Guyana’s re-elected Irfaan Ali sets out five-year plan
Recently, the electoral pattern across Latin America and the Caribbean has been for incumbent governments to be thrown out by voters angered by poor economic performance. In Guyana, President Irfaan Ali of the People’s Progressive Party/Civic (PPP/C) has bucked the trend: in polls on 1 September, he was re-elected to serve another five-year term. The fact that Guyana is currently one of the world’s fastest-growing economies may explain his resilience.
Offshore oil was first discovered ten years ago; production started up in 2019; and oil revenues have been gaining year-on-year ever since. On 22 September US oil giant Exxon Mobil announced it is investing US$6.8bn in Hammerhead, its seventh offshore project in the country. In his first term President Ali has injected what are comparatively vast sums into the small country’s economy (the population is around 830,000). In 2022-2024 Guyana’s GDP grew by an incredible annual average of 47%, according to International Monetary Fund (IMF) data, making it the fastest growing country in the world. In the five years to 2024 GDP multiplied by a factor of five.
The government has pursued ambitious infrastructure plans, developing new hospitals, a US$260m Chinese-built bridge over the Demerara River, and a coastal highway. Hotel construction is booming. An initial US$2.1bn has been invested in a new sustainable urban development, known as Silica City. New roads and schools are being completed. Shopping malls are being built. The Ali administration has made university tuition free to all citizens. Cash grants are being provided to lower income groups. Last year there was also a universal cash payout of G$100,000 (US$480) to every Guyanese citizen, whether living at home or abroad.
This largesse was undoubtedly a factor in the election result. The PPP/C, which appeals to the majority ethnic group of Indo-Guyanese saw its share of the vote increase by almost five percentage points to 55.3%. This helped it win an extra three seats in the legislature to take its total to 36 out of 65, giving it an outright majority.
A new party, We Invest in Nationhood (WIN) became the second largest in the national assembly with 16 seats. WIN, a populist group, is led by Azruddin Mohammed, a businessman sanctioned by the US for alleged tax evasion and bribing public officials. He denies any wrongdoing. A Partnership for National Unity (Apnu), which largely appeals to the Afro-Guyanese voters lost ground, gaining only 12 seats in total.
Politically therefore, President Ali is in a comparatively strong position as he faces the challenge of managing his country’s growing oil wealth. He has outlined his plans for the economy on various occasions. On 7 September in a speech at his swearing-in ceremony, he outlined a “strategic vision” for economic development, trade and sustainability. “Over the next five years we plan to establish shipping and logistics hubs linking Brazil and Caricom [the Caribbean Community], thereby creating new markets and new opportunities for our people,” he said. He also promised manpower planning for the labour market, an agricultural sector designed to promote food security, and sustainable environmental management.
In his speeches on the campaign trail touching on economic policy President Ali stressed three broad themes. First, he called for investment in human capital and tools for wealth creation. The aim here is to foster entrepreneurship and small business growth as well as using the oil sector to create new jobs and manufacturing capabilities. Second, Ali wants to use growing natural gas supply to build energy-intensive industries such as petrochemicals and data centres. Third, he says the government will continue investing in, and scaling up, projects in the non-energy sector of the economy, to diversify the economy and make it less vulnerable to future oil price volatility.
In fact, President Ali will have to deal with at least two energy-related conundrums. One is to avoid “Dutch disease” also referred to as the “resource curse”. This occurs when strong export-led growth of a single sector (such as oil or gas) strengthens the currency and makes other sectors such as manufacturing and agriculture uncompetitive, leading them to contract. The concept was first used to explain the negative effects of developing the Groningen natural gas fields in the Netherlands.
A particularly acute example of Dutch disease happened in Guyana’s western neighbour Venezuela, where extreme oil dependence ended up hollowing-out many sectors of activity including agriculture and manufacturing. President Ali’s challenge will therefore be to ensure the oil surplus is invested in long-term, non-energy sectors which are able to compete on global markets. Successive Venezuelan governments notably failed to do so, using energy windfalls for short-term political benefit.
A slightly different, and more present-day version of the dilemma facing Guyana is to achieve an energy transition starting from hydrocarbons and ending up with renewable energy such as wind and solar. In a recent interview with the New York Times President Ali was eager to make the case for using oil revenues to fund green projects.
As he put it, “Guyana is a new oil producer, but we are using the resource to finance our energy transition, to build resilient infrastructure, to support the region than we are in, to invest in livelihood options that will keep our forest standing, which stores many gigatons of carbon.” Ali has pointed out that his country’s vast forests make it net carbon negative, meaning it takes more carbon out of the atmosphere than it puts in. He believes that the developed economies should pay a fair-market price for the protection of such forests, while adding “the world will need fossil fuel a long time into the future”.
Despite, or even because, of the oil boom, the new government faces a set of difficult issues. In domestic political terms there are worries over potential corruption and ongoing inequality. Not everyone has more money in their pocket. Anand Persaud, editor of Guyanese daily Stabroek News, has been running reports on inflation and the cost of living, which he says, exposes “this big gulf between an ‘oil Guyana’ and a ‘non-oil Guyana’, and how they are not really meshing”. The regional political environment also carries risks. While Ali has aligned himself with the US administration led by President Donald Trump – a defensive move in view of Venezuela’s hostile territorial claims to the Essequibo region – he also faces pressure from the US to limit relations with China.
Inflation
In a May report the International Monetary Fund (IMF) notes that Guyana’s inflation rate closed 2024 at 2.9%, up from 2% in 2023, and projects it will edge up to around 4% this year.