….says strongest elements are multi-layered accountability structures

GOVERNMENT’s Green Paper which outlines the proposed plan for managing oil revenues through the establishment of the Sovereign Wealth Fund, contains “strong elements,” especially on accountability, transparency and oversight.

This is the assessment of Natural Resource Governance Institute (NRGI) Consultant Andrew Bauer, who on Wednesday delivered a lecture for journalists under the heading: “Oil Revenues and Green Growth – How can Guyana effectively manage oil revenues for green growth?”

The lecture was held at the Moray House on Camp Street in Georgetown. NRGI is a New York-based independent non-profit organisation, dedicated to improving countries’ governance over their natural resources to promote sustainable and inclusive development. Bauer is an expert in several areas of management, including public financial management; natural resource regulations and taxation; state-owned enterprises and sovereign wealth fund governance; local government finance and inter-governmental transfers; economic development and industrial policy; accountability mechanisms, as well as lobbying and advocacy.

The forum on Wednesday was hosted by the Guyana Press Association (GPA) in collaboration with Conservation International (Guyana). Bauer noted during the lunch-time presentation, that he interacted with the Ministry of Finance here and according to him, the agency is aware of all the challenges in its path. He said that the agency “has been studying this topic for a while; they understand the issues.”

Bauer said the Green Paper puts in place a sturdy policy foundation; and he noted that it contains a proposal for fiscal rule, which he said will constrain government’s spending. He said the strongest elements of the Green Paper are the “multi-layered” accountability structure.

He outlined the elements of the structure, those being Parliament, which is the ultimate authority over the petroleum sector; the Finance Ministry, which determines where money from the sector should be invested; and the Central Bank, which acts as the operations manager for the oil revenues. He said that the model is similar to what exists globally.
Bauer said that there is also a clear list of eligible assets, which the government can or “is allowed to invest in”; and he noted that “there is a fair amount of transparency and oversight.” These include the annual reports, audits undertaken by the Office of the Auditor General, as well as parliamentary oversight. “The strength of this paper is that they are taking the issues about accountability and transparency seriously,” Bauer noted of government’s approach to management of the sector.

He said that the government in the long-term may wish to prohibit the riskiest types of asset classes and incorporate a stronger risk-management framework. Additionally, he said that the government may also wish to revisit the fiscal rule to take into account of risk of overspending and over-borrowing.

Bauer also suggested that there should be open discussions and consensus-building to help ensure that all parties are on board with the plan on how to manage oil revenues. The Green Paper was created with inputs from the World Bank, the International Monetary Fund, the Inter-American Development Bank and the Commonwealth Secretariat; and is line with the Santiago Principles—24 generally accepted practices for good governance of resource revenues created by the International Forum of Sovereign Wealth Funds. The plan will hold petroleum and excess mining revenues in a “Natural Resources Fund”—a U.S. dollar-denominated Sovereign Wealth Fund (SWF) at the Bank of Guyana.

Holding funds in an international currency such as U.S. dollars is a common practice with SWFs, since it prevents inflation and distortion in the local currency. The plan outlines how petroleum revenues will be incorporated into the budget, how they will be saved and invested and what agencies and ministers have authority over how and when funds are spent. In August this year, the government presented the Green Paper to the National Assembly under the title, “Managing Future Petroleum Revenues and Establishment of Fiscal Rule and a Sovereign Wealth Fund.” It is expected to be laid in the National Assembly before the end of 2018.