Businessman Terrence Campbell is the Opposition’s representative on the Natural Resource Fund’s Investment Committee with his appointment gazetted to reflect it being retroactive from November 1, 2023.
“It is an opportunity to be an independent voice and to serve the people of Guyana,” he told Stabroek News on Wednesday, adding, “Independent voices are noticeably absent from the Board and its Committees.”
However, he explained that “notwithstanding the date of the Gazette and nominal date of appointment in November 2023, I haven’t yet received any formal notification on the appointment.”
He noted that NRF Investment Committee Chairperson, Shaleeza Shaw, has been in communication with him and suggested a meeting soon but “this is a position that requires instruments of appointment.”
The Opposition selected Campbell while Bank of Guyana Governor Gobind Ganga nominated the bank’s accountant and officer, Ganesh Sugrim, as its representative. Sugrim’s appointment took effect on March 1, 2024. It is unclear if he has been given his instrument of appointment.
Campbell said that he will make the most of his contributions so that this country benefits from its natural resource but is disappointed that the opposition does not have a representative on the Board of Directors of the NRF.
“A wealth fund is a mechanism for the citizens of a nation, or state, or even a city to invest assets to generate economic benefits. These funds are used to build up savings for future generations and to provide stability during economic downturns. It is, to my mind, unacceptable for the Opposition to be absent from the Board of such an important fund,” he expressed.
“Why do we make provision for Opposition representation on the boards of state-owned entities but not the fund which is far more important? Opposition representation will help to reduce the likelihood of the fund becoming politically captured where its actions are directed towards political objectives rather than economic goals,” he added.
Revisions
In January of this year, government announced revisions to the NRF withdrawal rule and a hike in the domestic and external debt ceilings.
Presenting his 2024 budget, Senior Minister in the Office of the President with Responsibility for Finance and the Public Service, Dr Ashni Singh, announced that US$1.15 billion in oil proceeds would be available for Budget 2024 based on the formula that was in place at that time. The figure for the 2023 budget was US$1 billion. Under the amended formula, US$1.586 billion is available to the government this year.
Under the new extraction formula approved on February 2nd this year, the government is to draw down 100 per cent of the first US$1 billion of deposits paid into the fund in the immediately preceding fiscal year.
According to the NRF legislation controversially passed on December 29, 2021, 100 per cent of the first US$500 million paid into the fund in the immediately preceding fiscal year could be withdrawn.
For every additional tranche, the government will increase the take. For the second US$1 billion paid into the fund in the immediately preceding fiscal year, the government is extracting 95%. The old legislation, by contrast, allowed the extraction of 75% of the second US$500 million.
The amendment passed will enable 90% of the third US$1 billion of deposits into the fund in the immediately preceding year to be taken. The old law extracted only 50% of the third US$500 million.
The new bill will take 85% of the fourth US$1 billion deposited compared to the old law which allowed the taking of only 25% of the fourth US$500 million.
The new formula approved on February 2 this year is clearly aiming at higher inflows when the fourth and fifth oil platforms become operational.
The NRF Act states how monies left in the NRF should be invested. “The Funds shall only be invested in eligible classes,” the Act says, and it outlines these. But where that sum available is below US$500 million, 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$257 million 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.
In its first quarterly report for this year, the Bank of Guyana said that the Board of Directors of the Natural Resource Fund at its meeting held on June 26, 2023, had approved the updated investment mandate for the Fund. It was mandated that the funds be maintained in the deposit account held at the Federal Reserve Bank of New York, earning overnight deposit interest at the prevailing federal funds rate of 5.30%. It was also agreed that the Bank of Guyana will continue to monitor the overnight interest rate and inform the Chairman of any changes by the Federal Reserve Bank to consider redeploying cash.
As at March 31, 2024, the report said that there has been no change made to the investment mandate as the federal funds rate remained within the range of 5.25% and 5.5%.
Giving insight into activities of the NRF, the report said that during the quarter, the Fund accounted for inflows amounting to G$94,957.79 million (US$455.43 million) comprising of profit oil – G$81,697.35 million (US$391.83 million) and royalties – G$13,260.45 million (US$63.6 million) in comparison to G$107,857.06 million (US$517.3 million) and G$11,010.03 million (US$52.81 million) respectively for the previous quarter.
“These funds were deposited into the Natural Resource Fund account held at the Federal Reserve Bank of New York. Since its inception, the Fund has accounted for G$746,711.01 million (US$3,581.35 million) from 44 lifts of profit oil and G$104,617.57 million (US$501.76 million) from royalties,” the report explained.
During the quarter, it said that “the Federal Reserve continued to maintain interest rates at 5.25% – 5.50%. Sustained high interest rates coupled with a higher account balance resulted in the Fund earning a higher level of interest income on its overnight deposits than previous quarters.”
The Fund earned G$6,162.99 million (US$29.56 million) in interest income over the quarter compared to G$5,636.98 million (US$27.04 million) the previous quarter,
Recording a profit of G$6,162.99 million (US$29.56 million) for the first quarter of 2024, in comparison to $5,636.98 million (US$27.04 million) for the last quarter of 2023, the report said that it was solely due to interest earned on deposits.
“This resulted in a return of 1.254% for the quarter compared with 1.269% in the previous quarter,” it stated.
The Fund has earned an annualized return of 1.797% since its inception.
