Govt draws out $62.3B more from oil fund

Oct 04, 2024 Apology, News

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– as concerns grow over transparency in spending

Kaieteur News – Amid growing concerns as to what specific projects oil funds are used to finance the government on Thursday announced that it has transferred $62.3B more from the Natural Resources Fund bringing its total withdrawal to date for the year to $239.176B.

The Ministry of Finance in a statement on Thursday said that pursuant to the Natural Resource Fund (NRF) Act 2021, as amended by the Fiscal Enactments (Amendment) Act 2024, Parliamentary approval has been granted for US$1,586,150,331 (equivalent to G$329,885,563,088) to be withdrawn from the NRF in 2024.

According to the ministry, in accordance with this approval, the Government of Guyana has made its fourth transfer for 2024, totalling US$300million (equivalent to G$62.394 billion) from the NRF on October1, 2024, to the Consolidated Fund. This brings the accumulated withdrawals to date up to US$1.150 billion (equivalent to G$239.176 billion) within the total of US$1.586 billion (equivalent to G$329.9 billion) approved to be withdrawn in 2024.

Lack of transparency

Concerns have been raised about the management of the of the NRF. Recently the Chairman of the National Assembly’s Public Accounts Committee (PAC) , Jermaine Figueira called for transparency when using Guyana’s oil money. He even cited the need for possible amendments to the Act.  Section 16.2 of the Act states that “All withdrawals from the Fund shall be deposited into the Consolidated Fund and shall be used only to finance: (a) national development priorities including any initiative aimed at realizing an inclusive green economy, and (b) essential projects that are directly related to ameliorating the effect of a major natural disaster.”

To date, government has budgeted approximately US$2.6B in oil money through 2022 to 2024.  Revenues earned from oil are transferred to the Consolidated Fund, blurring tracks of expenditure. Government is yet to identify the “national development priorities” being funded by oil revenue. This is particularly concerning because the legislation features no penalties for misuse of the funds.

Figueira however, pointed to the need for transparency  when using resources from the sector. He noted that the NRF Act is clear on how the funds should be spent. “…we require more specifics because the Act is very clear with regards to how those funds should be spent and if you just lump sum it into the consolidated fund we need to know definitely of those funds that were transferred into the consolidated fund that are they being used for the specific purposes with regards to what the Act speaks to.”

Amendments to the NRF Act

The Parliamentarian said the NRF Act may require amendments to justify transfers to the Consolidated Fund for spending across the board, rather than for specific purposes outlined in the Act. These amendments according to him are crucial to ensure there is absolute conformity with the legal requirements. He said, “Given how it is being transferred and the unknown of how it is being utilized it therefore requires some additional amendments to give greater clarity on the direction of how these funds should be directed and used.”

Figueira is adamant that the public must know how much of the Fund was used for any specific project. According to him, this can be done through the Budget documents in order to certify that the funds are being utilized in accordance with the act. He also shared the view that the oil money should be subjected to a separate audit. Figueira explained, “This is the most important sector and therefore a lot of attention should be directed specifically to these funds. We want to ensure that the country doesn’t suffer from the Dutch disease and therefore, these funds should be dispersed in a manner that is very responsible and therefore special attention should be directed specifically to that sector to manage the fund.”

Dangers

International Financial Analysts worry that the revenue may not be used to develop Guyana and improve the lives of its impoverished citizens because there is little transparency regarding the use of country’s oil wealth, . For instance, Director of Financial Analysis at the Institute for Energy Economics and Financial Analysis (IEEFA), Tom Sanzillo had pointed out that the government has not been prioritising saving the funds generated from the industry like Norway but has instead embarked on a massive infrastructural and energy development scheme which may very well benefit its partner, ExxonMobil more than the citizens in the country. Meanwhile, the government previously said that money from the oil account is transferred directly to the Consolidated Fund which blends the various revenue streams. This means the government is  unable to say what specific projects were funded by those earnings.

Interest

Kaieteur News in July 2023 reported that the Natural Resource Fund (NRF)  generated an interest of US$86.8M during that year- a substantial increase when compared to returns earned in 2022. This according to the 2023 NRF Annual Report tabled in Parliament by Senior Minister within the Office of the President with responsibility for Finance, Dr. Ashni Singh.

According to the document, “Net return generated by the Fund totaled G$18,105.25 million (US$86.84 million) for the year 2023, a substantial increase of 396% (G$14,455.17 / US$69.33 million) over the previous year’s level on account of higher interest rates on overnight deposits during 2023.”

The Fund achieved an annual portfolio return of 4.824%  in 2023 when compared to 1.581% in 2022. The 2023 NRF Annual Report states that Brent crude oil prices fell by 10.32% during 2023 moving from US$85.91 per barrel at the start of the year to US$77.04 per barrel  at the end of  2023. Further, the total barrels of oil produced by Guyana’s three Floating Production Storage and Offloading (FPSO) vessels totaled 142 million barrels during 2023 when compared with 101.41 million barrels produced in 2022.

Notably, as of December 31, 2023, the Fund accounted for inflows of US$1.6B for the reporting period, and represented an increase of 13.90% when compared with the inflows of US$1.4B for 2022. These inflows were deposited into the Natural Resource Fund account at the Federal Reserve Bank of New York, with the exception of two profit oil payments for two lifts in December 2023, totaling US$148.91 million. These payments were received in January and February, 2024. Meanwhile, the report outlines that outflows in the form of withdrawals from the Fund totaled US$1,002.13 million in 2023, which reflected an increase of 64.92% (US$394.48 million) over the previous year’s level of U$607.65 million.

 

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• consolidated, Jermaine Figueira, management, prioritising, Tom Sanzillo

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