The Exxon Signing Bonus Saga – A Storm in a Teacup

Jan 13, 2018 Letters

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DEAR EDITOR,
Over the course of the past several weeks, I have been following the “brouhaha” over the Exxon Signing Bonus as carried in the local print media. Upon careful consideration of the issues being raised, I can only conclude that the matter amounts to nothing more than a “storm in a teacup”.
As I understand it, it is incontrovertible that:
(i) the Government of Guyana did receive a cheque from Exxon Mobil as a signing bonus in the amount of US$18 mn;
(ii) the cheque was made payable to the Government of Guyana and not to any individual and this was publicly confirmed by an official of Exxon Mobil and
(iii) on the instructions of the Minister of Finance, a U.S dollar denominated account was opened with the Bank of Guyana and into which the cheque was deposited.
Among the issues being raised are that the Government was trying “to thief” the money, that the way in which the transaction was handled was lacking in transparency and that the money should have been lodged into the Consolidated Fund.
In addressing the first of those concerns, given the fact that the cheque in question was not made payable to any individual but to the Government of Guyana and was deposited into the Government’s account with the Bank of Guyana, there is no reason to dwell any further on the foolish assertion that the Government was trying “to thief” the money.
In relation to the issue of transparency, let me begin by explaining to the population at large that the Bank of Guyana is the principal banker of the Government of Guyana. It manages the accounts of all of the various ministries by cashing cheques and accepting deposits, similar to how an individual treats with a commercial bank. It also provides monthly statements in relation to activities on these accounts to each Ministry so that Ministry staff can reconcile these statements with the Ministry’s own internal records.
The process of opening a U.S dollar denominated account with the Bank of Guyana is part of Government’s everyday business with the Bank of Guyana and is no less transparent than Government opening an account denominated in Guyana dollars or any other currency with the Bank of Guyana.
We are operating in a multi-currency environment, whether it involves U.S dollars, Pounds Sterling, Euros, or Japanese Yen and if Government chooses to hold balances in any of these currencies for strategic reasons, so be it. Further, the reporting and reconciliation processes as outlined in the previous paragraph serve to underpin normal accounting internal control requirements in relation to transactions being undertaken.
Among the three issues raised, the most controversial one appears to be the alleged failure by Government to convert and pay the proceeds of the U.S dollar cheque into the Consolidated Fund, an assertion that is pedantic and one which does appear to confirm the saying that “the law is an ass”.
The Consolidated Fund is an account that is intended to provide a record of all receipts into and payments out of Government’s coffers. While it is denominated and held in Guyana dollars, there is nothing to suggest that the overall fund cannot consist of an amalgam of various currencies in which Government might be holding balances.
Thus, part of the Consolidated Fund could be in U.S dollars, another part in Pounds Sterling, etc, with the major portion being in Guyana dollars. However, for reporting purposes to Parliament or to any other entity, these foreign balances would be translated into Guyana dollars using the appropriate exchange rate and then aggregated with the Guyana dollar balances to give the total balance on the Fund.
The implicit suggestion that the U.S dollar cheque should have been converted into Guyana dollars and then deposited into the Consolidated Fund, smacks of an unfamiliarity with the tenets of basic finance.
As explained by Ministry of Finance officials, Government was holding the funds in U.S dollars to meet upcoming obligations in respect of legal fees associated with the Guyana/Venezuela border dispute and which will become payable in U.S dollars.
This is an eminently sensible strategy, since Government avoids the costs and risks in selling its U.S dollars and having to re-enter the market at later dates to buy U.S dollars at perhaps higher rates due to the fluctuating nature of the Guyana dollar. In other words, Government is consciously hedging its position against adverse changes in the U.S/Guyana exchange rate. There is also the added risk that having converted its U.S dollars, the Bank of Guyana might not have the foreign exchange available at the time(s) when required by Government.
In sum, none of the concerns raised merit the attention and coverage received and can only be regarded as being frivolous and myopic. Rather, Government should be commended for its foresight in protecting itself against the possibility of a declining Guyana dollar given its upcoming obligations in U.S dollars, and in saving taxpayers the additional burden that would ensue from any decline in the Guyana dollar that might occur.
Finally, our accounting and legal professionals must embrace the new environment in which entities do business which may involve holding accounts in currencies other than their domestic currency, but which are translated into the local currency, equivalent and aggregated with local currency balances for reporting purposes.
In the current international environment where trade in goods and services takes place in a variety of currencies and where opportunities for hedging risk become available, it would be foolish to suggest that balances in respect of the Consolidated Fund must only be held in Guyana dollars. Let’s stop making an ass out of the law!
Steve Fraser

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