Guyana setting dangerous precedent with rapid spending of oil funds –Int’l Consultant

Jan 15, 2022 News

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Kaieteur News – While the PPP/C Government has oftentimes said that the Natural Resource Fund— which holds Guyana’s royalties and revenues made from the sale of its profit oil—will guarantee savings for future generations, the rapid pace at which it intends to start spending the said money from 2022 sets a dangerous precedent for its economic prospects. Making this assertion recently, among others, , was International Consultant and Co-Director of Energy Practice at Americas Market Intelligence (AMI), Arthur Deakin.

Deakin, during an appearance on Kaieteur Radio’s Programme – Guyana’s Oil and You, said his take is that there are some positives to the NRF Legislation but spending too quickly can have devastating economic consequences.
Speaking to some of the positives of the law, Deakin said these include the simplification of the rules governing how the oil money would be withdrawn. Previously, there were to be two calculations governing the withdrawals, with the superior one being determined and subsequently used by the Finance Minister. In the new legislation passed by the PPP/C administration, these calculations were removed and it is now a Board of Directors that will determine how the money would be withdrawn based on a simplified formula then transferred to the Consolidated Fund.
Deakin opined that this level of clarity is important for compliance with the tenants of transparency and accountability while making the money easy to follow. He said too that there are several bodies that have been tasked with ensuring accountability for the oil money such as a Public Accountability and Oversight Committee.
“But the problem here is that the members of these bodies will be appointed by the President. Also troubling is that there is no clear confirmation or approval process in the law for how he will select these persons. The law therefore gives too much power to the president. Sure you must have some political appointees administering the fund…But it can’t just be the president appointing everyone at his discretion for the most part,” Deakin said, while adding that the President will have the power to appoint members for a three to five member Board of Directors which will essentially control where the oil money will be invested.
But what is equally concerning for Deakin is how quickly the money will be drawn down from the oil fund starting this year.
According to the NRF Law, “In the fiscal year that this Act comes into operation, notwithstanding the provisions of subsection (1) and the First Schedule, the ceiling on the amount that may be withdrawn shall be the total balance accumulated in the account described as the ‘Natural Resource Fund’ as at the date that Act comes into operation.”
Since the Act came into being on December 30, 2021 and the balance of the fund at the time was US$608M, the government has free reign to empty the oil account.
Taking this into consideration, the AMI Co-Director said, “I understand that Guyana wants its people to benefit from these funds, as they should, but you also have to think about it in terms of sustainable development of the economy…the government will essentially drain most of the fund to spend and that is not a good precedent to set.”
He added, “The idea of these funds is to allow for savings. I understand you want to develop now and set infrastructure and give back to the people but you risk overheating the economy. It is too high a figure to start with…Guyana is clearly overshooting on this front.”
Deakin also criticised the absence of explicit penalties for acts of corruption such as insider trading. He said in handling such vast revenues, there needs to be clear penalties for wrongdoings. Overall, he posited that enough is not in place to ensure the NRF is rooted in transparency and accountability.

CASE OF GHANA
Despite heavy criticism, the PPP/C Government has remained steadfast in its belief that there is no need for specific penalties for the misuse of oil revenues. According to the administration, the existing laws such as the Fiscal Management and Accountability Act (FMAA) are more than enough to address any malfeasance in public office. As a result, it hurriedly passed the Natural Resource Fund legislation on December 29, 2021, which was assented to hours later by President, Irfaan Ali.

It is significant to note however, that while the Ali administration insists that there is no need to outline explicit penalties for abuse or misuse of funds in the legislation, its Western counterpart, Ghana, which it claimed to have consulted on the NRF law, has shown a completely different approach toward the protection of the nation’s oil revenues.
According to Ghana’s legislation governing its Petroleum Fund, “A person who (a) misappropriates the Petroleum Funds; (b) defrauds, attempts to defraud or conspires with another person to defraud the Republic in relation to the Petroleum Funds; (c) uses, attempts to use or conspires with another person to use information on the Petroleum Funds or documents relating to the Petroleum Funds for personal benefit or advantage or for the personal advantage or benefit of another person; commits an offence and is liable on summary conviction to a fine of not less than five hundred thousand penalty units or to a term of imprisonment of not less than 15 years or to both.”
It goes on to state that, “(2) A person who abets in the commission of an offence is liable on summary conviction to a fine of not less than two hundred and fifty thousand penalty units or to a term of imprisonment of not less than seven years or to both.”
It is crucial to note that when Guyana pursued the creation of its first NRF legislation back in 2018, it was warned to have clear penalties or the fund could run the risk of failing to serve current and future generations. This advice was provided by the Natural Resource Governance Institute (NRGI) which also cited numerous examples from around the world of how often Natural Resource Funds become easily mismanaged, and the perpetrators, mostly politicians, go unpunished.

 

 

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