Guyana’s Vice President Dr. Bharrat Jagdeo is defending a decision to revise the withdrawal rule in the country’s Natural Resource Fund (NRF) Act, telling reporters at a press conference on Thursday that the original rule is “very conservative”. This was in response to a question about whether it is a poor reflection on the government to alter the formula so soon for increased financial withdrawals.
The current formula allows approximately US$1.15 billion of the US$1.97 billion in the NRF, otherwise called Guyana’s oil fund, to be withdrawn this year.
To this end, the Vice President said, “I think…it was conservative, very conservative.”
The need for revision stems from an expansion in Guyana’s budget. The government’s US$5.5 billion 2024 budget is 47% larger than the one approved in 2023. This expansion designates money for major projects in transport infrastructure, energy, social services, and the establishment of new schools and hospitals across the country.
Presenting the budget last Monday, senior minister with responsibility for finance, Dr. Ashni Singh said, “Every single Guyanese family should have access to decent housing including the potential to own their own home; sufficient nutritious food to experience zero hunger; good quality healthcare from conception to old age; relevant educational and skills training opportunities to equip those of employable age for the world of work; potable water and sanitation; and recreational facilities to support healthy living.”
However, with the increase in spending there are concerns about the potential overheating of the economy. The International Monetary Fund (IMF) in December released a positive report on Guyana’s development. But it warned the economy could become overheated, leading to inflationary pressures and appreciation of the real exchange rate beyond the level implied by a balanced expansion of the economy.
Jagdeo was asked to address concerns about the potential onset of Dutch disease – an economic condition where a sudden increase in wealth leads to negative repercussions. He said, “We have laid out a sustainable framework that will not cause a serious pressure on the exchange rate to appreciate.”
He has said that while the risk of overheating is a fair concern to have, the administration can manage it.
The government is expected to take an amendment to the withdrawal rule for its oil fund to Parliament in the coming weeks. Jagdeo opted not to disclose the amount the government plans to withdraw from the oil fund, noting that the Finance Ministry will take the lead.
