Spending the oil money

On Saturday, the government announced the first lift of one million barrels of oil from the second producing platform in the Atlantic – the Liza Unity – and it is expected that the price to be received will be in the vicinity of US$106 per barrel which would make it the highest take yet for the country since production started in 2019.

While the price available to Guyana is lucrative in light of the global demand for oil and the crisis sparked by Russia’s invasion of Ukraine, it wasn’t so long ago that crude oil futures collapsed below $0 for the first time in history as a result of a supply glut caused by the Coronavirus pandemic and ending one day at a stunning minus US$37.63 a barrel as shell-shocked traders paid to get rid of stocks. Actually, it was almost two years to the day. The volatility of the oil market and the increasingly intense international campaign for a changeover to green and cleaner fuels promise a wild ride in the coming years. Which is why prudence has to be exercised in spending the oil money earned by this country and extraction from the Natural Resource Fund (NRF).

The deeply flawed legislation for the NRF which allowed the government to empty the fund in its first year of operation – around US$607m – also sets a withdrawal regime for future years which seems excessive and does not pay sufficient heed to preserving inter-generational wealth way into the future considering that a non-renewable resource is being drawn down. For the 2023 fiscal year, the budget will be able to access 100% of the first US$500m paid into the NRF this year plus 75% of the second $500m and presumably pro-rated if the full second US$500m is not attained. With two more oil platforms to begin producing in the coming years, the take for the country will be enormous.

The first year’s allocation from the NRF has been swallowed up as budgetary support. No one has a clue about how it will be spent. Ideally, the proceeds should be geared towards orienting the economy away from oil and gas so that in 30 years when the industry and the  multitude of the  petroleum industry excrescences on both banks of the Demerara River have to be dismantled, agro-processing,  high-quality manufacturing and financial and technological services will be the pre-eminent features. One would expect, for example,  that the compelling efforts of the grape-growing farmer, Devon Gilead, featured in yesterday’s Sunday Stabroek would attract the consideration of the fund and be used as a template for expanded cultivation and development of an indigenous wine industry.

What must not occur is wild spending across the board without reference to the already gigantic 2022 budget of $552.9b, a mind-boggling 44.3% larger than in 2021. Spending must be contained within the parameters of the budget or on a properly argued request for supplementary funding. It must not be the case that government officials will venture far and wide and believe that they can make pledges and commitments not expressed in the budget simply because they believe that these can be “afforded” from the oil and gas cash flow.

Except for emergencies like chronic flooding which would enable access to contingency funds and may understandably require supplementary provisions, everything else should be strictly in accordance with the voted monies and budgetary discipline. Ministers of the Government have made various pledges during their much appreciated and welcome visits across the country. What is not always clear is whether monies have already been voted for these allocations, they will require supplementary provisions or are being tapped from some unknown fund.

It is important that President Ali sets the example. The announcement of expenditures should be underpinned by clear information on where monies are being drawn from. For example, the beautification that has been completed on the Lamaha Street embankment between Camp Street and Waterloo Street was unilaterally announced by the President and must have cost a fair amount. There was no known tendering for this project though it involved major works and one expects to see full accounting and the rationale for it as it will apparently be extended to the east and west.

On April 15 during a visit to the Utivlugt Community Centre where he addressed hundreds of out-of-work cane harvesters of the beleaguered Uitvlugt sugar estate, the President announced that he was able to organise temporary employment for them.

“Having listened to management, I am convinced that there’s enough work for planting, weeding, chemical spraying, cleaning of the side-line to get you at least six days per week now, and I’ve instructed that this be implemented immediately”, he said, according to the Office of the President.

He added “You have a Government who understands your pain; you have a Government who is committed to working with you and helping you. As we said when we came back, we are here to ensure that the sugar sector succeeds and ensure that we keep employment and not displace employment.”

Sugar workers deserve a sympathetic  ear in these dire circumstances however the announcement by the President pertains to significant expenditure. Is this money coming from allocations that were voted for GuySuCo? Or perhaps the $5b allotment in the 2022 budget for vulnerable communities? The public must be told and a decision is mandatory on the type of support that can be afforded to the sugar industry.

Similarly, the announcement of a novel scheme attached to Caribbean Premier League (CPL) cricket where 300 prefab homes will be built on lands already set aside  to accommodate visitors to the tournament needs explaining. Revenue from this venture will go towards home payments for the neediest.  Further, what state expenditure will be required for the hosting of the CPL final for three consecutive years and is this warranted?

There have also been announcements of hundreds of part-time jobs in Region Two and Region Six.   How much will these jobs cost and where is the money coming from?

Though its independence will be hamstrung by the entrenched ability of the Minister of Finance to determine general policy directives, one hopes that the Natural Resource Fund Board whenever it meets will consider that the people of this country must know how oil proceeds are being spent and that the directors will set out to address this shortcoming considering that they are to have overall management of the Fund.