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Guyana could have paid off US$1B in loans from Qatar and Saudi Arabia with lost taxes and royalties from ExxonMobil

Jun 18, 2023 ExxonMobil, News, Oil & Gas

Kaieteur News – Startling revelations have emerged regarding Guyana missing out on opportunities to alleviate its debt burden. The People’s Progressive Party Civic (PPP/C) administration, led by President Irfaan Ali, is in the process of racking up loans totaling US$1.16B from Qatar, Saudi Arabia, and the United States. What is particularly concerning is that this debt could have been paid off using the lost taxes and royalties from ExxonMobil during the period from 2020 to 2022.

Between 2020 and 2022, Guyana suffered a significant loss of potential revenue as a result of lower taxes and royalties collected from ExxonMobil. The accumulated total of lost taxes and royalties from ExxonMobil during this period stands at US$1.16B.

Guyana charges Exxon a measly 2% royalty, despite recently introducing a petroleum contract with 10% royalty for other oil companies. By not charging a 10% royalty for oil production in the first three years, Guyana has foregone US$880M in royalties.

As for taxes, Guyana pays Exxon’s income taxes out of its share of profit oil. This has resulted in the country sacrificing US$285M in taxes, based on figures from Exxon’s financial statements.

In terms of the loans, the PPP/C administration secured a loan of US$350 million from Qatar on May 29. This funding was specifically designated for the extension of the Schoonord to Crane four-lane highway project in Region Three.

Additionally, on June 6, the administration signed two loan agreements totaling US$150 million with the Saudi Fund for Development (SFD). These loans were intended for the “Infrastructural Development Works for the Housing Sector Project” and the “Construction of Wismar Bridge Project.” Furthermore, an application for a loan of approximately US$660 million from the United States Export-Import Bank to finance the Gas-to-Energy project is pending.

When evaluating the loans acquired from Qatar, Saudi Arabia, and the US, it becomes clear that the combined total of US$1.16 billion aligns precisely with the potential taxes and royalties lost from ExxonMobil during the 2020-2022 period. This correlation shows a gravely missed opportunity for Guyana to reduce its debts. President Ali has said Guyana must pursue every revenue-generating measure, but this does not seem to apply to Exxon.

While Vice President Dr. Bharrat Jagdeo defends the administration’s borrowing activities by citing the positive impact of the oil boom on the economy, it is crucial to consider the long-term consequences of such substantial borrowing. While investments in infrastructure are necessary for development, responsible financial management is essential to ensure the country’s economic stability and future growth.

As Guyana continues to grapple with its growing debt, it is imperative for the government to adopt prudent strategies for managing its finances. A comprehensive evaluation of the country’s debt sustainability, repayment capabilities, and potential avenues for revenue generation is essential.

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