This tiny country is giving $2,000 to every household as an Exxon oil boom supercharges its economy

Guyana’s government is tapping its newfound oil wealth to give $2,000 to every household.

The world’s fastest-growing economy is handing the equivalent of $2,000 to every household as it works to share its newfound oil wealth and soften the sting of higher living costs.

President Mohamed Irfaan Ali of Guyana, the South American country with just 800,000 people, announced the move last week and said his government would begin distributing the cash immediately.

Ali said the program aims to reduce Guyana’s economic disparities and relieve financial stress on locals, according to a post on the Department of Public Information’s website. It will inject the Guyanese-dollar equivalent of $287 million of disposable income into the economy, he said.

“This is how we are promoting prosperity, ownership, distribution of wealth,” Ali said. “This is how the resources and revenue of this country are being spent every single day to lift the lives of people, to expand national wealth, coastal wealth, and community wealth.”

Guyanese authorities have taken other steps to combat the rising cost of living, the post noted. They’ve removed more than 200 taxes and fees, including the excise tax on fuel and VAT on water, electricity, and some basic foods. They also gave a one-time, tax-free grant worth about $120 a person to a group that included teachers and public servants last year.

Nicolas Suarez, a senior economist at S&P Global Market Intelligence who covers Latin America, told B-17 the latest payout will “increase the average household’s disposable income, alleviating some budget constraints.”

Based on the most recent census figure of 264,000 households, he estimated the program’s scale at 1.5% of national GDP and 7.9% of Guyana’s Natural Resource Fund, which officials set up in 2019 to prudently manage the country’s oil revenues.

“In the short term, this measure could boost private consumption growth, but it may not ease inflationary pressures,” Suarez said. “On the contrary, higher government expenditures could lead to significant inflationary pressures over the next 12 months.”

He noted that inflation in Guyana has climbed from a pre-pandemic average of 2.3% a year to 3.3% in August.

Riding an oil wave

Guyana, an English-speaking former colony that gained independence from Britain in 1966, borders Venezuela to the west, Brazil to the south, and Suriname to the east.

Its natural resource fund is similar to Norway’s oil fund, set up in the 1990s to invest profits from the Scandinavian nation’s oil-and-gas sector, protect the economy from fluctuations in energy revenues, and serve as a financial reserve and long-term savings plan for Norwegians.

Norway’s gas-powered sovereign wealth fund has helped to make it one of the world’s wealthiest countries with an estimated population of 5.5 million and a GDP per capita of about $88,000 last year, according to World Bank data. Its oil fund held over $1.7 trillion of assets at the end of June, or more than $300,000 per Norwegian citizen.

Exxon, which has discovered an estimated 11 billion barrels of oil equivalent off Guyana’s coast since 2015, forecasts the country will produce about 1.3 million barrels a day once the company’s six projects are online in 2027. That amount rivals Qatar’s current output and would rank Guyana among the world’s 20 largest oil producers.

Guyana ramped up production to more than 600,000 barrels a day earlier this year, fueling roughly 50% GDP growth in the first half and putting Guyana on track to grow about 43% this year, Ali said in an August webcast.

Real GDP soared by about 62% in 2022 then 33% in 2023, while GDP per capita has surged from $7,000 in 2020 to around $26,000 this year, International Monetary Fund data shows.

Sharing the wealth

Guyana’s $2,000 payment to households “sounds like great news,” Karl Widerquist, a philosophy professor at Georgetown University-Qatar and the author of several books about universal basic income (UBI) told B-17.

He described the one-time distribution as “basic capital” or a “stakeholder grant” instead of a basic income, but said “it’s a big step in that direction if they go through with it.”

UBI typically refers to a recurring cash payment made to every individual in a society regardless of their wealth, with no restrictions on how the money is spent and no requirement to pay it back. Proponents hail it as a safety net against poverty that relieves financial strain and frees people to change jobs, start businesses, and weather periods of bad luck without stressing about paying their bills.

Guyana’s one-off, unconditional cash grant is a “positive step,” Cleo Goodman, the basic income lead at the Autonomy Institute think tank, told B-17. “This is a welcome injection of cash for citizens.”

However, she noted a guaranteed, regular income would be a “much more comprehensive commitment to redistributing this newfound wealth.”

Guyana was colonized by the Netherlands before Britain gained control in the late 18th century. The nation, which shares borders with Venezuela, Brazil and Suriname, became independent in 1966.