While Guyana’s oil revenue in the Natural Resource Fund (NRF) currently earns interest in the Federal Reserve, buoyed by favourable interest rates, the Bank of Guyana is assuring that should the rate drop, a longer-term instrument will be used.
In an interview with the media on Wednesday, Bank of Guyana Governor Dr. Gobind Ganga was asked about the investment mandate for the NRF. He explained that while the fund is currently benefitting from favourable overnight deposit rates in the Federal Reserve, this could change if the rate comes down.
“It has to be in liquid investment, meaning overnight deposits, or deposit generally, or T-Bills. So, what we are doing currently is leaving it as overnight deposit in the Federal Reserve, because we’re getting 5 per cent, 5.5 per cent interest. You can’t get that anywhere else,” he explained.
“And that will be changing over time as we see things moving in any other direction. For example, if the overnight rate or the fed rate is coming down, then we will seize the opportunity in putting it in a longer-term instrument,” the Governor said.
Meanwhile, Wednesday August 30 marked the one-year anniversary of the swearing-in of the NRF Board of Directors, chaired by retired Major General Joe Singh. Other members of the Board include Guyana’s Permanent Representative to the United Nations (UN), Carolyn Rodrigues-Birkett and Private Sector Executive Ramesh Dookhoo.
Additionally, former People’s National Congress (PNC) Parliamentarian Dunstan Barrow, and former Chancellor of the University of Guyana, Professor Compton Bourne, were sworn-in.
One year later, Ganga has described the dynamic between the Central Bank and the Board as a fruitful one.
“It has been fabulous in terms of how it has been operationalised, what the Bank has been doing, what the Directors in the various committees have been doing. It is all very acceptable, satisfactory. So, there’s no problem. Everything has been transparent, there has been good governance. Everything above board,” Ganga explained.
While the NRF Board consists of five members, the Public Accountability and Oversight Committee (PAOC) is comprised of nine members, and the Investment Committee comprises seven members.
The PAOC comprises Chairman Clement Sealey and members Wendell Jeffrey, Ryan Alexander, Abu Zaman, Dawn Gardener, Aslim Singh, Savitri Balbahadur, Teni Housty and Desmond Sears.
Meanwhile, the Investment Committee members include Chairperson Shaleeza Shaw, Loris Hukumchand, Richard Rambarran and Michael Munroe.
Guyana is, in 2023, expected to earn a total of US$1.6 billion in profit oil and royalties combined, buoyed by the startup of ExxonMobil’s third development in the Stabroek block – the Payara development – before the end of the year.
In January of this year, the Bank of Guyana signed an agreement to officially hand over control of the NRF to the Board of Directors appointed by the President. According to Section 5 (6) (d) of the NRF Act, the Board is required to enter into an operational agreement with the Bank, so that management of the Fund can change hands. This agreement was signed two days after the reading of the 2023 budget.
Whenever monies are to be used from the fund, those sums must first be budgeted for, and a financial paper approved in the National Assembly. After the amounts are examined by the NRF board, the monies are transferred to the Consolidated Fund for use in the budget.
In May, the Government made its second withdrawal from the NRF for 2023, intended to fund programmes under this year’s $781.9 billion budget. Minister of Finance, Dr Ashni Singh, had announced the withdrawal of US$200 million ($41.6 billion) from the fund. He had assured that, in accordance with the law, this sum would be transferred to the Consolidated Fund.
The first withdrawal for this year was made in February. In December 2022, the Government had made its third overall withdrawal for that year— US$207.6 million (G$43 billion) in oil funds — from the fund, which went towards financing Guyana’s national development plans. This had brought the accumulated withdrawals from the NRF for the year 2022 to US$607.6 million, equivalent to G$126 billion, in line with approved amount in the 2022 budget.
While safeguards exist, Vice President Bharrat Jagdeo has already signalled the Government’s intention to further strengthen the management capabilities of NRF, even with the improvements that have already been made to the fund’s management by the People’s Progressive Party/Civic (PPP/C). This is particularly important as the monies received from oil and gas continue to grow each year.
