18 October 2024

President Irfaan Ali has unveiled an ambitious social spending programme fuelled by the country’s rapidly growing oil revenues.

In a special session of Parliament, Ali announced several measures aimed at improving the quality of life for Guyanese citizens, including free university education, a one-time cash grant for every household, and a significant increase in the minimum wage.

As the country gears up for general elections next year, the President’s announcements signal a dramatic shift in Guyana’s economic landscape, leveraging its newfound oil wealth. “We have a US$22bn economy now,” said Vice President Bharrat Jagdeo, justifying the scale of the initiatives.

Among the headline announcements was a one-time cash grant of GY$200,000 (nearly US$1,000) for each of the nation’s approximately 264,000 households. Ali emphasised that the grant is aimed at reducing income disparities and ensuring more disposable income for every family.

Vice President Jagdeo also defended the cash injection, stating that after studying the issue, the conclusion was that Guyana’s economy is strong enough to absorb the GY$60bn (US$287.25mn) payout without risking inflationary pressures.

“We wanted to look at tax measures too to help people. But our experiences with tax breaks for the business community and the hope that they would pass on the benefit has not been a great one…so that is why we opted in this case just to give directly [to households],” Jagdeo added, noting that the country’s wealth from oil revenues allowed for such bold actions.

Guyana, once one of South America’s poorest nations, has transformed since ExxonMobil and partners discovered vast oil reserves off its Atlantic coast in 2015. With oil production soaring since late 2019, the government is now in a position to fund large-scale social programmes that were previously unimaginable. The country’s GDP grew by more than 60% in 2022, the highest growth rate globally, according to the International Monetary Fund.

In addition to the cash grant, Ali announced that university education would be made free starting January 2025, restoring a policy that had been discontinued in the 1990s. “Starting from the January 2025 semester, tuition fees will be completely abolished from the University of Guyana,” Ali said, fulfilling a long-standing campaign promise. This will benefit around 11,000 students and cost around GY$8bn (US$38.31mn).

The government also pledged significant support for the elderly and pensioners. President Ali committed GY$10bn (US$47mn) to the National Insurance Scheme (NIS) to assist retirees who have not met the required contributions to qualify for benefits. Noting that the details of the plan will be revealed in the 2025 National Budget, President Ali touted the cash injection as a means of improving the quality of life for the elderly, who have given their lives to building the country.

Further demonstrating the government’s focus on social welfare, Ali announced that every child in the country will receive a GY$10,000 (just under US$50) universal healthcare voucher starting in 2025. This initiative aims to finance a suite of basic health tests and preventative care, particularly for non-communicable diseases. “This universal health voucher will help us as we work to build a healthy, strong and resilient population,” said the President, estimating that around 500,000 people would benefit from the programme, at a cost of GY$5bn (US$24mn).

President Ali also took aim at high energy cost, announcing a plan to reduce electricity costs by 50% by the end of 2025. With government revenue increasing exponentially in recent years, the country’s civil service has been clamouring for pay increases. The Ali Administration have decided to focus on lower income earners, revealing that the minimum wage for public sector employees would be raised from GY$70,000 to GY$100,000 per month (US$350 to US$500). This increase is expected to pump over GY$1bn (US$4.7mn) into the economy. “This is how we build prosperity,” declared Ali.

Despite the widespread praise for these initiatives, some critics have raised concerns. The Working People’s Alliance (WPA), an opposition party, suggested that the one-off cash grant is an election tactic rather than a long-term solution. “This is election gimmickry,” said WPA co-leader David Hinds, calling for structured cash transfers tied to poverty alleviation rather than ad hoc payments. He also advocated for a feasibility study to explore more sustainable cash transfer systems.

Meanwhile, former Finance Minister Winston Jordan questioned how the government would define household for the purposes of the cash grant. Instead, he argued that the Ali Administration should half the payment and distribute it to each adult Guyanese, using identification data from the Guyana Revenue Authority (GRA), NIS and the Guyana Elections Commission’s (GECOM) register.

Vice President Jagdeo responded to criticism, saying the government had already taken significant steps to stabilise electricity and fuel prices, negotiate lower mortgage rates, and subsidise water costs. “We have tackled almost every single component in the four years we have been in office so far, and now this is the latest robust intervention to tackle cost of living,”said Jagdeo.

As Guyana prepares for its upcoming elections, the Ali administration’s promises of cash grants, free education, and social support will be central to the political debate. However, one thing is clear: Guyana’s oil wealth has opened up possibilities for social spending that were once unimaginable, and the country is eager to see how this newfound prosperity will shape its future.