…over “misinformed” statements about oil and gas sector
One day after United States (US) Ambassador to Guyana Perry Holloway called for Guyana to redouble its efforts to ensure the establishment of a strong and independent fund, similar to a Sovereign Wealth Fund (SWF), which would see the country’s development safeguarded as it continues to benefit from the emerging oil and gas sector, the Government issued a strong statement upbraiding the foreign diplomat.
In a strongly worded statement issued by the Finance Ministry on Wednesday, Government said as a new oil producing nation, Guyana is ahead of many countries, having already taken the initiative to establish a fund of this kind. Even Norway, which today is promoted as a model country in petroleum resource management, did not create a SWF until several years after its first oil.
“This of course does not mean that the establishment of such a fund is not immediately necessary, but rather, it demonstrates the Government’s commitment to good governance, transparency and accountability, by ensuring that a legislative framework is in place to safeguard our national patrimony, prior to the commencement of oil production,” the statement said.
While Government said it values the comments from bilateral and multilateral partners on the draft content of the SWF, and welcomes further engagement and support, it noted, they would “recommend that our partners exercise restraint when pronouncing on Guyana’s national priorities, and to refrain from making premature statements on its petroleum resource management, given the existing challenges of managing expectations and avoiding the Dutch Disease,” referring to the Ambassador’s comments.
Ambassador Holloway on Wednesday insisted that the establishment of a revenue and investment fund was necessary if Guyana is interested in effectively managing the windfall and monies that will flow from the oil and gas sector which should be utilised to boost the country’s overall growth and development.
His comment was made via an Op-Ed that was published by the US Embassy on their website and social media pages. The diplomat explained that Guyanese will ultimately have to make decisions on the type of development model they wish to have in place as he warned that a “rainy day fund” was simply not enough to secure the country’s future transformation.
Ambassador Holloway also expressed the view that as conversations and discussions continue about what needs to be done to properly manage the oil and gas sector, it was important that the SWF which is being proposed by the David Granger Administration remain “independent, nonpartisan, transparent and inviolable”. He also explained that the fund would realise investments in education, health, infrastructure, agriculture, and security as he stressed that its urgency cannot be understated.
According to him, difficult decisions are ahead whether that involves identifying the right talent to manage the fund or even making the difficult decision to borrow at concessional rates that will not be available tomorrow to develop the present. However, the investment today will pay off tomorrow.
But the Government said the establishment of a SWF is already a designated priority for their Administration. They said also that the suggestions contained in the Op-Ed may have given the impression that the Government and, by extension, the Finance Ministry, under whose remit the drafting of the legislation for the SWF falls, has not made significant progress on this important piece of legislation.
“That impression is misinformed. Consequently, the Ministry wishes to use this opportunity to remind the citizens and other stakeholders that the foundation for the establishment of the SWF began since 2016. This was announced more than a year ago at the opening of Guyana’s National Seminar on Preparing for First Oil, which was facilitated by Chatham House,” it added.
Moreover, the Finance Ministry said Minister Winston Jordan has made it clear Government’s intention to develop a fund to govern the use of petroleum resources as a key legislative priority. He also highlighted the objectives of such a fund as: to advance critical development and investment needs within the country (via the national budget); to address issues of stabilisation of the economy, and to ensure savings were made to guarantee inter-generational benefits from the extraction of this natural resource.
Those objectives, according to Government, reflect a comprehensive framework that will guide the prudent management of future oil revenues for the benefit of current and future generations, in keeping with the Government’s agenda. Therefore, Government’s investment expenditure will be driven by the Green State Development Strategy (GSDS) and, by the development priorities articulated and implemented through the National Budget, which has an established consultation cycle of its own.
Back in January this year, Natural Resources Minister Raphael Trotman explained that the fund was being scrutinised by several international agencies, regional stakeholders and local experts in various field as systems are put in place to manage the oil and gas sector.
In developing the draft SWF legislation, the Finance Ministry is receiving support from the Commonwealth Secretariat. A green paper on the subject will be published in 2018, and consultations will occur subsequently. The legislation is intended to be laid in Parliament by the end of 2018.
