The Energy Department is continuing its efforts to coordinate all petroleum sector donor activity from the USA, United Kingdom, Canada and Mexico.
Head of the Department, Dr. Mark Bynoe explained earlier this week that this is being done to ensure focused, cost effective and efficient support without duplication.
Dr. Bynoe noted that support for both the Department of Energy and sister institutions such as the Environmental Protection Agency, the Guyana Revenue Authority, the Audit Office of Guyana, the Civil Defence Commission and the Ministry of Social Protection is ongoing.
Further to this, Dr. Bynoe said that through the Finance Ministry, significant loans have been agreed and/or being finalized with the World Bank and the Inter-American Development Bank for institutional strengthening and governance for the Oil and Gas sector. He said that these loans are to address much needed support for the sector and to allow for more effective management.
WORLD BANK LOAN
Last year June, the World Bank approved a US$35 million Development Policy Credit to Guyana. This sum is expected to support Guyana’s efforts to strengthen financial sector development and fiscal management to better prepare the country to benefit from its newly discovered oil and gas reserves and transform its oil wealth into human capital.
While currently nearly one in four people in Guyana live in poverty, experts estimate that GDP will surge when commercial production of newly-discovered oil and gas begins. In response, the government has embarked on a series of reforms to diversify the economy and turn oil windfalls into human development and sustainable growth in the long term.
“Guyana is making important strides to promote financial resilience and improve fiscal management, and has embarked on a broad-based reform programme,” said Tahseen Sayed, World Bank’s Country Director for the Caribbean when the loan was signed.
“These reforms will be key to building a strong economy that is underpinned by a strategic management of public resources for the benefit of the Guyanese people.”
The World Bank said that the money will go towards enabling sound financial development to promote macroeconomic stability and long-term growth. In particular, the money will support banking reforms and depositor protection, the establishment of a deposit insurance scheme, implementation of a new insurance law, and the country’s anti-money laundering efforts.
“This Development Policy Credit, the first of a series of two programmatic financial and fiscal development policy credits, is financed from the International Development Association (IDA).”
Minister of Finance Winston Jordan had said, “This financing provides critical support to our reform agenda and efforts to strengthen institutions and build a resilient economy that is capable of withstanding both external and domestic shocks. These reforms will be key to guide the management of oil revenues for the benefit of present and future generations.”
The Inter-American Development Bank (IDB) is also taking a leading role in helping Guyana transform its governance approach when it comes to the energy sector. According to the IDB, Guyana has been approved for a loan of US$11.6M which will, among other things, pay for drafting a model contract for future Production Sharing Agreements (PSAs).
Under the 2016 agreement with ExxonMobil, the Coalition Government signed for a two percent royalty and questionable 50/50 share on every barrel of oil. However, Guyana’s share of the 50/50 is dependent on ExxonMobil recovering its expenses first. Commentators say that based on ExxonMobil’s track record, Guyana will be left with little.
The Government of Guyana says that it will be strengthening its newly established Department of Energy to handle these and other issues. The IDB says that the loan will prepare Guyana for its transition towards becoming a major oil and gas producing state.
“Relying upon a $11.64M policy-based loan from the Inter-American Development Bank (IDB), this project is designed to support the strengthening and the sustainability of the energy sector in Guyana by contributing to the institutional development of oil and gas governance and the development of cleaner energy sources for electricity generation,” IDB explained.
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