SWF mechanisms not strong enough to prevent Govt. from raiding oil revenues

SWF mechanisms not strong enough to prevent Govt. from raiding oil revenues – Opposition Leader

Aug 18, 2018 News

The mechanisms outlined in the discussion paper that the Government has released on the management of oil revenues are too weak, according to Opposition Leader, Bharrat Jagdeo.
“Any flow to the budget must be conditional, based on events that can be independently verified by a third party which reports to the National Assembly,” Jagdeo stated. He said this will avoid ‘raiding’ of the fund by Government, based on contrived events which have happened in other countries.
The Government recently released a Green Paper on the management of oil revenues. According to the Opposition Leader, the model outlined in the Green Paper is one that ignores best practices around the world, which dictate that there should be minimal political involvement in the management of the fund. He pointed out that the entire fund is going to be controlled by the Government through the Ministry of Finance.
The vision of the Government is that there will be a Natural Resource Fund which will be held by Central Bank, but Jagdeo noted that the bank reports to the Minister of Finance.
As it relates to the management structure for oil revenues, Jagdeo also noted that the Minister of Finance will name the members of the macro-economic committee and the investment committee
‘…Totally dominated by the Government, unlike most of the models that have been successful around the world. So we have a huge disappointment with that. If that will dictate what is in the legislation we will oppose, because it will lead to enormous problems down the road and too much political involvement,” Jagdeo noted.
He also raised concerns that oil revenues will be comingled with revenues from the forestry and mining sectors.
According to Jagdeo, the Green Paper is three years late, coming at a time when the Government had promised draft legislation on the management of oil revenues.
“It was our own Government who assured us several times in the past three years that they were working on and they would bring legislation to the Parliament concerning a Sovereign Wealth Fund shortly, and that was over the past three years. Now to be confronted with a discussion paper takes us right back to 2015,” Jagdeo stated.
With Government now securing views, Jagdeo predicts that legislation may be ‘far away’, but Guyana is expected to start producing commercial oil in 2020.

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