In outlining its proposed plan for managing future petroleum revenues and establishing a fiscal rule and a Sovereign Wealth Fund, the Guyana government through its Ministry of Finance stated in a Green Paper presented to Parliament on Wednesday, how petroleum revenue will be integrated in the National Budget.
According to the document, Petroleum revenues, as well as excess revenues from mining and forestry, will be deposited into the Natural Resources Fund (NRF) – “a US dollar bank account held by the Bank of Guyana – from which withdrawals will be made, based on a fiscal rule.”
The withdrawals from the NRF, the Green Paper states, will be deposited into the Consolidated Fund to form part of the financing streams for the annual budget, along with loans and tax and non-tax revenues.
Government will then determine its development priorities, based on the costed Green State Development Strategy (GSDS), and the available income envelope which, from 2020, will consist of petroleum revenues, loans, grants, tax and non-tax revenues. “Priority will be placed on catalytic investments to transform communities, regions and the country as a whole within the context of the measurable targets, identified within the GSDS,” the document outlined.
According to the proposed measures outlined in the Green Paper, the Natural Resource Fund cannot exceed the amount approved by Parliament. “In addition to withdrawals from the NRF being deposited into the Consolidated Fund to finance development priorities, the only further drawdowns that can be made would be for Petroleum Tax Refunds, when necessary.”
Extensive advice on the Green Paper and the Natural Resource Fund Act – now being finalised – was received from the World Bank, The International Monetary Fund and the Commonwealth Secretariat, making the legislation, according to the Ministry of Finance, “one of the most progressive in the world to date with an emphasis on fiscal prudence, inclusivity and complete transparency.”
However, the proposed mechanism for the management of the Fund, which places significant authority with the Ministry of Finance, is being criticized in the public domain.
Former Presidential Advisor on Petroleum Jan Mangal said in a Facebook post on Thursday that too much power vested in a Minister is tantamount to politicizing the oversight of the Fund. “Did those in charge not learn from the Petroleum Commission Bill? We seem to be trying our best to repeat the same mistakes now with the SWF, with respect to politicizing the oversight of the SWF by placing too much power with a Minister,” he stated.
The Green Paper outlines strict fiscal rules for the management of the Fund, with Finance Minister, Winston Jordan playing an integral role in the composition of the macroeconomic committee responsible for the Fund’s administration.