Before the end of the year, the Government of Guyana is expected to bring draft legislation before the National Assembly to pave the way for the establishment of a Natural Resource Fund.
The Fund is expected to act as a savings account for Guyana’s oil wealth. There will also be rules in place to govern how the government withdraws money from the account. While this is well and good, the International Monetary Fund (IMF) wants the government to also put in place, a Fiscal Responsibility Legislation. It made this quite clear in a statement it issued last Friday.
A Fiscal Responsibility Legislation imposes greater accountability and transparency over the public finances of a country. It forces an administration to return to Parliament to explain – and gain permission for – any spending in excess of Budget estimates. It also imposes strict penalties for breach of legislation.
In its missive, the IMF said, “The rules-based fiscal framework for managing oil wealth should be transparent and consistent with the resource fund deposit/withdrawal rules. It should provide the basis for determining the allocation of annual oil revenue for stabilization and domestic capital expenditure, as well as intergenerational savings. The consistency between the fund deposit/withdrawal rules and a fiscal rule could be reinforced by a Fiscal Responsibility Legislation.”
Based on an examination of the draft legislation for the Natural Resource Fund, the IMF has passed on to the government, a few recommendations, which can go a long way in reporting and auditing more efficient.
In its report, the IMF noted that there is a reporting requirement of an annual report with the audited financial accounts submitted to Parliament.
In addition, quarterly reports and financial statements will be submitted to Parliament within the year.
IMF said that all these reports are required to be posted on the Ministry of Finance website.
IMF noted, however that Section 37 of the draft legislation covers only quarterly reports. The IMF pointed out that annual financial statements are not mentioned. Furthermore, the IMF said that while one could assume that a fourth quarter report would be an annual report, it is not clear in the Bill. Also, in general, the Fund said that quarterly reports would be less comprehensive.
Additionally, the financial organization stated that Section 40 of the draft Bill requires the Ministry of Finance to submit an annual report, which is very detailed. The Fund notes, however, that it is not clear who is responsible to prepare it.
IMF said that all reporting to the Parliament should be prepared by Treasury officials with inputs from Bank of Guyana. The international organization also stated that the NRF is a part of central government and as such, it is essentially an extra budgetary fund that should be consolidated in central government reports. It said that even if there is a separate report, it needs to be submitted together with budgetary central government reports to the Parliament.
As it relates to accountability and oversight, the Fund said that there are provisions for both internal and external audit of the Natural Resource Fund. It noted, however, that it may be preferable for the Government of Guyana to have both the Bank of Guyana and the Ministry of Finance internal auditors have oversight responsibility.
Regarding the external audit, the Fund said that the Ministry of Finance would be a logical body to select an external auditor.
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