Government explain why it is not yet tapping into its oil fund

An estimated US$534M is sitting in Guyana’s Natural Resource Fund (NRF), in the Federal
Reserve Bank of New York.
The Government has maintained its decision not to spend Guyana’s oil money until the
provisions governing the management of the Fund are amended. The government said that the
following are reasons why they are not tapping into the NRF. Firstly, the Government has always
held that the NRF Act was passed during a period when the government in power was
illegitimate. It noted that on December 21, 2018, the former APNU+AFC Administration was
defeated in the National Assembly by a No Confidence Motion. From all indications, it said that
the then administration should have cut its losses from the month prior and started preparing for
the election of a new government.
However, one month later, the government moved to pass its NRF Bill through Parliament, while
the Parliamentary Opposition abstained from the House, in protest of what it dubbed as the then
government’s defiance of the No Confidence vote. Guyana’s Finance Minister, Dr. Ashni Singh
in a recent missive said, “This is the single most important piece of legislation to have been
enacted in many years, and the APNU/AFC government saw nothing wrong with sneaking it
through Parliament at a time when they had lost their mandate to govern, when they were widely
regarded as an illegal and illegitimate government, and without any Opposition input
whatsoever.” They noted that the PPP/C had committed to replacing the Act once the political
uncertainty ended through the swearing in of a new, democratically elected government. As
such, it was not only the uncertainty of the circumstances under which the Act was passed that
made it troublesome. It was also its contents.

In responding to Former Finance Minister, Winston Jordan’s recent statements about the NRF
Act in the letter pages of Stabroek News, Dr. Singh pointed out a key criticism of its
configuration, by Guyana’s development partner, the Inter-American Development Bank (IDB).
He reveled that the Bank published a report entitled “Economic Institutions for a Resilient
Caribbean” which includes a detailed assessment of Guyana’s NRF (pages 268-274). He said
that in outlining options for reform, the IDB stated, “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.” He
noted that the fund’s stated objectives are stabilisation, competitiveness, saving and
development. The IDB stated that these objectives transcend what the NRF’s operations can
achieve. “The rigid withdrawal rules may do little to foster stabilisation or saving but may entail
fiscal costs,” the Bank said. “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,” the IDB noted. It continued, “State-of-the-art advice based on international
experience and good fiscal management principles emphasises simplicity, flexibility,
transparency, and close integration with the budget and public asset-liability management.”
The bank pointed out that to put simply, for the purpose of accountability, the IDB’s position is
that the formula guiding maximum withdrawals should be simple enough for an outsider to read
and comprehend, and that unnecessary complexity would be an affront to transparency and
public understanding. “The irrefutable fact of the matter is that the NRF Act in its current

formulation was a piece of legislation which was very poorly conceived, and was ‘rammed down
the throats’ of the nation during a period when the APNU/AFC was in a state of illegality and
illegitimacy,” the finance minister said.
Vice President Dr. Bharrat Jagdeo has also said that, in its current configuration, he believes the
Act is not insulated from political maneuvering. Hence, the Act must be amended. President
Irfaan Ali has promised the legislation will be laid in Parliament before the year ends. Dr Jagdeo
was reported as telling a news outfit in August that the government will make public a
comprehensive plan for the spending of Guyana’s oil money, with priority areas such as
infrastructure and social upliftment, including investments in education and healthcare. The Vice
President had explained that the proposed projects will go through a process of accountability,
requiring the scrutiny and approval of the National Assembly.
Additionally, the Government intends to allow Guyana’s oil money to accrue in the NRF, as
current periodic deposits from the sale of Guyana’s crude are not significant. He stressed that in
the years to come, when ExxonMobil operationalises more development projects, steeply
ramping up production, the fund will see a corresponding increase in inflows. In the meantime,
the government will ensure it maximises Guyana’s earnings from the oil and gas industry, in
accordance with its deals with oil companies. The VP said that even though the oil money is not
being spent, positive transformations in Guyana’s economy have already begun. While the oil
and gas industry is a helpful catalyst, it is the government’s business-friendly policies which
have commanded the confidence of international investors, and prudent management which has
made relief available for the most vulnerable in times of economic hardship.