Vice President Bharrat Jagdeo has laid a firm footing that Government would continue to invest the oil revenues in areas which develop the productive capacity of the country and its people, and once there is stabilisation, monies would be funnelled into savings.
He was responding to a recent CNBC documentary, drawing contentions that the Natural Resource Fund (NRF) was not enough to keep the resource curse at bay.
However, Jagdeo pointed out that it was contradictory to save the country’s oil money in the early days of production while the population was suffering from inequalities that could be remedied with investments. It was also affirmed that Guyana’s NRF was not a slush fund, but a formula-based mechanism to determine how much is spent.
“I don’t put too much store on what they say on these programmes abroad, because we made it clear that our money will be invested in some areas. Education, health, some transfer to the vulnerable groups, infrastructure of a productive nature and we’ll save part of it. It is not a slush fund…Under this Government, it is formula-based. It’s transparent. At the end of the day, the Finance Minister has no say in this. It’s based on the formula,” the Vice President outlined.
Jagdeo drew attention to Norway, which took 10 years after producing oil to start saving any money through a Sovereign Wealth Fund. In Guyana’s case, this Fund was in place from the inception.
He shared that by investing in infrastructure, health care, education and other critical sectors, Government was creating a workforce that could create wealth for the country in a sustainable way.
“The same people who urge you to follow the Norwegian management and approach, they don’t look at what many other countries that had Sovereign Wealth Funds, that they only established it when their level of development had reached, in their determination, a critical minimum…We still have challenges to address that those countries had.
“They come up with all of these prescriptions for developing countries, but you can’t prescribe in abstract. You have to live here, understand the reality of the country, and challenges of the people. So, we want to save, but the current generation can’t even get a scholarship. We must fund their scholarship, first of all, because by funding their scholarship, more reliable power, we are developing their productive capacity to create wealth for this country,” Jagdeo added.
Back in December 2021, the Government amended the NRF Act to bring greater transparency and accountability in the management of Guyana’s oil resources, including the requirement that Government seek annual parliamentary approval for withdrawals from the NRF as stated in Section 19 of the NRF Act 2021.
The funds in the NRF, which are being held in an account at the Federal Reserve Bank of New York, have their origins in the oil-rich Stabroek Block offshore Guyana, where US oil major ExxonMobil and its partners – Hess Corporation and CNOOC – are producing light sweet crude using the Liza Destiny, Liza Unity, and more recently, the Prosperity Floating Production, Storage and Offloading (FPSO) vessels.
This month, the Guyana Government tabled a bill that sought to significantly increase the withdrawal amounts from the NRF.
Senior Minister with responsibility for Finance, Dr Ashni Singh presented the Fiscal Enactments (Amendment) Bill 2024 – a bill that intitules an act to amend the NRF Act, among other legislation.
The proposed bill was read for the first time in the National Assembly on Friday.
Under the new withdrawal formula in the proposed legislation, the Government plans to draw down 100 per cent of the first US$1 billion deposited into the Fund in the immediately preceding fiscal year; then 95 per cent of the second US$1 billion; followed by 90 per cent of the third US$1 billion; and 85 per cent of the fourth US$1 billion.
This proposed withdrawal formula is significantly higher than the figures that were catered for in the current 2021 NRF Bill. That NRF formula allows the withdrawal of 100 per cent for the first US$500 million; 75 per cent for the second US$500 million; 50 per cent for the third US500 million; 25 per cent for the fourth US$500 million; 5 per cent for the fifth US$500 million; and 3 per cent on the excess for the first US$2.5 billion.
