You cannot borrow your way to prosperity

Feb 09, 2025 Features / Columnists, Peeping Tom

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Peeping Tom…

Kaieteur News-The Jagdeo Doctrine is an absurd, reckless, and fundamentally shortsighted economic fallacy. It rests on the tenuous premise that borrowing is a means towards growing wealth. This is the deranged gospel preached by Vice President Bharrat Jagdeo whose economic stewardship saw growth plummet and required rebasing to create a mirage of GDP growth.

Now, as if history does not exist, he claims that Guyana’s economy, being larger than in 1992, has greater capacity to absorb debt. This assertion is not only flawed but terminally so.

A high GDP may suggest a robust economy, but it does not necessarily reflect real economic activity or the government’s fiscal health. In an oil-dependent economy, a substantial portion of GDP may be attributed to oil revenues, which are dictated by volatile global markets. If oil prices plummet, the illusion of prosperity remains momentarily intact—until the government faces the stark reality of dwindling revenue. The economy may appear large on paper, yet the state coffers will tell a different, more brutal story.

Debt servicing requires actual cash flow, not theoretical projections or inflated GDP figures. If oil prices fall, revenue from oil exports will decline, leaving the government scrambling to meet its debt obligations. Oil exports as a percentage of overall exports is already close to 90%. It may be okay when oil prices are relatively high. But if oil prices plunge, export earnings and revenues will be affected.

This is all the more reason why the GDP figure, swollen by past investments in oil infrastructure, becomes a useless abstraction, failing to account for a possible cash-strapped fiscal situation. The quintessential flaw in Jagdeo’s logic is the belief that a bloated GDP guarantees financial stability when, in reality, it may signify nothing more than a precarious house of cards.

Guyana’s reliance on oil exposes it to economic catastrophe. When oil prices tumble, as they inevitably will, the government will be forced to lean on non-oil revenues to sustain its activities. Here lies the death trap: if non-oil revenues are siphoned off to service external debt, the result will be devastating cuts in public expenditure. Hospitals will suffer, infrastructure will decay, and social services will be gutted. This is the inescapable consequence of Jagdeo’s foolish bravado—mortgaging Guyana’s future for the mirage of immediate growth.

Moreover, the currency risk compounds this looming disaster. A downturn in oil prices will inevitably lead to depreciation of the Guyanese dollar, making foreign-denominated debt more expensive to service. This will trigger inflation, further eroding any supposed economic gains. The GDP figure will become meaningless as the cost-of-living spirals out of control. At that point, the government will have only two choices—either to default on its obligations or to impose draconian austerity measures.

One of the most egregious errors in Jagdeo’s thinking is his failure to recognize that a high GDP does not translate into a manageable per capita debt burden. Per capita debt—something the PPP zealously tracked in 1992—measures the financial weight each citizen must bear. The man who once decried Guyana’s per capita debt under the PNC, now conveniently ignores it. If debt continues to grow while oil revenue remains volatile, future generations will inherit an economic noose that tightens with each passing year. This is the mark of economic illiteracy—an utter disregard for sustainability, replaced by the reckless pursuit of borrowing as an economic strategy.

A high per capita debt is not just an academic concern is a key metric for determining a country’s creditworthiness and investor risk. What Jagdeo is too inexperienced to grasp is that a high per capita debt, coupled with dependence on a volatile sector, makes Guyana an unattractive borrower in the long term. It signals to investors that the nation’s economy is a ticking time bomb, susceptible to collapse with the next downturn in global oil prices. Any responsible economic planner would take heed, but Jagdeo instead barrels forward, peddling his debt-laden fantasy as economic wisdom.

The inconvenient truth, which the Jagdeo Doctrine conveniently ignores, is that Guyana’s economy is dangerously imbalanced. The GDP size, largely driven by oil, does not reflect the country’s ability to withstand external shocks. Oil prices can crash overnight; debt obligations, on the other hand, do not vanish. The absurdity of using GDP as a justification for increased borrowing is akin to a gambler measuring his wealth by the number of chips in front of him while ignoring the insurmountable debt, he owes the casino.

Thus, the size of Guyana’s GDP, inflated by oil revenues, becomes an irrelevant metric when evaluating debt sustainability. What matters is actual, stable revenue—the ability to meet obligations without triggering economic turmoil. And while our debt service to revenue remains low, it must be considered that a decline in oil prices could throw this into disequilibrium. Therefore, Jagdeo’s insistence that borrowing is viable simply because of GDP growth and low debt servicing to revenue ratios is not just misleading—it is dangerous, irresponsible, and emblematic of economic mismanagement.

A country cannot borrow its way to wealth any more than an individual can spend their way to riches with a credit card. The time will come when the bills must be paid, and when that moment arrives, Guyana will be left exposed—overleveraged, underprepared, and at the mercy of forces beyond its control.

Jagdeo’s approach to economic management is a spectacle of hubris and shortsightedness. His belief that a high GDP equates to fiscal resilience is an insult to reason. His advocacy for borrowing as a pathway to prosperity is a reckless gambit that will burden generations to come.

(The views expressed in this article are those of the author and do not necessarily reflect the opinions of this newspaper.)

(You cannot borrow your way to prosperity)

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• absorb debt, high GDP, Jagdeo Doctrine, Peeping Tom, Vice President Bharrat Jagdeo

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