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Parliament should take command in managing Sovereign Wealth Fund – Commonwealth proposes
Finance Secretary, Dr. Hector Butts, makes a point during the meeting. Minister of Natural Resources, Mr. Raphael Trotman is seated to his right.
The Commonwealth Secretariat has submitted a proposal for a possible model for Guyana to consider using in the establishment of a sovereign wealth fund (SWF).
Yesterday, Minister of Natural Resources, Raphael Trotman, along with Finance Secretary, Dr. Hector Butts, and other officials from the Finance Ministry and the Guyana Revenue Authority (GRA), met with Economic Adviser at the Oceans and Natural Resources Division of the Commonwealth Secretariat, Dr. Daniel Wilde, who submitted the proposal.
The meeting was held at the Finance Ministry’s Boardroom, on Main Street.
Last year, Trotman, who has responsibilities for the emerging oil sector, sought Cabinet’s approval to re-engage the Commonwealth in the process as Guyana gears-up for production.
Government is working on crafting fiscal policies between the Ministries of Finance and Natural Resources and looking at petroleum legislation and regulations.
“We are looking at the idea of setting up a petroleum regulatory agency, and we are looking forward to hopefully keeping our promise of laying in the Parliament, by the end of 2016, the regulatory framework,” Minister Trotman explained yesterday.
Guyana has been receiving many offers for proposals relating to the setting up of the SWF, engaging the United Nations, the United States and Canadian governments. There is also a likely collaboration with the Government of Mexico.
Some of the key aspects of Dr. Wilde’s proposal dealt with the economic and sustainable amounts that could be withdrawn from the SWF annually and how the fund should be managed and what it should be invested in.
Based on Wilde’s proposal, the Parliament would be at the top of management hierarchy, whereby it will be responsible for passing the laws and outlining the roles and responsibilities of all of the other related institutions.
The Ministry of Finance, which comes under the Parliament, will be tasked with the drafting of a detailed investment mandate, while the Central Bank will be tasked with managing all of the investments.
Trotman said that Guyana shouldn’t wait for oil before it acts. Instead it should start saving from the revenues of all its resources, particularly gold. This way, he said, the country will be better prepared when oil revenue comes on stream.
A SWF is a state-owned fund, which is invested in real and financial assets such as stocks, bonds, real estate, precious metals, or in alternative investments such as private equity funds. They are mostly funded by revenues from commodity exports or from foreign-exchange reserves held by the Central Bank.
The idea of fund took more importance after US-owned ExxonMobil announced last year that it had discovered significant evidence of oil in its offshore concession, sparking high interest in other explorations.
Guyana is working now to put regulatory and other systems in place to deal with the revenues that can come in as little as four years.
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