IMF urges Govt…Put all petroleum revenue payments immediately in Natural Resource Fund

Jan 29, 2018 News

– calls for legal requirement to ensure this is done

In keeping with the principles of accountability and effective cash flow management, the International Monetary Fund (IMF) has proposed to Guyana’s Government that all petroleum revenue payments should be immediately swept into the Sovereign Wealth Fund which would be renamed the Natural Resource Fund (NRF).
The Fund made these and other comments after reviewing the draft legislation which the administration has prepared to govern the Natural Resource Fund. This draft is still to be released for members of the public to review. Nonetheless, the IMF has advised that there be no delays in handing over petroleum revenue payments to the NRF once collected by the Guyana Revenue Authority or any other revenue collecting agency.
The Fund categorically stated that measures be taken to ensure that there is a legal requirement in place to reinforce the importance of having the funds transferred immediately.
Part Two of the NRF Bill speaks to the rules for deposits and withdrawals into the fund. It says that all petroleum revenue shall be deposited into the NRF at least every six months. The draft legislation notes that petroleum revenue includes royalty, the government’s share of profit oil and gas, corporate income tax (including potential petroleum or additional profits tax), bonus payments, dividends paid from a national oil company, revenue from the sales of shares or equity in a national oil company, and any other fiscal instrument levied solely on petroleum. Excluded are indirect taxes (VAT and customs duties) and fees collected by the Petroleum Commission.
The Natural Resource Fund Act establishes the NRF to “effectively, efficiently and wisely manage natural resource wealth for the benefit of current and future generations of the people of Guyana.” The worthy objectives are to prevent revenue volatility from leading to volatility in public expenditure, prevent a loss of economic competitiveness, fairly transferring natural resource wealth across generations, and use natural resource wealth to finance infrastructure, social development and regional distribution programs.

STABILISING EFFECT
While the intention to create a Natural Resource Fund has earned the APNU+AFC Administration much praise, there remains concerns by some that the nation is yet to know what will be the specific features of the Fund.
Natural Resources Minister, Raphael Trotman had told Kaieteur News that the Fund will have several features, one of which will be for budget stabilisation.
The Minister said, “One must first understand that the (Natural Resource) Fund is just a generic name. Most funds of this kind have several features which ours will have as well. However, the main characteristic of this Fund is to save money for the future generation which would be garnered from our oil wealth.”
Minister Trotman said that there is already a draft for the Fund in place. He said that it is in the possession of the Finance Minister, Winston Jordan. The Leader of the Alliance for Change (AFC) said that government is going to continue with efforts to refine the Bill before bringing it for public discussion.

Natural Resources Minister, Raphael Trotman

“…But back to the various features of the Fund; it will of course, have a feature for saving money and one for investing money. It will also have another crucial aspect which will be a budget stabiliser. In this regard, let us take the gold sector for example. Let’s say we have the Fund and the government puts together a budget expecting that it will get $5 from the gold sector but it only collects $3.”
In this regard, the Minister posited that Government would be able to enter the Fund to make up for that short fall. He said that this would be done so as to ensure that budget targets, once announced, are met.
“So you can now take from the Fund to ensure you have levels of growth in the economy and you can meet the programmes and targets budgeted for. Additionally, there is another aspect of the Fund that will be dedicated to environmental protection. So some moneys from the fund will be put aside to protect the environment and then we are looking at infrastructural and social welfare projects,” expressed Minister Trotman.

FRAMEWORK
During his 2017 budget presentation, Trotman had told the House that it is important that the extractive industries that fuel the nation’s growth today also provide for the children tomorrow. In an effort to ensure that the benefits accrued from the natural resources sector reach every Guyanese for generations to come, he said that the Government is committed to the establishment of the Fund and will develop a framework for it.
He commented that the Fund will enable the Government to protect the economy from the volatile nature of natural resource revenues, help grow and modernise the sustainable non-extractive sectors of the economy, and further enhance the capacity of the citizenry.
“We have already indicated that we will consider three sub-funds within the Fund. The three sub-funds are: 1) Stabilisation Fund, 2) Infrastructure and Social Development Fund and 3) Citizens Participation Fund. We have already begun seeking advice and guidance on developing such a Fund from the School of Public Policy- University of Calgary and the Commonwealth Secretariat, both of which are equipped with strong expertise on extractive resource governance,” the Natural Resources Minister had said.
Trotman noted that the creation of a long overdue Fund will demonstrate to Guyanese and the world at large, that hydrocarbon development, and by extension all other extractive industries, can be catalysts for a green economy.