Cabinet gets Green Paper on safeguarding oil revenues

-law for natural resources fund being fine-tuned

Minister of Finance Winston Jordan

Even as Attorney General Basil Williams and team continue to “fine tune” draft legislation for a Natural Resources Fund (NRF), a Green Paper will soon be presented to the National Assembly, with fiscal responsibility and debt sustainability key among its contents.

The Green Paper was presented to the APNU+AFC Cabinet last Tuesday and is expected to be discussed when it meets again this week, before being tabled in the National Assembly ahead of next month’s parliamentary recess, Minister of Finance Winston Jordan told Sunday Stabroek.

“The Green Paper was presented to Cabinet last week Tuesday and discussed. The Commonwealth Advisor, Dr Daniel Wilde, he was there to make a presentation along with the Ministry of Finance internal staff and myself. It was well received by Cabinet. It has been deferred to this Tuesday until some additional members, some key members who were not present at that meeting, would be there to provide their input. Hopefully, by then, it would be finalised and once Cabinet says it is a go, we will get it printed and presented to the National Assembly before it goes into recess, the 10th of August[2018],” Jordan explained.

He explained that draft legislation for the NRF was with the Attorney General’s Chambers and they have been working to complete it, hold additional consultations and then present it to the National Assembly before the end of this year.

When this newspaper questioned Williams on the sidelines of Friday’s sitting of the National Assembly, he informed that the draft is almost completed.

“We are working on it. It is still in its drafting stages but we have to fine tune it, you know. It went to Cabinet, we discussed it at Cabinet and we have some further things to do with it,” he said.

Jordan has said that the foundation for the establishment of the NRF began one year after the APNU+AFC government took office and is a priority. Objectives of the fund, he explained, are to advance critical development and investment needs within the country; to address issues of stabilisation of the economy; and to ensure savings were made to guarantee inter-generational benefits from the extraction of the finite natural resource. Those objectives, he further said, reflect a comprehensive framework that will guide the prudent management of future oil revenues for the benefit of current and future generations, in keeping with the government’s agenda.

Jordan told this newspaper on Friday that the proposals set out in the Green Paper give a clear view of how government plans to safeguard spending from the NRF. “The [NRF] will benefit from this Green Paper, in terms of what Cabinet will have to say, particularly as it pertains to the fiscal rule. The fiscal rule has to be embedded into this legislation, that is, in the Green Paper. Once Cabinet agrees to that, we will revise the Green Paper to put in that fiscal rule and that fiscal rule will get into the [NRF] legislation. That is the last piece of the [NRF] legislation,” he explained.

“The Green paper will elicit ideas and responses and indicate government’s approach to this political policy and the inputs into this policy where we are saving for our future, saving for stabilisation and saving for national development. The whole paper is important because the whole paper is informing the legislation… how to avoid pre-resource curse—Dutch disease—how it is structured, how will it be managed and how the accounting for the transparency mechanisms and the whole concept of it aligning with the Santiago Principles,” he added.

The Santiago Principles promote transparency, good governance, accountability and prudent investment practices whilst encouraging more open dialogue and deeper understanding of Sovereign Wealth Fund (SWF) activities, according to the International Forum of Sovereign Wealth Funds.

Commonwealth advisor Dr.  Wilde and development partners have been helping the David Granger-led APNU+AFC government in the preparation of the NRF Green Paper.

Wilde has said that he believes that this country is on the right path as it pertains to the preparing of the NRF before first oil in 2020. Explaining its structure, he has said, “The main components were the relationship between the Sovereign Wealth Fund and the annual budget, ensuring that all petroleum revenues are transparently paid into the fund. The management of the Sovereign Wealth Fund, which ensures appropriate checks and balances and the Ministry of Finance is the overall manager on behalf of the government, and that the Bank of Guyana is the operational manager.”

Government and Wilde have also talked about the reporting and auditing arrangements, which he said should ensure that the fund is transparently and well managed with a number of reporting requirements.

The Commonwealth expert, who has experience in helping to craft similar legislation in other countries, added that reports compiled quarterly and annually to international standards “must be submitted to Parliament and be made public.”

Jordan said that the Green Paper should have first been crafted before the NRF but added that it is not too late to have created it and he also opined that the draft legislation also represents a good effort. He pointed to last year’s International Monetary Fund (IMF) study, which spoke on the SWF, saying that the report also acknowledged that the country had a good draft but there were “one and two areas” that still needed more clarity. Those concerns, according to Jordan, have been addressed and he said a further analysis would show this.

“In a sense we had put the cart before the horse. We had developed a Sovereign Wealth Fund legislation before the Green Paper, where we were supposed to develop the Green Paper, develop a White Paper then get the SWF draft. We already have the SWF draft, where we had consultations and help from international agencies and so on,” he said.

The Minister of Finance is appealing to Guyana’s citizenry to pay special attention the Green Paper as it deals with spending of funds from what will be Guyana’s biggest revenue earner—oil and gas—and to deduce if the plans will safeguard corruption and foster transparency.

“I think they should pay attention, at the level of the Green Paper, [to] what is the government’s thinking about what they will be doing with the money. Not whether they will be building roads and so on but the general construct that no one will go ‘kittening away’ the money. But that this money will be well-invested, well-kept and well-used for the three broad purposes we said. Those are: For inter-generational equity, which is saving for down the road; For stabilisation, which means when the prices drop and so on, we are not going to have to be worried that we won’t be able to continue doing projects. (Say, for example barrel per oil equivalent price today is US$70 something dollars and then you go and take on a $300 million project, and when the price drops say to US$40, that project faces the possibility of being mothballed or something or marked down. No! You must be able to have a stabilisation concept that you must be able to use to make sure that project continues.) Then there is a national development construct, where based on the Green State Development Strategy, there will be transformative projects in there, which will need financing through the budget and so some funds will be transferred through the SWF for the purposes of financing transformative projects and other activities, approved by Parliament through the budget,” Jordan explained.

According to Jordan, the NRF “will benefit from bipartisan oversight and will also have multiple layers of oversight.”

“The committees are going to be set up in a way where you have nominees from government, the opposition, the private sector, civil society and particular agencies and persons with particular expertise. It is about two or three committees that are set up and there are different benchmarks for how you withdraw and so on,” he explained.  

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