Guyana continues to receive advice from experts in the field of revenue management who point to the vital importance of establishing a Sovereign Wealth Fund (SWF) with strong fiscal rules in order to effectively manage the billions of US dollars the country will receive from oil production.
Norwegian Economist and expert in the field of natural resources management, Vidar Ovesen, said petroleum revenues are finite, volatile, uncertain and often significant. “Policies should aim at smoothening public expenditures over time, preventing external shocks from hitting economy. Strong focus should be on long-term fiscal sustainability.”
Mr. Ovesen, speaking at a workshop on Stabilization/Sovereign Wealth Funds in Georgetown on May 21, said petroleum revenues, if not properly managed, can do more harm than good to the economy. “To avoid this, the framework for managing petroleum revenues must be considered in a broader fiscal and macroeconomic context.”
Designing the legal and institutional framework requires emphasis on good governance and transparency the Economist stated.
The International Monetary Fund (IMF) has pointed out that very few developing or transitional economies with a rich petroleum endowment have become success stories in development and poverty elimination. Oil wealth has come to be seen more often as a curse than as a blessing, the IMF has said. Yet petroleum revenue could, in principle, unlock the constraints of foreign exchange, savings and public finance and underpin a path of growth, development and poverty elimination. This is the pathway Guyana is looking to take as the South American country prepares for fist oil in less than 24 months.
A former Member of Parliament (MP) in Guyana speaking at a SWF presentation on May 31 told those gathered that political partisanship could be the ‘biggest mistake’ for the management of oil revenue in the country.
To avert this, the former MP – Charles Ramson Jr. recommends the establishment of a bi-partisan group comprising six Parliamentarians; three from each side of the House that will focus on the SWF. “Each team should be supported by a technical person, and they will be able to take all the briefings, the overseas trips etc., so they make sovereign wealth fund their focus. They have the responsibility to brief their party, their constituents…and engage with the public and report that feedback.”
Authorities in the lone English speaking country on the continent are looking to implement new laws which will enable it to bolster its economy, tackle poverty and meet crucial sustainable development targets.
Revenue from multiple offshore developments, beginning with Liza Phase 1, could help Guyana meet the Sustainable Development Goals agreed by United Nations countries.
Commonwealth Economic Adviser Daniel Wilde in January said, “If used wisely, Guyana’s oil revenue could help it to fundamentally transform its economy and enable it to meet key sustainable development goals. That’s why we have been working closely with the Government to draft new legislation to establish a Sovereign Wealth Fund. Once implemented, the Sovereign Wealth Fund should contribute to economic stabilization, fairly transfer petroleum wealth across generations and maintain economic competitiveness.”
The country’s Finance Minister Winston Jordan said at an April 9 press conference in Georgetown that a green paper along with the requisite draft legislation on the Natural Resource Fund – renamed from Sovereign Wealth Fund – will be sent to Cabinet shortly for its examination. Once this is cleared by the Cabinet, Mr. Jordan said it will then be made available to the public “for further discussions, refinements and improvements, then we will hand it over to the Attorney General Chambers and then to the Parliament.”
This will be seen as a welcomed development by Guyanese, who through various civil society groups and business representative bodies, have been pressing for work on the establishment of the fund to be fast-tracked.