Today’s column starts my revisit of the Guyana Natural Resource Fund, NRF, alternatively termed Sovereign Wealth Fund, SWF. It addresses the topic from three unequally weighted perspectives. First. I revisit today the economic rationale behind these Funds. Second, in what follows I briefly address the transition from the NRF Act 2019 to the NRF Act 2021 and thirdly, I offer a critique of the very notion of such Funds.
NRF/SWF rationale!
Worldwide data clearly reveal that, oil and gas discoveries on the scale of Guyana’s invariably lead to impact booms in export and government revenues, thereby creating what economists term as “fiscal space”. That space is basically room in the national budget allowing government spending on its policies, projects, and programmes; without jeopardizing financial and/or macroeconomic stability. Because such spending may focus on items like infrastructure, health, education, social welfare, productivity enhancing products (hardware) and services (software), environmental sustainability, and so on, governments uniformly pounce on these revenues as a “golden opportunity” to exploit at the fullest.