As the Guyana Government continues on its massive transformation agenda, it is expected that more than US$5 billion will be withdrawn from the Natural Resource Fund (NRF) account over the coming years to finance major developmental projects in the country.
This is according to Finance Minister, Dr Ashni Singh during a presentation on Thursday at the International Energy Conference being held at the Marriott Hotel in Georgetown.
Dr Singh disclosed that based on current oil prices, Guyana is projected to have a balance of some US$10.7 billion by 2026 in the NRF, which holds the country’s earnings from oil production activities offshore Guyana. The NRF account is being held at the Federal Reserve Bank of New York in the United States of America.
However, the Finance Minister sought to dispel assumptions that staggering amounts of monies are being accumulated in the NRF account. He reminded that the 2021 NRF Act allows for annual withdrawals to fund capital projects and as a result, there would only be some US$5.4 billion left in the NRF by 2026.
This means that approximately US$5.3 billion will be withdrawn from the country’s sovereign wealth fund over the next three years.
“Cumulatively, based on these very assumptions, we would be looking at by the end of 2026, total deposits into the Fund of US$10.7 billion. Total withdrawals from the Fund, in line with the legislative formula, of US$5.3 billion… with a balance of just under five and a half billion US dollars,” Dr Singh stated.
He further explained, however, that these figures were based on current oil market prices and did not take into account the future ramping up of oil production. By 2027, Guyana is expected to be producing some one million barrels of oil per day in the ExxonMobil-operated offshore Stabroek Block, alone.
“Of course, as production ramps up further beyond 2026 as we get up to a million barrels a day and beyond, obviously deposits into the Fund will grow commensurately as will the balance… So, we’re looking at transferring, based on the current [transfer] formula [built in the NRF Act], US$1.002 billion in 2023, and into the medium term, we’re looking at about US$1.2 billion annually,” the Minister indicated.
Only last week, he announced that the Government made its first drawdown from the NRF for 2023 to the tune of US$200 million or G$41.6 billion. This money was transferred to the Consolidated Fund to “finance national development priorities” following the passage of Budget 2023 in the National Assembly earlier this month.
In his Budget presentation in January, the Finance Minister reported that Government had withdrawn some US$607.6 million last year to finance national development priorities in the 2022 Budget. At the end of 2022, the overall balance in the NRF, inclusive of interest income and after transfers to the budget, amounted to US$1271.8 million.
This year, Guyana is expected to earn an estimated US$1406.6 million in profit oil and another US$225.2 million in royalties.
According to the Finance Minister during his presentation on the macroeconomic outlook of Guyana, it is important to ensure that the moment is seized now to lay the foundation for investments to be made on initiatives that are critical to long-term economic growth in the country.
“We see this as the moment to ensure that we invest in the things that matter for long-term economic growth; we see as critical for long-term economic growth and, in particular, that we address the historic infrastructural impediments to long-term economic growth.
And so, there has been a conscious decision in Government to reorient the composition of the [National] Budget from Government consumption of goods and services to Government investment, and in particular, investment in infrastructure,” Dr Singh asserted.
Among the major infrastructural projects that Budget 2023 allocated funding for is the People’s Progressive Party/Civic (PPP/C) model gas-to-energy initiative, which will see rich-gas being piped from the Stabroek Block offshore to onshore in Region Three to support a 300-megawatt (MW) power plant and an integrated Natural Gas Liquid (NGL) plant at Wales, West Bank Demerara (WBD).
So far, Government has spent $24.6 billion on the start-up of this project and another $43.3 billion was budgeted this year so as to meet the deadline to deliver rich gas to fuel the power plant by the end of 2024 and to have the NGL plant online by 2025.
Additionally, some $5.2 billion was set aside this year for works on the new Demerara River bridge. Preparatory works have commenced with an aggressive work programme this year to advance construction of the high span, four-lane permanent hybrid concrete and cable-stayed structure.
Moreover, Government has injected another $11.9 billion in 2023 for ongoing construction works on the Linden-Mabura Hill Road. The first phase of works on the highway, which will ultimately link Linden to Lethem and improve access to Brazil, have commenced.
