The Ministry of Finance notes with interest an Op-ed by US Ambassador Perry Holloway, which appeared in the local dailies on Tuesday, March 13, 2018, captioned ‘Prioritising a Sovereign Wealth Fund, Preparing for Prosperity Now.’
The Ministry of Finance appreciates the spirit of the Op-ed, but wishes to make clear that the establishment of a Sovereign Wealth Fund (SWF) is already designated priority for the Government of the Co-operative Republic of Guyana (GCRG). We would also like to emphasise that it is the government and people of Guyana who will decide on the tenets of the SWF.
The suggestions contained in the Op-ed may give the impression that the GCRG and, by extension, the Ministry of Finance, under whose remit the drafting of the legislation for the SWF falls, has not made significant progress on this important piece of legislation. That impression is misinformed.
Consequently, the Ministry wishes to use this opportunity to remind the citizens and other stakeholders that the foundation for the establishment of the SWF began since 2016. This was announced more than a year ago at the opening of Guyana’s National Seminar on Preparing for First Oil, which was facilitated by Chatham House.
At that forum, the Minister of Finance made clear the Government’s intention to develop a Fund to govern the use of petroleum resources as a key legislative priority. He also highlighted the objectives of such a Fund as:
- to advance critical development and investment needs within the country (via the national budget);
- to address issues of stabilisation of the economy, and
- to ensure savings were made to guarantee inter-generational benefits from the extraction of this finite natural resource.
Those objectives reflect a comprehensive framework that will guide the prudent management of future oil revenues for the benefit of current and future generations, in keeping with the government’s agenda.
Therefore, government’s investment expenditure will be driven by the Green State Development Strategy (GSDS) – our national development plan – and, by the development priorities articulated and implemented through the National Budget, which has an established consultation cycle of its own.
In developing the draft SWF legislation, the Ministry of Finance is receiving support from the Commonwealth Secretariat. A green paper on the subject will be published in 2018, and consultations will occur subsequently. The legislation is intended to be laid in Parliament by the end of 2018.
It is important to note that as a new oil producing nation, Guyana is ahead of many countries, having already taken the initiative to establish a Fund of this kind. Even Norway, which today is promoted as a model country in petroleum resource management, did not create a Sovereign Wealth Fund until several years after its first oil.
This of course does not mean that the establishment of such a Fund is not immediately necessary, but rather, it demonstrates the government’s commitment to good governance, transparency and accountability, by ensuring that a legislative framework is in place to safeguard our national patrimony, prior to the commencement of oil production.
The Ministry of Finance values the comments from our bilateral and multilateral partners on the draft content of the SWF, and welcomes further engagement and support. However, we would like to recommend that our partners exercise restraint when pronouncing on Guyana’s national priorities, and to refrain from making premature statements on its petroleum resource management, given the existing challenges of managing expectations and avoiding the Dutch disease.
The Ministry of Finance welcomes direct engagement with our partners as we navigate these pivotal moments in the history of our country’s development.