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Tarron Khemraj

Tarron Khemraj

January 9 ,2022

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The PPP/C government’s version of the Natural Resource Fund Act is no different from the earlier one by the APNU+AFC coalition in relation to the concentration of powers.

This is the contention of economist, Professor Tarron Khemraj in his column in today’s Sunday Stabroek.

Withering criticism has greeted the government’s decision to have the Natural Resource Fund Act passed on December 29 last year without any consultation or referral of the draft law to a Special Select Committee of Parliament or the Natural Resource Committee for expert review.  The law was assented to on December 30, 2021 and an order promulgated a day later bringing the Act into operation as of January 1st, 2022. PPP/C officials have argued that their version of the Act was far better than APNU+AFC’s and that broad powers concentrated in the Minister of Finance have been removed.

Khemraj disagrees with this claim by the PPP/C government and expressed serious doubts about parts of the legislation.

“The first one pertains to the issue of independence of the Board. The degree of perceived independence from or control by a politician is not significantly different from the APNU+AFC’s version of the Act. The latter gave substantial power to the Minister of Finance, while the PPP/C’s version hands significant power to the President and subsidiary power to the Minister of Finance. While the President gets to determine the majority of members who will serve on the Board, the Minister of Finance has significant authority over the Investment Committee”, Khemraj said.

Under the PPP/C’s version of the Act, while the National Assembly and the Private Sector Commission will be identifying one candidate each for the board of the Natural Resource Fund, President Irfaan Ali will select one and possibly three in his own deliberate judgement,  giving him  control over this all-important oversight body.

“I find the desire of careered politicians to exercise complete control to be curious since the Board, the Investment Committee, and the proposed Public Accountability and Oversight Committee (PAOC) cannot dictate fiscal policy (annual budgets). The task of spending and taxing rests solely in the power of the elected administration. An astute government will always yield something to the parliamentary opposition, but that’s another discussion for another day…”, Khemraj said.

He added: “We can debate whether various proposed budgets express optimal project choice or timing – they often don’t – but career professionals cannot take away that power from elected politicians. In any case, most professionals will be hard-pressed to be independent in a place like Guyana. Most will likely be in some form of transactional relationship – explicitly or implicitly – with the government, or its proxies, as it assumes an ever-greater role – for better or worse – in the Guyanese economy. Therefore, why are politicians so insecure that their first-order instinct is to stamp out all checks and balances on good governance?”

Khemraj also took aim at the abandonment in the PPP/C legislation of a macroeconomic committee which had been in the APNU+AFC version and which was intended to guide on the amount of money that could be withdrawn from the NRF without disrupting the economy.

“Perhaps nothing so expresses this insecurity as the abandonment of the macroeconomic committee, which could have played a crucial role in not only suggesting the best amount of annual withdrawal, but also providing detailed insight into the potential risks of drawing down large amounts of US dollars and depositing them into the Consolidated Fund. The Act (see 20.1) also requires that the Minister of Finance provides three-year projections of oil revenues as he prepares budget proposals. The committee could have helped in this regard and prevented the need for ad hoc number plucking”, Khemraj asserted.

Moreover, he noted that the macroeconomic committee was meant to provide a data-driven approach for the management of the Fund.

“Investment management of large funds, whether active or passive, often rely on this kind of approach to decision making. We cannot invest without data and information. Converting data into useful information would have been a very helpful input for not only the government, but also the Board, the PAOC and civil society”, Khemraj contended.

A petition tendered to Parliament by Policy Forum Guyana and signed by 64 Guyanese calling for a deferral of debate on the Natural Resources Fund Bill until citizens could consider it was ignored.

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The Natural Resource Fund Bill 2021 is an attack on Good Governance

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On January 23rd 2019, the previous administration passed the Natural Resource Fund Act that established the Natural Resource Fund (NRF) to invest Guyana’s windfall from its oil and gas and mining industries. The NRF’s objective is to help stabilise the Guyanese economy from economic shocks, finance national development priorities and provide savings for the nation’s posterity.

