Former Presidential Advisor on Petroleum, Dr. Jan Mangal has cautioned against Government’s stated intention to have the Ministry of Finance manage the Natural Resource Fund (NRF).
Government’s Green Paper on the management of oil revenues sets out that the Ministry of Finance would be responsible for the overall management of the NRF.
“The main issue is the management of the fund, which needs to be as apolitical as possible, especially in the Guyana context with contentious politics (ethnic) and lack of trust,” Mangal told Kaieteur News.
The Green Paper states that the Ministry of Finance will manage requested withdrawal from the fund in the annual budget proposal.
The Ministry will also be responsible for calculating the fiscally sustainable amount, drafting the investment mandate, and entering into the operational agreement with the Bank of Guyana.
Additionally, the Green Paper highlights that the Ministry of Finance will appoint a five-member Macroeconomic Committee, which will determine the economically sustainable amount for the fund.
Further, the intention is to have the Minister also appoint a seven-member Sovereign Investment Committee, which would be responsible for advising the Minister about the fund’s investment mandate.
Apart from funds being transferred to the national budget, the Green Paper notes that NRF investments are to be made in overseas markets.
The vision for this, according to the Green Paper, is that this will serve to ensure that the country has a long-term stable source of income, which will allow for the fund to meet its stabilisation and intergenerational savings objectives.
The vision articulated by Government is to have a private manager administer the overall investment portfolio.
According to Mangal, the philosophy for the fund has to be right from the start, hence, the need for a comprehensive framework for revenue.
“I hope the new Department of Energy will hire the applicable professionals to develop this framework. It is unfortunate that the fund is being taken to Cabinet and Parliament without us having the appropriate people to work on it,” Mangal highlighted.
The oil and gas consultant noted that the current exercise with the NRF seems to be a repeat of what happened with the Petroleum Commission Bill (PCB).
He said in the case of the PCB, the Ministry responsible for the PCB seemed intent on ignoring all the comments from stakeholders, and the Bill was only revisited after intervention by the President, who requested a review by the Inter-American Development Bank (IDB) and sent it to the Ministry.
As it relates to examples of effective fund management, Mangal highlighted Chile and Norway, but warned that Guyana cannot copy wholesale.
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