Tomorrow’s budget presentation will formally disclose the closing balance of the Natural Resource Fund (NRF) for 2022 and how much monies are expected to be deposited in the Consolidated Fund and the amount to be directed towards “very safe investments”.
The Chair of the NRF Board charged with the overall governance of the Fund, Major General (Rtd) Joseph Singh told the Sunday Stabroek that, even as the body has begun work since it was constituted last year, it must now await the approval of the 2023 Budget Estimates.
“The NRF Board will be, like everyone else, awaiting the Budget 2023 presentation. What is in the budget for the Fund has to be approved by Parliament. And only when those sums are approved for the NRF we can act,” he said. “When that is done, we will check the approved amounts against the reports collected from Bank of Guyana and will begin execution of duties using the guidelines of the Act. The Act guides you on everything that has to be done…,” the NRF Chair added.
The NRF will, for the first time, be activating the Fund’s investment protocols for monies set aside for future generations. The purpose of the NRF Fund is to manage the natural resource wealth of Guyana for the benefit of present and future generations in an effective and efficient manner by ensuring that volatility in natural resource revenues does not lead to volatile public spending; that natural resource revenues do not lead to a loss of economic competitiveness; fair transferals of natural resource wealth across generations, thus ensuring that future generations benefit equally from Guyana’s natural resource wealth, and using this natural resource wealth to finance national development priorities including any initiative aimed at realising an inclusive green economy.
The NRF comprises oil profits and royalties. All of the money that accrued up to the end of the year 2021 – US$607.6m – was allocated to the 2022 budget.
The NRF Act 2021 came into operation on 1st January, 2022, and as part of the 2022 Budget process, Parliamentary approval was granted for a total of US$607.6 million to be transferred during fiscal year 2022 and that was done.
“The amount that the Minister shall request the National Assembly to approve as the withdrawal from the Fund for the next ensuing fiscal year shall be included in the annual budget proposal and shall not exceed for that year, the ceiling calculated in accordance with Section 17 and the First Schedule plus any amount required for emergency financing,” the Act states. The Finance Minister must also, according to the Act, provide the Fund’s earning projections for the next three years.
But sources have told the Sunday Stabroek that the Investment Committee – charged with advising on investment allocations – has still not been constituted as the opposition APNU+AFC is yet to name its nominee. “The Investment Committee is still not yet quorate. The nominee for the Opposition still has not been given and it is unknown when it will be,” a source told this newspaper.
With two FPSOs producing a total average of 340,000 barrels of oil per day and a third set to come on board later this year, the revenue projections are expected to significantly increase.
The Stabroek News had last week reported that as of the ending of 2022, US$1.26b was in the Fund. The formula in the Natural Resource Fund Act for withdrawals from the Fund sets out the total that could be applied to the next year’s budget. According to the First Schedule of the Act, 100% of the first US$500m paid into the fund in the immediately preceding year can be tapped; 75% of the second US$500m and 50% of the third US$500m. Combined, this means that US$1.007b, which is 65.8% higher than the US$607.6m that was available for the 2022 budget, is currently available for the 2023 budget. Importantly, this also means that US$257m is now available in the Fund to be invested by the government for future generations.
The Act states how those monies should be invested. “The Funds shall only be invested in eligible classes,” the Act says, and it outlines these. But since the sum available this year is below US$500m, all of it has to be invested in what the Act calls very safe investments.
“Where the balance of the fund is less than five hundred million United States Dollars, then all of the Fund shall be invested in very safe investments,” the Act says. Section 23:1 of the Act defines safe investments” to be – “For the purposes of this section, the term `very safe investments’ means eligible bank deposits and eligible treasury bills only”.
The Act also points out that the total amount requested for emergency financing for a fiscal year shall not be subject to the ceiling calculation, thus in the event of a national emergency in this calendar year, monies could come from the US$257m in the Fund through a supplementary appropriation bill. The Minister will, however, have to provide, in such a case, a detailed report on why the money is required and a report describing the major natural disaster including impacts on the environment and population of Guyana.
The status of the Investment Committee was posed to the NRF Chairman who directed this newspaper to its Head, Shaleeza Shaw. Calls to her mobile number went unanswered. However, sources told this newspaper that the Investment Committee is still awaiting the nominee of the Opposition. This newspaper tried to reach the Leader of the Opposition, Aubrey Norton, but neither calls nor messages were answered. The APNU+AFC had contended that the Act was not properly passed and has challenged its passage in court. Its litigants, Party Chief Whip Christopher Jones and Executive Norris Witter, are seeking to have all actions taken by anyone, including the Minister of Finance, pursuant to the passage of the bill, or the constitution of any Board under the NRF, be declared null and void.
They are also asking the court to grant any order necessary to ensure that the NRF be replenished to the extent of all sums disbursed from the Fund, inclusive of any Appropriation Act. Attorney General Anil Nandlall SC had asked the court to strike out the action, arguing, among other things, that it is an abuse of process and baseless. The defendants are the AG, Minister of Finance, the Speaker of the National Assembly, the Clerk of the National Assembly and Parliament Office.