The current administration has drafted a new piece of legislation, the Natural Resource Bill 2021, which seeks to eviscerate good governance and remove independent oversight from the Natural Resource Fund (NRF) as provided under the current Natural Resource Fund Act 2019, so that the government could easily take up to US$1.7 billion annually from the Guyanese people’s fund.

Public Accountability & Oversight Committee:

Essential to the governance structure of the Natural Resource Fund under the Act, is the 22 member Public Accountability & Oversight Committee (PAOC). The PAOC is an independent committee that is appointed by the President and whose membership is nominated by a broad-based segment of Guyanese society, consisting of representatives from:

  1. The ten Regional Democratic Councils
  2. A consortium of civil-society and community-based organisations
  3. A consortium of Women’s civil-society and community-based organisations
  4. A consortium of youth civil-society and community-based organisations
  5. The Transparency Institute of Guyana
  6. The Bar Association of Guyana
  7. The Guyana Consumers Association
  8. The Guyana Extractive Industries Transparency Initiative
  9. The Guyana Press Association
  10. The most representative associations of trade unions
  11. The Institute of Chartered Accountants of Guyana
  12. The Private Sector Commission
  13. The University of Guyana

The law mandates the PAOC to establish a code of conduct to govern its members and the PAOC shall publish the code on Parliament’s website. This self-imposed code of conduct speaks to the autonomy of the committee.

Under Section 6 of the Natural Resource Fund Act 2019, the Public Accountability & Oversight Committee’s role is to:

  1. Monitor and evaluate the compliance of the Government and other relevant persons with the provisions of the Act
  2. Monitor and evaluate whether the Fund has been managed in accordance with the principles of transparency, good governance and international best practices including the Santiago Principles
  3. Provide independent assessment of the management of the Fund and utilisation of withdrawals from the Fund
  4. Facilitate public consultations on the management of the Fund and utilisation of withdrawals from the Fund.


Below is the current Governance Structure in The Natural Resource Fund Act 2019

The Dismantling of The Public Accountability and Oversight Committee

Under the proposed the Natural Resource Fund Bill 2021, the government wants to strip the Public Accountability & Oversight Committee (PAOC) of all its authority to prevent independent accountability and oversight in the operations of The Natural Resource Fund. The government wants to take away authority from this independent committee and place it in the hands of a politically handpicked Board of Directors. Under the new Bill, the new role of the PAOC will be relegated to:

  1. Receiving quarterly reports from the Board of Directors on the operations of the Fund
  2. Meeting at least quarterly with the Board of Directors of the Fund to be briefed on the operations of the Fund

Moreover, in the Natural Resource Fund Bill 2021, the Finance Minister shall determine a code of conduct to govern the PAOC and the Finance Minister will publish the code on the Finance Ministry’s website. This dictate by the Finance Minister makes the PAOC dependent upon the Finance Ministry to determine how to conduct its affairs.

In the Natural Resource Fund Bill 2021, the composition of the PAOC is completely reshaped. Instead of having the broad-based 22 member representatives of the Guyanese society, the PAOC will be truncated to a nine-person committee. In fact, there will be little transparency in the appointment of the PAOC. This removes accountability and participation from the society as was required by the original National Resource Fund Act 2019. The proposed PAOC will consists of:

  1. One representative from the National Assembly
  2. Three representatives of the religious community
  3. Two representatives of the private sector
  4. Two representatives of organised labour
  5. One representative of the professions

Board of Directors:

In the Bill, the government wants to create a three-to-five person Board of Directors, with a nominee from the National Assembly and the private sector, respectively. The President will select the rest of the members and appoint all members onto the board, including the Chairman. The Board of Directors will:

