THE Ministry of Finance is currently finalising the draft legislation to govern the establishment and operation of a sovereign wealth fund (SWF).
This is according to Minister of Finance, Winston Jordan, who told participants at an oil and gas seminar that it has shared the draft document with key partners including the International Monetary Fund (IMF) the Inter-American Development Bank (IDB) and the World Bank (WB), among other parties.
The seminar, which was held under the theme “Managing Resources Post Discovery,” was held at ‘De Impeccable’ Banquet Hall on Brickdam, Georgetown, and participants included Minister of Natural Resources, Raphael Trotman, representatives of Chatham House, the Commonwealth Secretariat, the Natural Resources Governance Institute as well as officials from Trinidad & Tobago, Ghana and Chile.
Minister Jordan stated that the Finance Ministry has received extensive feedback and comments on the draft document, and an in-house team is examining the feedback with a view of revising the draft SWF provided by the Commonwealth Secretariat.
He said that the main purpose of the sovereign wealth fund is to safeguard against the resource curse, to improve future generational wealth, to achieve fiscal sustainability and increase the country’s national savings. “We will ensure that the elements of this fund are compatible with the developmental objectives of the government”, Minister Jordan said.
During his address, the Finance Minister stressed that transparency and accountability in the management of Guyana’s oil and gas sector are priorities for the government, adding that government will seek to utilise as many of the available tools as possible.
He noted too that the efficient management of the oil and gas sector and the careful utilisation of the revenues in Guyana, must involve multiple stakeholders. He said this would require close cooperation with, and collaboration from all of the entities, as he pointed to the attendees’ presence as an indication of their willingness to understand their respective roles in future.
“Let me emphasise that the management of oil resources starts with the management of domestic expectations”, the Finance Minister said. He said it is “critical in view of situations” where persons are already asking when ‘the money will be shared out.’
He noted that early expectation management is necessary to avoid pressure on the government to undertake excessive public spending when oil extraction commences in 2020. However, he noted that the government’s plan is to ensure that the citizens receive maximum benefit from the oil revenues as it pursues fiscal discipline.
As Minister of Finance, Jordan said that he is cognisant of the fact that oil resources are exhaustible and prices are volatile, hence the need for efficient planning to ensure that the revenues are spent wisely and that the economy is insulated from shocks stemming from volatility in commodity prices.
Against this backdrop, he said that the Ministry of Finance is in the process of designing a dedicated fiscal framework with clear objectives and priorities. He said too, that the agency will also adopt a coherent macroeconomic management strategy that fosters inclusive growth and sustainable development outcomes.
Minister Jordan reminded the audience that many oil producing countries, including Guyana’s immediate neighbours, have been experiencing “severe” macroeconomic instability.
He said it has been illustrated that countries can mitigate such pitfalls through efficient economic diversification. “And, that is why our plan is to invest heavily in core traditional sectors while oil revenues are available,” he noted.
In that regard, he said the government is currently conceptualising a medium- term development plan with assistance from the United Nations Environmental Programme (UNEP).