Jagdeo’s grand revival of a rotten idea

Jun 15, 2025 Features / Columnists, Peeping Tom

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Kaieteur News – There are few things more dangerous in public life than a man with a failed idea who refuses to bury it. Mr. Bharrat Jagdeo, Guyana’s perennial prince of economic wisdom, has dusted off the cobwebs from one such idea—the reintroduction of a development bank, a notion that should have remained precisely where his government left it two decades ago: on the backburner, behind the kettle of discarded promises, somewhere next to the blueprint for sugar’s resurrection.

In resurrecting this bank, Mr. Jagdeo is not so much offering policy as he is peddling nostalgia—nostalgia for a time when feasibility studies were commissioned and promptly shelved, when lofty rhetoric outpaced fiscal reality, and when “development” was the convenient cloak for state-sponsored bungling. In those heady early 2000s, when he was still burnishing his credentials as an economic modernizer, his government had the good sense (for once) to order a study into the viability of such a bank. The study, it was said, did not find the idea of a development bank appealing. It was even said that for such a bank to be viable the rates offered may not have been much different from those being offered by commercial banks. Afterwards, we did not hear much about a development bank.

That was then.

Now, awash with petrodollars, Jagdeo appears ready to plunge ahead, proposing an interest-free bank tailored—he says—for small and medium-sized enterprises. One suspects that this bank may be government-supported and that Jagdeo supposedly believes the oil money will lubricate this old machine and make it run smoothly. But Guyana, if it has memory, should shudder.

We have walked this road before, and we know how it ends. It ends with the Guyana Agricultural and Industrial Development Bank—GAIBANK, they called it, though it might as well have been named GAIBLEED. Born under the PNC, GAIBANK was supposed to be the financial engine of rural upliftment and industrial advance. It turned out to be a giant sieve. Loans were given not on merit but on connection; projects were financed not on feasibility but on fantasy. The result: mountains of bad debt, a bloated bureaucracy, and a credibility deficit deeper than the Berbice River. The bank collapsed under its own weight.

Did we learn? No. The PPP, upon taking office, chose not to clean up but to pile on. They absorbed GAIBANK’s debts into a “loan recovery agency”—a euphemism for financial hospice care—and merged it with GNCB, another tottering institution. The result? Still more haemorrhaging. Eventually, even the PPP could not deny the futility and quietly privatized the remains. So it is not just the PNC that owns the stain of development-bank disaster. The PPP, Jagdeo’s PPP, helped deepen it.

An interest-free development bank is not merely a bad idea. It is an idea so utterly devoid of economic discipline that it borders on the delusional. Why, after all, would anyone repay a loan that costs them nothing to keep? What incentive remains when the invisible hand is strapped to a bureaucrat’s desk and the visible hand is giving handouts? An interest-free loan promotes moral hazard. It says to the recipient that this is not a commercial transaction; it is concession.

A development bank tailored to offer interest-free loans would not just duplicate the functions of existing commercial banks; it would actively undermine them. Private banks, which survive on margins and risk assessment, would find themselves crowded out. Why would any borrower, when offered interest-free capital from a state institution, turn to Republic Bank or GBTI or Demerara Bank? The playing field, already uneven, would tilt sharply in favour of those with access to political connections. That is not financial inclusion; it is patronage in a lab coat.

And who funds this fantasy? The government, of course because which private investor or international financial agency is going to finance an interest-free development bank.  Such a bank has to be financed by the taxpayer. Or more precisely: the oil windfall, which we are told must be saved for future generations. But what generation benefits from a state-supported bank that subsidizes unviable projects and socializes private losses? This is not development. It is the slow siphoning of national wealth into a pit dug by hubris and lined with nostalgia.

The dangers do not end there. A state development bank, especially one built on cheap or free credit, invites political interference. Loans will be directed not by rigorous underwriting standards but by phone calls from ministries. We have seen it before in Guyana. Every project gone bust will require a bailout. And each bailout will come with a press release, blaming global conditions or rogue managers, never the policy that bred the mess.

Moreover, Jagdeo’s development bank gambit sets a chilling precedent. It signals that the government, rather than creating the conditions for capital formation, intends to become the capital provider. That’s not economic planning; it’s economic regression. It smothers competition and revives the state as a dispenser of favours rather than an enabler of enterprise.

Mr. Jagdeo is often described as a man of vision. But even a blind man can have visions. The real test is whether those visions are grounded in reality, tempered by history, and shaped by prudence. His development bank proposal fails on all counts. It is an act of forgetting masquerading as leadership.

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

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• Bharrat Jagdeo, Cconomic wisdom, Guyana, Peeping Tom, Rotten idea

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