Dear Editor,
Yet again I feel compelled to pen a letter to you, given recent developments, particularly with respect to our natural resource wealth management, in this instance. For anyone who has been following the developments with regard to the Natural Resources Fund Act, from its first iteration by the previous government, to this one laid and passed by the current government, there are a few changes that could be concerning and that raise questions, which could affect our development as a nation. My hope is that these could be addressed by the authorities in meaningful ways.
The removal of the macroeconomic committee
My understanding of the macroeconomic committee (MC), in the previous version of the Act, is that it served as a check on the spending power allowable by the Fund. As we all know, inflation triggered by the supply chain disruptions, has already translated into a higher cost of living for us in Guyana. Inflation reported by the Bureau of Statistics has been higher this year than probably in more than a decade. Undoubtedly, part of this inflationary effect is also attributable to ramped up government spending. Without a MC, what mechanisms have been put in place in this version of the Act, to manage the economic effects of ramped up public spending and the onset of Dutch Disease? At risk also is the competitiveness of our private sector.
The replacement of the withdrawal rule
I must admit, the new rule is indeed much simpler than the previous one – it is straightforward and can be followed quite easily. However, in its simplicity, is an allowance for significant public spending in 2022.
If the government so desires, it could withdraw $500 million USD or $100 billion GYD for public spending. That’s nearly one quarter of 2021 budget! While yes, this could mean investments in much needed assets towards the improvement of public services, what we should not forget is that investment expenditure also generate recurrent costs. Has analysis been done to show how non-NRF revenues are anticipated to grow over the next 5-10 years, that will demonstrate an absorptive capacity of the state to meaningfully service the growing recurrent obligations? What I’m saying, Editor, is that we need to make sure that our regular budget, outside of oil revenues, is able to absorb the costs associated with new roads, schools and hospitals that could be built with oil revenues. If we don’t, then we risk going down an unsustainable path, which would end up with services being even more poorly maintained than they are now.
“Impartiality” of fund management
Editor, I see little difference in the grand scheme of things. In the previous version, and in this version, Parliament still needs to approve withdrawals for public spending. At the end of the day, the Parliament comprises our elected representatives, and we couldn’t ask for anything better. If the public says they don’t want politicians involved, then we’d literally have to throw out our Constitution because it would mean that our democracy holds no value. The Minister of Finance did not, and still does not hold unilateral control over the Fund, which is fine. However, I am still concerned at the removal of the Macroeconomic Committee, which was to comprise persons specially qualified in macroeconomics – who wouldn’t want technical specialists to help us ensure our economy is effectively managed? Additionally, the thinning of the Oversight Committee also raises questions of inclusivity and wider stakeholder participation, which is counter to the principles of democracy and societal involvement.
Editor, the warning signs are clear when we examine examples of other countries. We need to be wary of runaway spending, widening inequalities and rising costs of living. I’m not convinced that this version of the Act safeguards us sufficiently from these things.
Sincerely,
V. Singh