I hope the Green Paper on the proposed Sovereign Wealth Fund (SWF) is a work in progress. The paper outlines a fiscal rule for withdrawals and the passive investment strategies for the foreign assets that will make up the Natural Resource Fund (NRF). It is quite intuitive why a NRF is necessary. It’s like a person’s bank savings account, with monies put away for financing income shortfall. The “rational” person is probably going to have some long-term or permanent spending profile. Once income rises above the long-term spending habit, the person saves for when hard times come. The Green Paper is proposing a set of rules and new systems that it hopes will make the Guyanese government behave like a rational person. In addition, the idea of having a single NRF makes sense.
The public has expressed several objections regarding who will be the caretaker of the people’s oil and gas bank account. For example, many people have rightly objected to the strong control the Green Paper gives to the Minister of Finance over the NRF. It is clear from the document that the Minister has significant leverage over the proposed Macroeconomic Committee, as well as the Sovereign Investment Committee. The control over the future Macroeconomic Committee is more important from the perspective of best use of the oil revenues.
It is no secret that no one can be independent in Guyana. No one is exempted from the politicians’ grip or private special interests. There is no way on this planet a Guyanese Minister of Finance will place a truly competent and fiercely independent macroeconomic expert to Chair the committee responsible for determining the sustainable amount of annual withdrawal for the National Budget. Ultimately, the President and Minister will select people from their political and ethnic networks. As noted in the paper, Cabinet also gets to vet another member of the committee. Since Guyana does not have an independent central bank, the government of the day gets indirect control over the person representing the Bank of Guyana (BoG).