suriname is already in election mode, with the political parties jockeying to position themselves for the expected oil wealth. President Santokhi’s government, led by the Progressive Reform Party (VHP), is struggling to regain public support after several tough years of economic restructuring as well as a series of scandals, including the escape from incarceration of former President Desi Bouterse for his involvement in the massacre of his political opponents in 1982.
Guyana’s elections are further off having to be held by November 2025. The position of the ruling party, the People’s Progressive Party/Civic (PPP/C), appears more secure. That said, there is a degree of public discontent over the lack of employment opportunities; still high, though improving unemployment numbers (down from 15.7 percent in 2020 to 12.4 percent in 2023); high youth unemployment and an influx of illegal workers from Cuba, Brazil, Haiti, and Venezuela. In the past there has been friction between the country’s two largest ethnic groups, the Indo-Guyanese, who tend to be represented by the PPP/C, and the Afro-Guyanese, who usually support the People’s National Congress (PNC). Despite efforts to move beyond the ethnic divide, it remains a political factor that could easily resurface in the election season. Considering the political backdrop, political will is needed to make the poverty alleviation programs work. It is one thing to announce and/or legislate programs, the real challenge is in making them work – even during the late elections cycle. And in both Guyana and Suriname, there remains considerable work to be done to spread each nation’s wealth, which will be central to their future economic and political economic well-being.
Scott B. MacDonald is Chief Economist at Smith’s Research & Gradings, Senior Fellow at Global Americans, and Founding Member of the Caribbean Policy Consortium.
Global Americans takes pride in serving as a platform that offers in-depth analyses on various political, economic, environmental, and foreign affairs issues in the Western Hemisphere. The views and opinions expressed in this article are solely those of the author and do not necessarily reflect the views of Global Americans or anyone associated with it, and publication by Global Americans does not constitute an endorsement of all or any part of the views expressed.