  1. Manage the of the Fund
  2. Review and approve the policies of the Fund
  3. Monitor the performance of the Fund
  4. Ensure compliance with the approved policies of the Fund
  5. Exercise general oversight of all aspects of the operations of the Fund
  6. Ensure that the Fund is managed in compliance with all applicable laws
  7. Prepare the Investment Mandate
  8. Seek advice from the Investment Committee with regards to the preparing and amending the Investment Mandate
  9. Be assisted by the Senior Investment Advisor and Analyst
  10. Enter into an operational agreement with The Bank of Guyana for the operational management of the Fund


Below is the proposed governance structure under Natural Resource Fund Bill 2021

The proposed Bill is an attack on good governance. The public will no longer be consulted and provide oversight on the operations of the Natural Resource Fund and Guyana’s oil money. There will be no independent oversight and accountability. The government will control everything.

The destruction of the Sustainable Amount:

Under the Natural Resource Fund Act 2019, the maximum amount that can be withdrawn from the National Resource Fund is the lesser of the Economically Sustainable Amount and the Fiscally Sustainable Amount.

The Economically Sustainable Amount is the maximum amount that can be withdrawn from the NRF without adversely impacting the nation’s economy. While the Fiscally Sustainable Amount ensures that the government considers the impact of the level of nation’s oil production, the price of oil, the nation’s non-petroleum revenues and the NRF’s assets under management (AUM) will have on the NRF’s objective.

The Macroeconomic Committee was created to determine the Economically Sustainable Amount. The Finance Minister appoints the five members of Macroeconomic Committee. Committee members are nominated by the Finance Minister, the Private Sector Commission, the Leader of the Opposition, Cabinet, and the Bank of Guyana. The Macroeconomic Committee’s role is to:

  1. Analyse how past and future spending from withdrawals from the Fund would affect the economy’s competitiveness
  2. Recommend to the Finance Ministry an Economically Sustainable Amount that can be withdrawn from the fund while maintaining or bolstering the strength of the nation’s economy

Specifically, this committee is tasked to analyse how spending from the fund would impact:

  1. Inflation
  2. The exchange rates
  3. The balance of payments
  4. Economic growth, especially in the manufacturing and agriculture sectors
  5. Composition of public spending
  6. The stability in public spending
  7. Public Debt
  8. Other relevant macroeconomic indicators

Under the new Bill, the government wants to get rid of the Macroeconomic Committee. There will be no requirement to determine how spending from the Natural Resource Fund will impact the economy. In addition, the government has stricken out the Fiscally Sustainable Amount requirement and, in its place, has used an arbitrary approach to determine the maximum amount to withdraw from the Natural Resource Fund. Under the Natural Resource Fund Bill 2021, the government will determine the maximum withdrawal amount ranging from 100% of the first US$500 million paid into the Fund in the preceding fiscal year to 3% of any amount exceeding US$2.5 billion paid into the Fund in the preceding fiscal year.

For instance, if US$2.5 billion is paid into the fund in a fiscal year, the government can withdraw up to US$1.5 billion or up to 60% of the amount paid into the Natural Resource Fund. Not included in this withdrawal amount are funds that can be used for emergency purposes such as natural disasters.

The Natural Resource Fund (NRF) is the Guyanese people’s fund; therefore, all Guyanese have a vested invest in ensuring that the NRF is governed and operated with the highest international standards and accountability. The livelihood of our children and grandchildren depends upon it. This land belongs to all of us, and we must ensure that we benefit from all its resources. We the people must do everything within our power to make sure that we protect what rightfully belongs to us.

Rennie Parris, BBA, MSc, CFA

@seignet posted:

Guyana going bust, and the PNC is pushing it for a quick bankruptcy.

Had to believe with somuch wealth the country is still going to be bankrupt.

Are you aware the US$608 Million from the NRF gone fuh channa ,it's to cover the huge local borrowing to fund the two PPP budgets from August 2020 . That's the reason the 2021 NRF Act  was railroaded in Parliament.

Yo, Django...why you dont post the whole article? We want TK and the detractors to know that Dr Jagdeo will boom out de BOOM. Post both article here. I dont have a subscription. Boom out! Thank you, man.

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