Guyana’s Natural Resource Fund witnessed a surge in interest income in the first half of 2023, earning US$35.6 million (approximately GY$7.42 billion). This development is attributable to higher deposit account balances and escalated interest rates set by the Federal Reserve Bank of New York.
In the first two quarters of 2023, the Fund registered total inflows of GY$91.52 billion (US$438.95 million). This consisted of profit oil, which accounted for GY$80.42 billion (US$385.69 million), and royalties, which summed up to GY$11.1 billion (US$53.26 million). These figures represent an upturn in profit oil revenue compared to the previous quarter, which posted GY$33.75 billion (US$161.86 million), and a slight decline in royalties from the previous quarter’s GY$12.01 billion (US$57.59 million).
The Federal Reserve Bank of New York, which holds the Fund’s deposit account, played a key role in the increase in interest income. Over the second quarter of the year, it raised its interest rates target range once, moving it from 4.75%-5% to 5%-5.25%. As a consequence of these adjustments, the Fund experienced higher interest rates on overnight deposits.
These boosted interest rates, coupled with an augmented account balance, culminated in the Fund raking in GY$4.16 billion (US$19.94 million) in interest income during the second quarter. This marks an increase from the GY$3.27 billion (US$15.66 million) earned in the previous quarter.
The Board of Directors of the Natural Resource Fund convened a meeting on June 26, 2023, where they agreed upon an updated investment mandate for the Fund. The board decided to maintain the funds in the deposit account held at the Federal Reserve Bank of New York, accruing interest on overnight deposits at the prevailing federal funds rate of 5.05%. The Bank of Guyana will continue to monitor the overnight interest rate, keeping the Board informed of any rate changes initiated by the Federal Reserve Bank for potential cash redeployment considerations. The same strategy was employed for the previous quarter.
The Board of Directors for the Oil Fund and the Central Bank of Guyana are working together to manage the Fund, after signing an operational agreement in January. The Chairman of the Board is retired Guyana Army Chief of Staff, Major General, Joe Singh.