The Government of Guyana, in another attempt to assure citizens of greater accountability and transparency in the management of Guyana’s oil resources, on December 16, 2021, tabled a Bill in the National Assembly for a new Natural Resource Fund (NRF) Act.
The Bill was tabled by the Senior Minister in the Office of the President with responsibility for Finance, Dr. Ashni Singh. It seeks to repeal the NRF Act of 2019.
The Bill contains several enhanced clauses, including one that seeks to provide for the establishment of a Board of Directors which will be responsible for reviewing and approving the policies of the Fund and monitoring its performance, thereby separating the management of the Fund from the Minister responsible for finance.
It also seeks to establish an amended nine-member Public Accountability and Oversight Committee with the responsibility of providing non-governmental oversight of the operations of the Fund, replacing the cumbersome 22-member committee previously proposed.
Notably, one of the key amendments in the proposed legislation is that the Minister could face up to 10 years imprisonment if he fails to disclose the receipt of any petroleum revenue received by the Government in the Official Gazette within three months of receipt of such monies.
Under the previous APNU+AFC Administration, there was widespread furor following the discovery that a US$18 million signature bonus had been collected by the Government from ExxonMobil but had not been disclosed to the citizens.
Further, former Finance Minister Winston Jordan had even denied ever receiving this sum until information came to light, exposing that the Ministry of Finance asked the Bank of Guyana to set up a special account in which the amount was to be placed.
After reluctant admission by the then APNU+AFC Administration subsequently, the public was still never provided with an explanation as to what the funds were spent on, despite the monies being afterward placed in the Consolidated Fund as required by law. With the provisions in the new Act, a situation like this could never repeat itself.
Another key improvement in the Bill is an updated section which not only requires the Government to seek Parliamentary approval for withdrawals from the Fund but sets out new, simplified calculations needed for ensuring that the Fund achieves its purposes.
It was only in November last that the former Finance Minister proclaimed that the NRF Act 2019 was the product of ‘extensive national and international consultations’ and that ‘the Coalition sought an NRF of the highest caliber’.
However, Jordan deliberately omitted the fact that the NRF Act 2019 was passed after the No-Confidence motion was successfully passed against the APNU+AFC Government in the National Assembly, rendering it a caretaker Government and shrouding the NRF Act in a cloud of illegitimacy.
Further, the NRF Act 2019 was the subject of criticism from many subject matter experts, including the Inter-American Development Bank (IDB) in its publication entitled, “Economic Institutions for a Resilient Caribbean” which includes a detailed assessment of Guyana’s NRF (pages 268-274).
Amongst the observations made by that assessment were:
“The objectives and design of the NRF raise several issues. The fund on its own cannot achieve the objectives that have been set for it. The rigid withdrawal rules may do little to foster stabilization or saving but may entail fiscal costs.” (p. 270)
“The formula for the maximum permissible withdrawal is among the most complex operational rules for a resource fund in the world. Its design departs from good practices.” (p. 271)
“State-of-the-art advice based on international experience and good fiscal management principles emphasizes simplicity, flexibility, transparency, and close integration with the budget and public asset-liability management. The rule’s complexity may also conspire against fiscal transparency and public understanding.” (p. 271).
The mechanism outlined in the Bill removes these complexities and hindrances to achieving the Fund’s objectives by providing a simpler, more transparent formula for calculating the ceiling on annual withdrawals.
This monumental legislation that the PPP/C government laid in the National Assembly, will improve the management of the natural resources wealth of Guyana for the present and future benefit of all citizens.