Guyana needs independent, int’l body monitoring oil funds to ensure transparent spending

Oct 11, 2022 News

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…existing checks and balances all have ties to Executive branch – Analyst

Kaieteur News – Director of Energy at Americas Market Intelligence (AMI) Arthur Deakin has acknowledged that while Guyana has established a legislative and regulatory framework to manage its oil revenues, a deeper analysis exposes that the checks and balances implemented are closely tied to the Executive branch.

In his latest contribution to the Energy Advisor, a weekly publication by the Inter-American Dialogue, Deakin alluded that this does not bode well for transparency and accountability.

Expounding further, Deakin said Guyana has put in place, the Natural Resource Fund (NRF) legislation which allows for a Board of Directors, an Investment Committee and a Public Accountability and Oversight Committee.

The members of the NRF Board are Major General (ret’d) Joseph Singh (Chairman);  Guyana’s Permanent Representative to the United Nations (UN), Ambassador Carolyn Rodrigues; former President of the Caribbean Development Bank (CDB) Professor Compton Bourne; Dunstan Barrow; and Ramesh Dookoo of the Private Sector Commission (PSC).

The members of the Public Accountability and Oversight Committee comprise (Chairman) Clement Sealey, Wendell Jeffery, Abu Zaman, Ryan Alexander, Dawn Gardener, Aslim Singh, Teni Housty, Desmond Sears, and Savitri Balbahadur.

As for the Investment Committee, the members are as follows: Shaleeza Shaw (Chairperson), Michael Munroe, Richard Rambarran and Lauris Hukumchand.

Importantly, Deakin said most of the members appointed to the committees responsible for the management of the oil monies have either been appointed directly by the President or chosen by the National Assembly, where the President’s party has a majority.

Deakin said this prevents the much-needed separation between political influences and the billions of dollars flowing into the country.

Additionally, Deakin said it is also concerning that $400 million was drawn down from the Natural Resource Fund in May and July, before any of these oversight mechanisms were in place. The analyst noted that this money has been allocated to finance ‘national development priorities’ which have yet to be defined. He stressed however that it is unclear where exactly it will be spent.

Deakin said in conclusion that Guyana also needs the participation of an independent and international body in the monitoring of these funds to ensure appropriate and transparent spending of the revenues. The current state of affairs he posits needs to be improved.

As previously reported, the purpose of Guyana’s Natural Resource Fund is to ensure there is prudent management of the nation’s oil earnings for the present and future benefit of the people by ensuring that volatility in natural resource revenues does not lead to volatile public spending.

The objective of the Fund is also hinged on ensuring revenues collected do not lead to a loss of economic competitiveness along with fairly transferring natural resource wealth across generations to ensure all Guyanese benefit from the sector. The Fund is also intended to ensure Guyana’s natural resource wealth is used to finance national development priorities including any initiative aimed at realising an inclusive green economy.

To ensure that its purpose is realised, the NRF Act 2021 focuses on four key areas: Providing notification of all oil receipts to the Guyana Parliament, ensure withdrawals are governed by a transparent process, Allowance for parliamentary oversight and approval of every cent to be used, and effective management and oversight via a Board of Directors, a Public Accountability and Oversight Committee, the Audit Office of Guyana, and Central Bank.

The NRF Board is responsible for overall management of the Fund, reviewing and approving the policies of the Fund, and preparing the Fund’s investment mandate.

The law also allows for an Investment Committee to provide advice to the Board on the Fund’s investment mandate. The Board would be assisted by a Senior Investment Advisor and Analyst.

The Committee would also be responsible for advising the Board of Directors while taking into account, the overall objectives of the Fund, the current conditions, opportunities and constraints in relevant financial markets, the need to ensure sufficient funds are available for withdrawals, international best practices in investment portfolio management, the principle of financial diversification with the objective of maximising risk adjusted financial returns, and taking into account the capacity of the institutions involved in the management of the Fund.

The Committee is also required to take account of the country’s ability to bear financial risk, the need for the Fund in the long term to achieve on average, over a number of years, a real total return of at least three percent per annum in US dollars while minimising risk.

It would also have to consider the need for the Fund to follow a strategic asset allocation strategy whereby overtime as the balance of the Fund increases, the percentage of the Fund invested in low risk eligible asset classes increases.

The law states that the advice of the committee would be contained in written reports submitted to the Board at least annually or within 20 working days of the Board requesting such advice.

Furthermore, the legislation also paves the way for the establishment of a Public Accountability and Oversight Committee which provides strict monitoring of how the revenues are used.

Guyana’s Central Bank is responsible for the operational management of the Fund which includes establishing risk management arrangements, and all necessary internal management systems for the fund.

Additionally, the legislation empowers the Auditor General of Guyana to audit the accounts of the Fund. He can also engage an internationally recognised auditing firm to assist in the discharge of this function.

The Ministry of Finance is also mandated to publish on its website for public perusal: annual reports on the fund, audited financial statements, and the external auditor’s report, quarterly reports, and financial statements submitted to the Minister by the bank, monthly reports, and the Fund’s investment mandate.

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