Guyanese could very well see the proceeds of the prospective Sovereign Wealth Fund (SWF) being utilised to replenish the country’s assets which signals that some time would pass before citizens can benefit from the impending oil and gas sector.
This was posited by Opposition Leader Dr Bharrat Jagdeo, who told members of the press on Wednesday that Government’s approach to the yet to be established investment fund is “wrong in principle”.
His concerns are premised on reports of Guyana’s reserves, including gold, being significantly depleted under the incumbent Administration.
“Often Sovereign Wealth Funds are there when you have reserves to manage but we are running down our reserves so low now [with] over $400 million [spent in] less than three months of imports, that we may have to spend a couple years using all the money we receive from ExxonMobil just to build up back our reserves,” Jagdeo noted at his Georgetown office.
The former President told reporters that the current approach is being dominated by the Government to which the People’s Progressive Party is opposed.
“We want an independently managed Sovereign Wealth Fund that insulated from actions of people in the political sphere. We want a petroleum commission that exhibits the same features that is a technical body without political interference. We believe that once the management of the SWF caters for that, it must have a simple fiscal rule to get resources out of this fund and once that happens there must be a transparent system,” he noted.
The PPP’s position is that once the resources are paid into the revenue stream of the Government, it must go through the requisite parliamentary process. Noting that SWFs are managed for saving for a country’s future, stabalisation and excess reserves but according to him, State reserves have been “run down” by the present coalition Administration.
“They have already sold out all the gold and used up the money; they have transferred over $40 billion from the semi-autonomous agencies that they claimed was there as a slush fund under the PPP. They transferred it and used it all up. In the reserves in the central bank, the net foreign assets in the country are being depleted and they are borrowing more. Government is damaging our future by borrowing so much money,” the former Head of State opined.
In April 2018, an interpretation of the Bank of Guyana’s Statement of Assets and Liabilities reflected that the bank’s total assets were on a slide, as several indices ranging from the bank’s gold holdings to its market securities showed reductions when compared to previous years.
According to the bank document, its total assets as of March 28, 2018, were $206.4 billion which had included $1.9 billion in gold reserves, $82.1 billion in capital market securities and $5.6 billion in money market securities.
This is a reduction from the gold reserves the bank recorded in June 2017. According to the bank’s Half Year Report last year, it had $4.8 billion worth of gold in its foreign holdings as assets. The central bank in a subsequent report, explained that gold reserves were down as it was taking advantage of a higher price. Bank of Guyana Governor Gobind Ganga told the press that “you sell when the value is high and buy when it is low”.
At the end of August 2018, ExxonMobil made its ninth discovery offshore Guyana, marking its fifth discovery on the Stabroek Block in the past year. The previous discoveries had led to the announcement of an estimated recoverable resource of more than four billion oil-equivalent barrels discovered to date. It also created the potential for up to five floating production, storage and offloading (FPSO) vessels producing more than 750,000 barrels per day by 2025.
The first discovery was made in 2015 and as 2019 approaches, Government is yet to establish the SWF even though first official oil production is expected by 2020.
Government had issued a Green Paper on the Fund but Jagdeo had said it proved nothing unless the Administration took the necessary steps to introduce draft legislation on the SWF which will guide how money from oil resources will be utilised for the country’s development.