Latest update February 15th, 2025 12:52 PM
Latest News
- Exxon given more time to respond to first two audits – Routledge
- Guyana put on Donald Trump’s list to accept African and Asian deportees
- Ukraine’s Zelenskyy calls for united US-Europe support against Russia
- Opposition agrees with TI findings on corruption in Guyana
- Man assaults ex-partner for bringing husband into shared home
Without independent oversight, oil fund more susceptible to mismanagement – US Analyst
Kaieteur News-Senior analyst at America’s Market Intelligence (AMI), Arthur Deakin, has posited that if Guyana’s Natural Resource Fund (NRF) goes without independent oversight, then that oil fund will be more susceptible to “mismanagement and political cronyism”.
Deakin wrote these and other critical points in his January 2020 piece titled Fundamental Lessons for Guyana’s Sovereign Wealth Fund.
In his commentary, Deakin recalled that the governing law for the NRF, which currently holds US$185M in oil proceeds, was passed in early 2019 by the previous A Partnership
US Analyst, Arthur Deakin
for National Unity + Alliance For Change (APNU+AFC) administration.
By using a US dollar-based New York Federal Reserve account, the Analyst noted that the NRF protects the oil revenues against inflationary and nominal exchange rate pressures, which are caused by fluctuations in the domestic economy. He added too that it sets a limit on the annual amount transferred from the fund to the government’s budget.
To this Deakin highlighted, “The establishment of the fund was an important development for a country seeking to mitigate the Dutch disease and promote transparency,”
But despite this being positive initiative, the analyst criticized the Guyanese government for failing to implement some necessary measures it had established in the NRF Act.
Deakin reminded that the Act states that the Ministry of Finance (MoF), which is responsible for the overall management of the fund, would provide the Bank of Guyana (BoG) that is responsible for the operation of the fund, with an investment mandate pertaining to the funds. In developing the mandate, the Finance Ministry would receive advice from the Investment Committee, a group of experienced financial experts. But currently, that Committee does not exist, Deakin noted.
Similarly, he said, the Macroeconomic Committee, which is supposed to be responsible for analyzing the future implications of public spending on the country’s economic competitiveness is supposed to advise the maximum amount that should be withdrawn from the fund each year. This Committee, Deakin wrote, in addition to the Public Oversight and Accountability Committee, is also missing.
He further explained, “The NRF Act also fell short in depoliticizing the management of the fund. As it stands, the Ministry of Finance has too much control over the governance and spending of the resources. The members of the ever-so-important Investment Committee are all appointed directly by the ministry. The Minister of Finance, in conjunction with Parliament, also has a final say on how the monies are spent.”
Without a more independent oversight structure, Deakin warned that the fund will be more susceptible to “political cronyism and mismanagement”.
He mentioned that industry experts have also pointed out that the fund lacks a medium-term expenditure framework and a clearer fiscal rule, which would allow for better planning and prioritization of its incoming resources. At the moment, the fiscal rule which will be used to determine how much money is spent each year from the fund, has been heavily criticized for being too complex for laymen to properly supervise.
The analyst went on to note that the current rule also fails to curb debt-financed spending used to address short-term needs. Additionally, he said, the Act did not create a broader fiscal framework that defined rules for public debt, balanced budgets and revenues.
Taking the foregoing factors into consideration, Deakin stressed that Guyana’s oil funds are more susceptible to abuse by its politicians if the necessary systems are not in place.
Similar Articles
THE BLUNT OF THE DAY
Sports
Features/Columnists
The Opposition is engaged in self-sabotage
Peeping Tom… Kaieteur News- You know, I never thought I’d see the day when elections in Guyana would become something... more
OAS Secretary General Election and renewed OAS Consensus
Antiguan Barbudan Ambassador to the United States, Sir Ronald Sanders By Sir Ronald Sanders Kaieteur News- The upcoming election... more
Weekend Cartoon
