I join with others in calling for revising of the 2016 Production Sharing Agreement, PSA 2016. Withdrawal rules are less important than invoking the special clause under Article 24, ‘Force Majeure’, dealing with the additional actual and potential activities that are placing Guyanese to bear indirect costs arising from activities of adding an oil industry to the national economy.
These extra activities require more hospitals, technical and managerial education, more roads usage and congested highways, more inland security, and more monitoring of the oil industry itself on land and at sea, and in financial intermediation services, including oil companies auditing.
A case for recognizing the indirect cost of using the Guyana Financial System, FISIM has already been made; an indirect cost of G$25,606 million was subtracted from Guyana’s Gross Domestic Product in 2023 (Bank of Guyana Annual Report, Table 10-I).
Meanwhile, all the other indirect costs that Guyana pays for through its assets, such as extra Government Services in its budget, extra health education, transportation airports, Guyana’s Coast Guard, using Guyana’s owned Ships, FPSOs for fetching crude oil extracted, using Guyana’s environment on land and at sea for waste disposal, water and sewer, electricity, and so on, all carry zero extra charge.
Total Government spending on current plus capital expenditure in 2023 was G$804,149 millions, of which NRF withdrawals were G$208,422 (26%). Domestic tax revenue were G$366,615 (a tax burden on Residents, 46% of total spending), while oil companies are tax exempt on import duties and on regular and windfall profits. Oil companies can afford to pay their fair share of profits tax into Guyana’s treasury, the Consolidated Fund.
Indeed, Guyana should find it necessary to reduce taxes and indirect costs on its residents, while asking the oil companies to bear indirect costs that show up in its budget, including extra insurance by invoking Article 24 of the 2016 Production Sharing Agreement. Events have changed and Government recognizes that ‘ting baad’ in granting the G$100,000 cash grants.
Sincerely,
Ganga Persad Ramdas
