The National Assembly of Guyana approved the first withdrawal from the country’s Natural Resource Fund on Thursday afternoon, clearing US$607 million for spending.
The withdrawal clears the fund of all revenue, as per the provisions of the new law, the Natural Resource Fund Act 2021 which was passed in the House in December.
The Act, when passed, replaced the 2019 version, which the current government said had worrying deficiencies. The government introduced a board of directors, cut down the size of an oversight committee it said was too cumbersome, and simplified the previously complicated formula for the upper limit on yearly withdrawals.
The first withdrawal, which amounts to about GY$126 billion, will be deposited into Guyana’s main bank account, the consolidated fund, and will be used for budget support.
Guyana’s Finance Minister Dr. Ashni Singh had announced in January that the funds would be used to support the budget for Guyana’s 2022 fiscal year. Of Guyana’s GY$552.9 billion 2022 budget, the first withdrawal from its oil fund will make up 24%.
Vice President Dr. Bharrat Jagdeo had said that the government will focus the country’s oil wealth on building up the country’s infrastructure. The government ministry with responsibility for infrastructure was given the largest budget of all ministries for capital expenses – GY$88 billion. It will be used to build a large network of roads and bridges to open vast swathes of land for new communities to be built as the government doles out thousands of acres of land to citizens, fulfilling an election promise to give its citizens 50,000 house lots before its term ends.
The government is also pushing for the construction of bridges to improve intra-country connectivity, and improve trade between Guyana and its neighbours, Brazil and Suriname. It has placed a lot of emphasis on improving the ease of doing business which the private sector has complained about for years. Funds have been budgeted for the introduction of an electronic single window for trade.
2022 is also the year for the commencement of construction on two large energy projects. The gas-to-energy project design sees ExxonMobil piping natural gas from its offshore Liza operation to an onshore power plant for electricity generation. It is expected to be commissioned in 2024. The Amaila Falls hydropower project is the second project, expected to be commissioned in 2027. The two projects, the government says, will cut the cost of power in half. Government expects this to revolutionise business in Guyana, as business have long complained that the high cost of power hampers their ability to be competitive.
Guyana expects US$957 million to flow into the Natural Resource Fund in 2022, a significant projected increase due to the expected start-up of ExxonMobil’s Liza Phase 2 project early this year.