Govt spending out oil money- APNU+AFC; increased withdrawals to finance fast-paced development projects- Finance Minister

Last Updated on Sunday, 4 February 2024, 8:44 by Denis Chabrol

The opposition A Partnership for National Unity+Alliance For Change (APNU+AFC) has accused government of emptying the Natural Resource Fund (NRF) and increasing Guyana’s debt ceiling, but the Guyana government has defended those decisions on the grounds that was fast-tracking development for all Guyanese.

After walking out of Friday’s parliamentary debate on amendment to the fiscal rules of the NRF Act and increases in the domestic and foreign debt ceilings, the combined opposition on Saturday held a news conference to vent its objections to the amendments, saying that no money would be remain in the NRF for future generations and each Guyanese would be saddled with a higher local and foreign debts.

“They have not marginally increased the amount they can withdraw, merely tweaked the formula to extract some benefit or clarified it in some way. Rather, by now stipulating that as much as 97% of last year’s oil revenues can be withdrawn, they have essentially abolished the fund altogether,” APNU Chairman and Opposition Leader Aubrey Norton told a news conference on Saturday.

Justifying the formula and mechanism that was in the APNU+AFC administration’s version of the NRF Act, opposition parliamentarians also said they were worried that Guyana’s development was now being made to depend on oil prices that could slump very low on the international market. If there are minimal savings in our Natural Resource Fund and the price of oil falls, various development projects may have to be delayed, cut or otherwise reworked. This will not only result in financial losses, it will generate a climate of extreme instability in the local economy. Guyana’s economy will be in a constant state of flux, booming when the oil price is high and in a downturn whenever it is low,” Mr Norton added.  He said in such a situation, businesses would be unable to plan, workers would not be employed regularly and Guyana’s overall economic growth would suffer.

Finance Minister Dr Ashni Singh said there would be increased withdrawals to finance government’s infrastructural and other development projects but 90 percent of the first US$5 billion in the NRF would be saved for future generations. He said more money would be taken out of the fund while “striking an optimal balance between how much we withdraw in the near term versus how much we save in the medium and longer term.

Dr Singh signaled that “the lion’s share” of Guyana’s oil revenues would be saved several years from now after the first US$5 billion is earned “while at the same time ensuring that today” government could build roads, schools, hospitals and housing areas for Guyanese.

AFC spokesman on Finance, Juretha Fernandes interpreted the Finance Minister’s position as a “nice way of saying that they are going to be spending all right now; they are not going to be leaving any for later.”

The new NRF fiscal rules now allow government to draw down 100 percent of the first US$1 billion of deposits paid into the fund in the immediately preceding fiscal year; 95 percent of the second US$1 billion; 90 percent of the third US$1 billion;  85 percent of the fourth US$1 billion; 50 percent of the fifth US$1 billion, and 10 percent of any amounts in excess of the first US$5 billion immediately preceding fiscal year.

Elson Lowe, Finance and Economics Advisor to the Opposition Leader, said Guyana would not be earning US$5 billion from oil until 2028 or 2029 depending on the price of oil and expenses. “What that means is that until we get to that very high level, you essentially have no sovereign wealth fund. That, to me, is extremely very risk-taking,” he said, adding that 0il price crises could last for years.

The Finance Minister said the new debt ceilings must not be interpreted as the level of debt that Guyana would be incurring. Instead, he on Friday sought to explain why the the external loan ceiling was increased from GY$900 billion to GY$1.5 trillion , and the Public Loans ceiling from GY$750 billion to GY$1.5 trillion. “We are coming today to adjust the debt ceiling, both for external and domestic debt, to create the room that would be  necessary to allow a dynamic management of our multiple financing options in order to ensure that we utilise an optimal combination of financing while at the same time executing this accelerated development programme,” he said.

But Ms Fernandes said raising the debt ceiling so often and incurring huge debts now would raise the key question for all political parties in power: “Do you service debts or do you service the people?” She cautioned against borrowing based on oil revenues that would eventually dry up, Guyana would once again have to depend on the non-oil sector.

AFC Leader Khemraj Ramjattan said “if you max out everything now” while expecting that more would be earned by 2028-2029, the opposition was worried that Guyana was incapable of spending the money wisely. With oil revenues expected to last 20 to 25 years, he said revenues would be poured into substandard projects through a small clique of contractors.