Kazakhstan among oil fund models being examined – President Ali

Natural Resources Fund

− says Guyana has development deficit that has to be addressed

While revealing that the Government is examining the Kazakhstan model for its prospective Natural Resource Fund (NRF), which will be reformed to bring about greater transparency, President Dr Irfaan Ali also noted that Guyana has a development deficit that has to be bridged with the oil funds.
According to the President during a recent engagement with the diaspora, it is important to remember that countries who set up a Sovereign Wealth Fund (SWF) did so after their own countries had achieved a certain level of independence.

“This is key and I think sometimes we need to premise our arguments on the different models on this. What was the state of the country when they adopted a particular model? You would agree that Guyana is in dire need of infrastructure, transformation in the health and energy sector, in the transportation sector.”
“And we have to create the framework for expansion in other sectors that would bring jobs and create the platform through which our country would evolve into the future. And that is the stage we are in in Guyana,” he said.
President Ali noted that this is particularly so with Norway, which he acknowledged was a very good model. But he further explained that the Government is looking at other models, including the Kazakhstan model.
Kazakhstan, the world’s largest landlocked country, is located in Central Asia and is a producer of oil and gas. Its fund is called the National Fund of the Republic of Kazakhstan (NRFK) and was established in 2001. Kazakhstan only began producing over 1000 barrels of oil per day in 2003, but had discovered oil well before that.

“What the academic debate doesn’t tell you is that for example in the Norwegian model, which is a very good model that we’re looking. And we’re looking at many models. Right now, we’re looking at the Kazakhstan model. What we have to understand is that Norway adopted that model after the country had a certain level of infrastructure, service and development.”
“And that is the stage we are in in Guyana, giving Guyana a chance to become competitive and the people of Guyana an opportunity to get world class services. And world class infrastructure. That will be done transparently and the model we finally settle on will be a model that is adopted nationally,” President Ali said.
Finance Minister, Dr Ashni Singh had explained that money from the oil and gas sector that is banked in the fund cannot be actively invested with the fund in its current state. For now, the fund will passively accrue interest from the New York Federal Reserve Bank where it is currently banked.
“We came into Government with a Natural Resources Fund that was already in existence. And in fact, it was set up by a law that was passed after the No-Confidence Motion had been approved. It was approved in December of 2018. The Natural Resource Fund Act was passed in 2019, with no Opposition involvement or input. The fund in its current configuration is not actively invested.”
“As you know, it’s our intention to reform the fund and its management. In due course we’ll be going to Parliament to address some of the deficiencies in the current arrangement. And at that point of time, we will consider an active investment strategy for the fund, a prudent but active investment strategy. But at this point the fund is not actively invested,” Singh had stated.
It was previously disclosed in February of this year that over US$200 million earned in oil revenues is currently in Guyana’s Natural Resource Fund, with the latest payment made in January this year.
It is expected that once the Natural Resource Fund Act, which stipulates that various committees must be established to provide oversight for the fund, is reviewed, it will be brought to the National Assembly by the current Government.
In keeping with its manifesto commitments, the Government has pledged to implement a number of measures to ensure accountable and transparent management of the country’s natural resources including establishing an arm’s length sovereign wealth fund insulated from political interference and upholding the Santiago Principles of transparency and accountability, and the EITI.