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Absence of rules to monitor spending of oil money by politicians a major red flag – NRGI
Kaieteur News – The Natural Resource Governance Institute (NRGI), one of the world’s leading non-profit organisations dedicated to helping countries properly manage their oil and gas wealth, recently conducted an assessment on Guyana and found that its systems for revenue management are weak.
This assessment, which covers the 2019 to 2020 period, was done for NRGI’s 2021 Resource Governance Index (RGI) on which Guyana secured a score of 55 out of 100 points.
Kaieteur News had previously reported that the 2021 RGI assesses how 18 resource-rich countries govern their oil, gas and mineral wealth. The index score is made up of three components. Two measure key characteristics of the extractives sector – value realisation and revenue management – and the third captures the broader context of governance — the enabling environment.
As regards revenue management, NRGI, which is headquartered in New York, said Guyana was deemed to be weak in this component due to a poor national budgeting assessment. In that subcomponent, Guyana has scored 40 out of 100 points.
Expounding further, NRGI which was founded in 2013 noted that the country’s fiscal regime was designed in the 1980s and does not reflect recent economic changes in Guyana. But what is more troubling to the Institute is the absence of a fiscal rule to ensure that the spending of the oil money is not a victim of politicisation.
Given the prospects of high revenue in the coming years, NRGI said this is clearly a major red flag. NRGI in its report said, “It is crucial that Guyana has a decentralised mechanism to decide fiscal expenditures and shield them from politicised decision-making.”
On a positive note, NRGI noted that Guyana obtained “good” scores regarding the government’s disclosure of the national budget and national debt. It further noted that the former government’s decision to create the Natural Resource Fund (NRF) in 2019, with clear withdrawal rules that control the amount that is transferred to the national budget, constitutes a step toward sound economic policy for the sector.
The Institute was keen to note that since the NRF legislation has not been activated and no withdrawal has taken place since production started in December 2019, international organisations and civil society are now asking the government for the early operationalisation of the fund.
The Institute further highlighted that the institutional set-up of the NRF shows that Guyana’s government intends to address volatility in commodity prices and save for the future. It stressed nonetheless that the passage of the NRF Bill was not smooth due to the No-Confidence vote against the former government.
NRGI acknowledged that the Bill was approved and voted on in absence of the opposition party, now in power, while adding that there is uncertainty regarding its use.
On this premise, the international organisation articulated, “If the Guyanese government decides to amend or repeal the NRF law, it is crucial this process is transparent and inclusive so citizens can trust any new institutional framework.”
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