The APNU+AFC Parliamentary Opposition yesterday pilloried the government for paving the way for increased extractions from the Natural Resource Fund (NRF), following the passage of the Fiscal Enactments Amendment Bill No. 2 of 2024 on Friday night in the National Assembly.
The bill was passed in the absence of the opposition which walked out to register their indignation at what they said was eavesdropping and the broadcasting of private conversations by their members, within the confines of their private room in the precincts of parliament at the Arthur Chung Conference Centre.
Leader of the Opposition Aubrey Norton during a press conference held yesterday at Congress Place, Sophia, Georgetown, said that the government intentionally proposed a new formula so that it can withdraw 100% of the first US$1 billion of deposits paid into the NRF in the immediately preceding fiscal year.
The previous NRF legislation which was controversially passed on December 29, 2021, stated that 100% of the first US$500 million paid into the fund in the immediately preceding fiscal year can be withdrawn.
Against this backdrop, the Opposition Leader asked what the government would say to the Guyanese people if there were any eventualities such as an oil spill or any worst-case scenario, and there were no intergenerational savings to take the country out of such a crisis.
According to Norton, the government’s control and abuse of the NRF will result in a financial crisis which will reflect poorly on the governance of the incumbent regime.
He remarked, “The PPP’s decision to overturn the Natural Resource Fund’s withdrawal rules, rules they put in place only a few years ago, should fill every last man, woman and child in Guyana with dread.”
“They have not marginally increased the amount they can withdraw, merely tweaked the formula to extract some benefit or clarified it in some way. Rather, by now stipulating that as much as 97% of last year’s oil revenues can be withdrawn, they have essentially abolished the fund altogether,” he declared.
The Opposition Leader warned, “If nearly every last cent that goes into a savings account can be withdrawn; it is as if there is no savings account at all. This is what the PPP is doing with a fund intended to insulate our economy from many of the ills faced by oil-rich countries.”
Norton referenced Venezuela, which had established a sovereign wealth fund in 1998, but twenty years later only had US$3 million in savings. Norton said that when the oil price crisis of the mid-2010’s struck, Venezuela was unable to sustain its budget and was unable to borrow, which led to inflation and placed the country in an economic crisis. If APNU+AFC is elected in 2025, he promised to reverse this practice of gutting the resource fund, as the current government is doing and instead put in place a well-planned, flexible framework that balances the nation’s development needs in the event of a financial crisis.
“Oil is a notoriously volatile commodity and as a result, we must be thoughtful in the way we make use of these resources,” Norton said.
Plummets
Economist and Youth Policy Advisor, Elson Low, weighing in on the subject at his party’s press briefing said, “The government seems not to understand that in case the price for oil plummets, it is very difficult to get yourself out of this situation no matter how much you have increased the internal and domestic debt ceilings”.
The Fiscal Enactments Bill also includes proposals to lift ceilings on domestic and external debt.
The updated debt ceilings will take immediate effect and will provide the government with the flexibility needed to adapt the financing mix depending on the evolving global and domestic economic situation, particularly given global uncertainties regarding interest rates.
The Bill proposes that the domestic public debt ceiling be increased to $1.5 trillion, up from $750 billion from its last revision. Meanwhile, a new external borrowing ceiling of $1.5 trillion was proposed, after its last increase to $900 billion.
Low said that it would be naïve for the government to think that their reliance on debt would vindicate them from recouping the financial losses incurred if “God forbids”, there is a decline in oil prices or even worse the “natural resource curse”.
The government’s new extraction formula from the NRF is aimed at higher revenues when the fourth and fifth oil platforms become operational, but now that the fiscal enactment bill is passed, intergenerational savings will decline according to Alliance for Change (AFC) Leader Khemraj Ramjattan.
The AFC leader, also an attorney-at-law, said while the Fiscal Enactments Bill proposes to take 90% of the third US$1 billion of deposits into the fund in the immediately preceding year, the current legislation which governs the NRF required only a 50% extraction of the third US$500 million.
He explained that for the second US$1 billion paid into the fund in the immediately preceding fiscal year, the government is proposing to extract 95%, but the law requires 75% of the second US$500 million.
Additionally, the bill envisages taking 85% of the fourth US$1billion deposited when the current law only allows a 25% withdrawal of the fourth US$500 million.
Ramjattan is of the firm view that the government will utilise the passage of this bill to “possibly degut” the NRF.
Shadow Minister of Finance Juretha Fernandes is adamant that the government is inept in managing its debt since it is currently and persistently tampering with the domestic debt ceiling.
She said that what the government did was increase wages and salaries against the projection of the non-oil gross domestic product while raising its debt ceilings and ability to borrow against the projected oil revenues.
According to the Shadow Minister of Finance, the government’s action serves as a method for economic destruction and not “financial sustainability”.
However, Singh, following the passage of the historic $1.146 trillion budget and the fiscal enactments bill in the absence of the opposition, remarked, “This bill contains critical legislation and statutory elements contained in this year’s fiscal plan.”
While lashing out at the opposition for their absence during the passage of the bill and accusing the party of obstructing, derailing and hindering progress, Singh said that the fiscal enactments bill has the legal framework which will ensure sustainable and optimal financing of the accelerated development agenda, the government is delivering to Guyanese.
The finance minister said that the bill includes provisions for the removal of Duty and Value Added Tax (VAT) on sports equipment and technology, the removal of Duty and VAT on firefighting equipment, reducing the cost of life and medical insurance, and an increase in the income tax threshold.
The Income tax threshold will now be upped to $100,000 monthly from $85,000, resulting in 13,000 persons being removed from paying income tax and a $4.8 billion increase in disposable income of workers.
During his presentation to Parliament on the Bill, a Ministry of Finance release on Friday said that Singh emphasized “We have committed to delivering improvement to the well-being of all Guyanese in a rapidly accelerated fashion and at a rapidly accelerated pace and as was ventilated during the course of this debate, whether it is the rapid build out of physical and economic infrastructure, such as our transport and energy infrastructure, our social infrastructure such as public health care facilities and our educational facilities, or the strengthening of the capability of our security sector agencies, including the police and the fire service with the deployment of additional assets and the deployment of high technology, or the improvement of our social services, or the build out of our housing and water infrastructure, or indeed any other sector, we this PPP/C are in a hurry to improve the lives of every single Guyanese family and every single Guyanese individual.”
He also told the National Assembly that the APNU+AFC’s walkout was reminiscent of their actions in December 2021 when they disrupted Parliament during consideration of the Natural Resource Fund Act.
