The Finance Ministry has said the move to increase the withdrawal amounts from the Natural Resources Fund (NRF) and raise both the domestic and external debt ceilings is prudent fiscal management – something which the People’s Progressive Party/Civic (PPP/C) Administration has consistently displayed through its transparent and accountable management of the economy.
Finance Minister Dr Ashni Singh
Following the announcements, made during his presentation of Budget 2024 two weeks ago, Senior Finance Minister Dr Ashni Singh on Friday tabled the Fiscal Enactments (Amendment) Bill 2024 in the National Assembly. This Bill includes proposals to amend the First Schedule of the NRF Act 2021 to reflect an updated withdrawal rule, as well as updated ceilings on domestic and external debt.
According to a statement from the Finance Ministry, these amendments are “aimed at accelerating the delivery of public goods and services to Guyanese, while optimising the financing mix in keeping with sound fiscal management.
“Once approved by the National Assembly, the revised [NRF withdrawal] rule will take effect from this fiscal year, and will replace the conservative rule that currently exists in the Act. Similarly, the updated debt ceilings will take immediate effect, and will provide the Government with the flexibility needed to adapt the financing mix, depending on the evolving global and domestic economic situation, particularly given global uncertainties regarding interest rates.”
NRF withdrawals
The Finance Ministry explained that the NRF rule, while allowing for greater financial resources to be available to support intensified public investment and accelerated delivery of social services, would ensure that, as production and revenue are ramped up further, an increasing share of the inflows into the NRF would be saved relative to the share transferred to the Consolidated Fund to finance these national development priorities.
The Bill proposes that the First Schedule of the NRF Act 2021 be amended to reflect revised calculations for the ceiling on annual withdrawals. Under the revised proposals, a sliding scale is proposed for withdrawals from the first US$5 billion of deposits paid into the Fund in the immediately preceding fiscal year. Beyond the first US$5 billion, 90 per cent of deposits in the immediately preceding fiscal year will be saved, benefitting generations and generations of Guyanese for years to come.
A breakdown of the new withdrawal formula in the proposed legislation shows that Government plans to draw down 100 per cent on the first US$1 billion deposited into the Fund in the immediately preceding fiscal year; then 95 per cent on the second US$1 billion; followed by 90 per cent on the third US$1 billion; and 85 per cent on the fourth US$1 billion.
In defending this new formula, the Finance Ministry explained that the NRF Act 2021, which was passed in the National Assembly in December 2021, represents one of the most significant steps taken by the PPP/C Government to bring greater accountability and transparency in the management of Guyana’s oil resources. It replaced the illegitimate APNU/AFC caretaker administration’s NRF Act 2019, which was rushed through the National Assembly after the Coalition Government had already lost the no-confidence motion (NCM) and had therefore lost their mandate to govern.
The Ministry noted that the current NRF Act 2021 contains several enhanced clauses, including the establishment of a Board of Directors which is responsible for reviewing and approving the policies of the Fund and monitoring its performance, thereby separating the management of the Fund from the Minister responsible for Finance.
It further pointed out that the NRF Act 2021 not only requires the Government to seek Parliamentary approval for withdrawals from the Fund, but also sets out new, simplified calculations needed for ensuring that the Fund achieves its purposes.
Another key improvement is that the Minister could face up to ten years’ imprisonment if he fails to disclose the receipt of any petroleum revenue received by the government in the Official Gazette within three months of receipt of such monies.
“PPP transparency and accountability ensures that the public and relevant regulatory bodies are always duly informed and aware of all receipts into the Fund, unlike the previous APNU/AFC administration that unscrupulously hid the US$18 million signing bonus,” the Ministry stated.
Debt ceilings
Similarly, the Finance Ministry said the PPP/C Government has maintained transparent debt management by ensuring Parliamentary approval of revised debt ceilings, as required by the evolving circumstances of the economy, including the country’s enhanced debt-carrying capacity, while at the same time maintaining debt sustainability and macroeconomic stability.
This contrasts against APNU/AFC’s incurrence of an illegal overdraft, which they then concealed by failing to include the overdraft in their reported debt figures, thereby avoiding the necessity to report what would have been a breach of the debt ceiling at the time.
Budget 2024 proposes an increase in the domestic and external debt ceilings, which the Finance Minister had said would provide the flexibility needed to optimise the financing mix while at the same time safeguarding Guyana’s debt sustainability.
The Government is seeking to amend the borrowing ceiling for Public (Domestic) Loans by 100 per cent and for External Loans by 66.7 per cent.
Dr Singh reiterated, according to the Ministry’s statement, that “the PPP/C Government will maintain its transparent and accountable management of the oil and gas sector and of the economy as a whole, including by maintaining strict fiscal discipline, strategic vision, and economic stewardship that will ensure that the funds will be used for financing investments that will reap high dividends for current and future generations”.
