Guyana’s Finance Minister, Dr. Ashni Singh tabled the Natural Resource Fund Bill 2021 in Parliament on Thursday morning, seeking to bring a more practical governance mechanism for the management of the country’s petroleum revenues, especially where it concerns rules for withdrawals, and management of the Fund.
The new Bill seeks the establishment of a 9-member Public Accountability and Oversight Committee, a reduction of the 22-member committee the current Act has.
The Act currently in place was passed into law by the previous government in January 2019, but the new administration has insisted that it is not practical. This, the government posits, is demonstrated by the current configuration of this committee, which is drawn from a wide cross-section of Guyanese society, including civil society, attorneys, consumers, the press, accountants, the private sector, local democratic representatives from each region, academia, the Extractive Industries Transparency Initiative (EITI), and the Transparency Institute of Guyana Inc.
The new committee will have nine members, which will include a nominee of the national assembly, and representatives of the religious community, the private sector, organised labour and the professions.
Describing the Act on Wednesday, Dr. Singh said that the committee cannot provide the oversight and management functions that the Fund requires. Hence, the government is of the view that too much of this responsibility is left to be usurped by the Minister of Finance.
To provide effective, regular management and oversight functions for the Fund, the new Bill provides for the establishment of a Board of Directors of the Fund.
These functions include the overall management of the Fund, reviewing and approving its policies, monitoring its performance, ensuring compliance with its approved policies, exercising general oversight over all aspects of its operations, and ensuring that its management is in compliance with the law.
If passed, the law would mandate the Board to consist of three to five members, appointed by Guyana’s President, serving for a period of two years.
One member would be nominated by the National Assembly, and another would represent the private sector.
“The Directors shall be selected from among persons who have wide experience and ability in legal, financial, business, or administrative matters,” the Bill states.
Dr. Singh believes the Board will put a necessary governance structure in place, which is absent from the current Act.
The Minister, under the proposed Bill, will be responsible for giving policy directives to the Board.
The Bill also simplifies the rules used to determine maximum withdrawals from the Fund in a fiscal year. Currently, the Act sets out a complex set of formulas to determine the ceiling, which involve the calculation of benchmark oil prices based on a moving average of past prices and forecasts of future prices, estimates of oil production, non-oil revenues, and the NRF’s balance.
In a report published in February titled ‘Economic Institutions for a Resilient Caribbean’, the Inter-American Development Bank (IDB) criticised the rule as being too complex and departing from good practice.
Under the Government’s proposed Bill, Guyana will be allowed to withdraw 100% of the first US$500 million of deposits from the previous fiscal year, 75% of the second, 50% of the third, 25% of the fourth, 5% of the fifth, and 3% of any amounts in excess of the first two US$500 million. When the government doesn’t yet have these figures, the figures would be substituted with the best estimate. The exception to these rules is cases of major natural disaster(s).
Ultimately, Guyana’s Parliament will vote to approve the amount to be withdrawn.
Dr. Singh believes the new Bill will provide a strong framework for the management of the Fund.
