Widespread consultations on the creation of a Sovereign Wealth Fund (SWF) and ensuring that the fund is insulated from political interference are two areas that US Ambassador to Guyana, Perry Holloway, pointed to when creating a fund that works for the benefit of the people of a country.
The Ambassador told OilNOW during an interview on Friday he believes that once the Guyana government consults and agree on how this fund is set up and what are the priorities, its next challenge is figuring out how to protect it from political influence. Buy-in, he said, is important for all the key stakeholders; government ministries and agencies, political opposition, citizens, private sector and other concerned groups.
In this regard, the Ambassador says he looks forward to seeing how the government will accomplish this. “Many countries; they decide how their Sovereign Wealth Fund is going to work. They passed the law – here are our priority areas and here is the percentage of money we will focus towards things – and then they say in order to change this law, we need like two thirds of our Parliament to vote to change it so that makes it very hard to do. When do you think in Guyana you will get two thirds of parliament to agree to anything…that is very difficult under this Government, that was difficult under the previous Government.”
He explained that it is important for Guyanese to have widespread knowledge on the SWF and its impact on the country’s development. “If the price of oil goes down much lower than you ever thought but you had budgeted to do all these wonderful things in your budget then you pull from the rainy-day fund to supplement your priority areas,” he pointed out.
The Guyana government has already developed draft legislation for the establishment of a Sovereign Wealth Fund, with key support from the Commonwealth Secretariat.
Guyana’s Minister of Finance, Winston Jordan, told OilNOW that both himself and Minister of Natural Resources, Raphael Trotman, have examined the draft and incorporated some of the best practices that were presented to them in a SWF model, during a visit to Uganda.
He therefore underscored that the Government is making significant and careful steps in the creation of such a fund.
“I sent the draft from the Commonwealth Secretariat to a range of multi-stakeholder groups and we have gotten extensive feedback, which essentially will see a substantive revised draft so the IMF team will be working with at least the ministry of natural resources and sitting down with people helping to reshape the draft that was left,” Mr. Jordan said.
He disclosed too that the Cabinet has approved three broad objectives of the fund and these are budget support for infrastructural development, stimulation aspect – which recognizes the unpredictability of oil prices, and lastly, provisions for savings for future generations.
This means that laws that are crafted for the utilization of the fund will be focused around these three objectives.
At his post-Cabinet news conference on Thursday in Georgetown, Guyana, the country’s Minister of State, Joseph Harmon, said the administration cannot afford to be complacent in safeguarding the interest of Guyanese. “This administration, we are taking our time. We’re trying to get things right, because we believe in the interest of the people of this country we have to establish these funds, we have to establish all of these processes in a sound way that can stand scrutiny for years to come.”
He noted that Guyana is looking at best practices around the world and tailoring the SWF to “our own local conditions.”
The Chatham House and other well-established fund management countries and agencies have been instrumental in Guyana’s quest to create a successful SWF.
An inter-ministerial technical team has been formed to oversee the finalization of the draft SWF legislation, after which it will then go to the Cabinet. “After that process is completed it will be made available to the public for wide consultations, before being introduced into Parliament,” the finance minister earlier disclosed.