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Single Fund deemed to be sufficient for petroleum revenue management

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A single fund will be the most “effective, efficient and transparent mechanism” for achieving the multiple objectives of the Guyana Government for the successful management of oil and gas revenues. 

This is the determination of the Ministry of Finance as outlied in the Green Paper on “Managing Future Petroleum Revenues and Establishment of a Fiscal Rule and Sovereign Wealth Fund” tabled in the South-American nation’s National Assembly on Wednesday, August 8, 2018. 

According to the Paper,” the Government has carefully considered whether separate funds are required to meet the multiple objectives of intergenerational savings, stabilization, and investing in developmental priorities.” 

The document went on to say that “the view of the Government is that a single fund, the Natural Resource Fund, will be the most effective, efficient and transparent mechanism for achieving these multiple objectives.” 

This determination was arrived at after careful consideration of a number of factors, the report stated. 

Among the considerations was that of cost. “Establishing a SWF is relatively complex and there can be substantial administrative costs. If two completely separate funds are established then this implies that there are two governance structures, two investment policies/ investment mandates, two sets of accounts and two external audits,” the Green Paper stated. 

It further added that it would be unwise to spread the limited expertise and experience in fund management in Guyana across two separate funds. 

Objectives 

The proposed single Natural Resource Fund is designed with three main objectives. In presenting the Green Paper to the South-American nation’s legislative body on August 8, Guyanese Finance Minister Winston Jordan explained that the three goals of the fund are as follows; “ensure the sustainable use of our petroleum revenues to obtain a diversified and  green economy, ensure we avoid the mismanagement of our national patrimony and the dreaded resource curse and ensure that all Guyanese, especially our youth who comprise the majority of our population and future generations, are able to benefit from these windfall revenues thereby enabling them to live in security and comfort.” 

As such, he stated that “in the interest of good governance, I anticipate that no member of this honorable house will argue against the establishment of the Sovereign Wealth Fund.” 

With its three broad objectives of “stabilization, savings and domestic development,” Minister Jordan said that the Natural Resource Fund will play a crucial role in the management of Natural Resource revenues of the magnitude that Guyana is likely to experience. “The Fiscal rule options that have been proposed in the Green Paper are designed to achieve these objectives,” he said.

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