– Vice-President Jagdeo tells Private Sector Commission

GUYANA’S eventual use of its oil earnings will create more room for private-sector growth and expansion, according to Vice-President Dr Bharrat Jagdeo.

At a breakfast hosted for members of the Private Sector Commission (PSC) last week, Jagdeo explained to those gathered at State House in Georgetown that government’s use of the petroleum revenues ultimately means that it will rely less on borrowing from the domestic banking system, which would leave more room for the private sector to access increased loans and support from local banking institutions.

It was noted too that even with the hefty sum of US$534 million in Guyana’s Natural Resource Fund (NRF), this represents just a mere fraction of what is to come. As a matter of fact, the former Head of State said that deposits into the country’s petroleum account would only see significant increases after a few years. “… Until next four to five years, oil resources won’t be a lot,” Jagdeo noted.

He said that spending from the NRF will go a far way in creating a conducive space for private sector growth and investment. “That is something that is crucial for us,” he posited.

The Vice-President also assured attendees that with the eventual passage of the new legislation to govern the NRF, the oil revenues can be utilised for only developmental projects which would more likely boost private-sector operations even further.

SUPPORT FUTURE GROWTH
“A lot of the oil and gas money [that] comes in will be to support future growth: the highways, the bridges, the power plants of the future; a lot of expenditure on the capital side,” Jagdeo said.

As a matter of fact, the NRF 2021 Bill, which was recently tabled in the National Assembly, stipulates that the country’s oil revenues can only be used to finance developmental works and/or respond to major natural disasters.

The newly proposed law seeks to repeal the ‘inadequate’ NRF Act of 2019, which was hurriedly implemented by the former Coalition Government, even after it was toppled with the passage of a no-confidence motion in December 2018.

Nonetheless, once this new bill is passed by the National Assembly and signed into law by President Dr Irfaan Ali, it will enable the government to make an immediate 100 per cent withdrawal from the country’s Sovereign Wealth Fund to kickstart further development.

Thereafter, however, all other withdrawals will be capped to ensure that a substantial portion of the petroleum revenues are saved for the benefit of future generations.

The proposed cap on withdrawals will take effect at 75 per cent of the second US$500 million deposited into the NRF during the preceding fiscal year of its passage, followed by 50 per cent, then 25 per cent, five per cent, and finally, three per cent of any amounts in excess of $2.5 billion.

Added to that, Dr Jagdeo told the business community that the caps were proposed as a means of ensuring that all Guyanese are able to calculate and keep track of how their country’s oil earnings are being spent.

The proposed law follows an observation made by one of Guyana’s leading financial partners, the Inter-American Development Bank (IDB), which had said that the design of the 2019 NRF Act “departs from good practices” and that its complexity may “conspire against fiscal transparency and public understanding.”

RIGHT THE WRONGS
When the People’s Progressive Party/Civic (PPP/C) Government assumed office in 2020, it pledged to right the wrongs of the Act before any withdrawals are made.

Dr Jagdeo also informed the PSC that in keeping with proper financial regulations, the new law proposes that all withdrawals of oil revenues be first and foremost deposited into the Consolidated Fund, from which the government could then begin to spend. Added to that, requests for withdrawals would also have to be made as part of the country’s annual budget.

The Vice-President said too that the bill seeks to limit the powers of every Finance Minister of the country, by proposing that the fund be governed by a Board of Directors, comprising no less than three and no more than five members, including the chairperson, who shall be appointed by the President.

The bill also requires that all appointments and changes to the NRF Board of Directors be published in the Official Gazette, on the website of the Ministry of Finance and in at least two of the local daily newspapers.
The board itself is proposed to have a lifespan of two years, after which it shall be “eligible for reappointment.”

It will be responsible for overall management of the fund; reviewing and approving policies of the fund; monitoring performance of the fund; ensuring compliance with the approved policies of the fund; exercising general oversight of all aspects of the operations of the fund and ensuring that the fund is managed in compliance with the act and all other applicable laws.

Additionally, the board members will be required to adhere to a strict Code of Conduct while executing their duties.

Dr Jagdeo also highlighted that new legislation calls for the establishment of a Public Accountability and Oversight Committee as well as an Investment Committee, which will give members of the private sector a much deserved seat at the table.

As previously reported, Dr Jagdeo also encouraged members of the private sector to be vocal on issues that affect them and to continue advocating for betterment.