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Oil money should not be invested into companies associated with petroleum sector – Economist
Kaieteur News – As Guyana’s oil earnings continue to increase – with production rates set to climb to over one million barrels of oil per day by 2027 – Economist, Elson Low has warned that the revenue stream from these earnings should not be invested into companies associated with oil and gas.
Economist, Elson Low
Low made the assertion during a recent interview with Kaieteur News, following the appointment of the ‘Investment Committee for the Natural Resource Fund (NRF)’.
The Economist explained that proper decisions, when it comes to investing these funds, are critical especially since the Government is fixed on using the limited window to develop its oil and gas resource.
To this end, Low, who holds a Bachelor’s Degree in Political Science and Economics from a United States College, Amherst, said the ‘Investment Committee’ must stay away from investments into the oil and gas related industry to avoid risk. He explained, “This is because the fund must act as a stabilising mechanism when oil prices are low and oil and gas companies may see their stocks drop severely in those conditions.”
The Economist contended that protecting Guyana’s earnings from its oil wealth must be a priority to the body, to ensure that future generations enjoy the benefits from these resources as well. In fact, it has been reported that in 2021, Norway’s ‘Sovereign Wealth Fund’ sold the last of its investments in the oil and gas industry. This is the conclusion of a prolonged period of divestment from the oil and gas industry, with oil exploration companies being removed from the fund’s investments in 2019.
The NRF Act of 2021 states at Section 24 (1) that the Fund shall ‘…be invested for the purpose of long-term savings in eligible bank deposits, eligible treasury bills, eligible sovereign bonds, eligible corporate bonds, eligible equities, eligible derivatives and eligible commodities.’
Section 26 goes on to point out that the ‘The Fund shall be invested according to the principle of passive investment management which shall mean that – (a) investments in eligible treasury bills and eligible commodities shall be made to track indices… (b) investment in eligible sovereign bonds shall be made to track the Barclay’s Global Treasury Index, (c) investments in eligible corporate bonds shall be made to track the Barclay’s Global Aggregate Corporate Index, and (d) investments into eligible equities shall be made to track the MSCI World Index…’
On the other hand, the law is clear that the Government is not allowed to borrow or lend money from the Fund or ‘hold a financial instrument that places or may place a liability or contingent liability on the Fund.’
Furthermore, Section 25 of the Law explains that the oil revenue must not be used to provide credit to Government or any other person or entity, used as collateral for debts, guarantees, commitments or other liabilities of any person or entity, used for borrowing against any of the assets of the Fund.
On August 30, last, President Irfaan Ali appointed members to sit on the ‘Investment Committee for the NRF’. This newspaper reported that Executive Director of the Georgetown Chamber of Commerce and Industry (GCCI), Richard Rambarran, Attorney-at-Law, Michael Munroe, and Chartered Banker, MBA Ms. Shaleeza Shaw, received their Letters of Appointment to sit on the Committee. Shaw will serve as Chairperson and Mr. Lauris Hukumchand, who is currently overseas, will be appointed at a later time.
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