Natural Resource Fund Act

It is now nearly three weeks since the last sitting of Parliament which approved a variety of bills pertaining to the 2020 budget. The PPP/C government has stated that it has a robust legislative agenda and the public must begin seeing evidence of this. Having spent five years on the opposition benches in the 11th Parliament, the new government must be acutely aware of its legislative priorities.

One of these must certainly be the Natural Resource Fund (NRF) or our version of a sovereign wealth fund to gather the revenues flowing in from the country’s natural resources. The country has already accrued over US$150m since the production of oil began in December last year and this sum is sitting in an account in the New York Federal Reserve Bank without the country and its people having access to it as the natural resources legislation has not been fully activated.

On December 11 last year, the Ministry of Finance and the Bank of Guyana (BoG) signed a MoU which set forth the obligations of the BoG as the operational manager of the NRF, which include: 1) receiving and accounting for all deposits into the NRF; 2) investing the NRF in eligible asset classes; 3) appointing private managers and custodians; 4) reporting on the performance of the NRF on a monthly, quarterly and annual basis; 5) implementing management systems, procedures and risk management arrangements in accordance with international standards; and, 6) providing the public with information on the NRF as required by law; among others.

The Natural Resource Fund (NRF) Bill No. 14 of 2018 was tabled in Parliament on November 15, 2018, passed on January 3rd, 2019 and assented to on January 23rd, 2019. Considering that this crucial bill was debated after the APNU+AFC government had fallen in a motion of no confidence on December 21, 2018, the then opposition PPP/C understandably boycotted the second and third readings of the bill and disavowed any participation in the enlivening of the Act.

The PPP/C subsequently declined to make nominations to the Macroeconomic or Investment committees under the act after a formal request had been made to then Opposition Leader, Bharrat Jagdeo. Then opposition MP Juan Edghill wrote then Finance Minister Winston Jordan stating: “The Office of the Leader of the Opposition wishes to remind you that this activity which you seek to engage in, by inviting our nominations is unauthorized, out

side of your constitutional mandate, and is not properly set in law”.

He added: “In essence, your government and you lost the mandate to pursue such actions as you did on January 3, 2019; you proceeded even against the best of advice and public pronouncements made”.

It is now for the PPP/C government to make haste with the full activation of the Act so that the people of Guyana can exercise sovereignty over the funds that have accrued from the extraction of oil under this benighted 2016 Production Sharing Agreement.

What is the PPP/C government’s thinking on the NRF? Will it move to repeal the Act and bring its own? At this point it may be a far better proposition for the government to make whatever amendments it feels are absolutely necessary to the current Act unless it holds to the position that any legislation passed post-December 21, 2018 is tainted.

Whatever it does, the government must fully engage with both the opposition and civil society on the NRF Act. There were major concerns over the bill as it relates to ministerial powers and the manner in which the key committees are composed and constituted. There could be a swift engagement at the Natural Resources Sector Committee of Parliament on the way forward.

As it relates to civil society, Policy Forum Guyana (PFG) which groups a number of non-governmental organisations had shown interest in the bill and had raised a number of valid concerns.

PFG had said that there was an assumption that the views of financial experts are superior to everyone else and this was carried over into the Natural Resources Fund Act by the requirement of a master’s level qualification for members of the important decision-making committees, all of whom are appointed by the Minister of Finance. It said that this approach found the rest of the society lumped into a Public Accountability & Oversight Committee. This committee is therefore seen as one with no real decision-making powers, having a haphazardly chosen membership with no governing principles, the PFG had said in a statement.

While not directly related to the NRF, the Irfaan Ali administration will have to present to Parliament and the public a policy paper on spending during the life of this administration. Given the historic deficit in the 2020 budget, the internal debt and the significant external debt, the PPP/C government will have to show fiscal restraint. There cannot be unrestrained spending and borrowing that would put the country in a deeper hole even before it begins to adumbrate how the economy will be oriented towards jobs growth and green fuels.

With just around US$150m in oil revenues in the New York account and one more lift of oil expected this year, the Ali administration has already signalled that it is seeking to raise US$250m (over $50b) for its housing programme. The new proposed Demerara Harbour Bridge will come with a hefty price tag as will the various extensive road networks under consideration and the needs of the Guyana Sugar Corporation.

The legislation establishing the NRF sets out the maximum amount which can be withdrawn in any given year with the ethos being to ensure that there isn’t runaway spending and reckless decisions. In the absence of a functional NRF and a defined policy on spending in the wake of the accrual of oil revenues, it is difficult to reconcile this public announcement of the mobilizing of US$250m in addition to other indicators of the raising of funds from sources where interest has to be paid.

There must be some relationship between the NRF and the government’s spending plans and President Ali has to address this as soon as possible.