By Gary Eleazar
Guyana has officially begun oil production in the Stabroek Block offshore the country’s coast in the its Exclusive Economic Zone. Production is estimated at rate of 120,000 barrels per day (bpd) with each of the four partners taking an accumulated one million barrels every eight to ten days.
The country has passed and enacted a Natural Resources Fund Act and has appointed the central bank as the manager of the fund.
Government, however, has allocated US$700,000 to the fund for its operations in the coming year—managing ‘excess’ revenues garnered from mining and forestry, including revenues from the sale of crude.
The management of the country’s NRF, called the Sovereign Wealth Fund by some, has been placed under the management of the Bank of Guyana under an Operational Management Agreement that was inked with the Ministry of Finance on December 11, last.
Under that agreement between the Central Bank and the Ministry of Finance, the Minister of Finance will annually determine the annual fee to be charged by the Bank for the management of the Fund “and shall be based on the resource requirements”.
This amount include funding by the bank for the fund’s operation and employments costs. There is also funding for capital expenditure needed by the bank to execute its duties in managing the NRF as is required under the Act and the Agreement.
The Agreement inked between Bank and Guyana Governor, Dr. Gobin Ganga and Minister of Finance, Winston Jordan, stipulates however, that “the annual fee to be charged by the bank for the management of the fund for 2020 only shall be $168,051,000 (US$789,000).
The agreement does provide, however, that should there be reasonable cause for the bank to charge in excess of the fee, an additional amount may be requested but shall be limited to a tenth of the previous year’s allocation.
Additionally, fees charged by external service providers for services provided to the fund shall be paid in addition to the fees paid to the Bank, “from the assets of the fund”.
Responsibilities under the Agreement to be funded by the ‘annual fee’ includes meeting the daily operational management of the fund including the maintenance of records, appointing banking correspondents, dealers, brokers, and private managers among others.
The Bank is also expected to provide monthly and quarterly reports to be submitted to the Minister—a report that must include a summary of the performance of the account and each of the private managers involved.
Under the principles adopted for the operationalising of the Fund, “the assets of the fund shall be maintained in the name of the bank but segregated from other assets of the bank…”
At the inking of the Agreement, the two officials had expressed optimism in the efficient management of the NRF and pointed to safeguards in place.
Under the management arrangement, the bank will be responsible for developing risk management systems and developing the human resources “so as to ensure effective operational management of the fund”.
It will be the responsibility of the Bank of Guyana to advise the Minister of Finance with regards to any activity that affects the management and value of the fund in addition to providing the public with information with regards the fund as is required by law.
The NRF Act, according to the officials provides for penalties with regards the use of the fund that can be brought against officials for misuse and losses.
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