When Guyana establishes its Natural Resource Fund (NRF), there should be a clear rule which says that withdrawals from the Fund should not be used to serve recurrent expenditure such as salaries for public servants.
This remark was part of the many words of wisdom offered by former Prime Minister of Trinidad and Tobago, Kamla Persad-Bissessar at a Dinner and Award ceremony that was held by the Guyana Manufacturing and Services Association (GMSA).
At the event, the TT Opposition Leader emphasized that recurrent expenditure does not bring any returns. When the fund is used for this purpose, the Trinidadian official said, it only defeats the purpose of the Fund, which is “money set aside for a rainy day.”
Persad-Bissessar said, “Based on what happened in Trinidad and Tobago, I can tell you that it would be unwise to set up a Fund and use it to supplement recurring expenditure. When my country set up the Heritage Fund, the Government raided it twice for the purpose of recurrent expenditure. But recurrent expenditure brings no return. It brings no development and therefore, whatever legislation you make, I suggest that you put within it, provisions that prevent this from happening. The Fund is an insurance policy, not a cash cow that every time you have a deficit in your budget that you run to it. It doesn’t work like that. There must clear reasons as to why you are going into it.”
Further to this, the former TT Prime Minister said that Guyana needs to be on the lookout for two types of shocks. She noted the first to be output shocks. The official explained that in this regard, a country is producing and exploring but at some point, the production slows down, thereby affecting output levels as well as the money that would be saved for a rainy day.
Persad-Bissessar said that the second issue would be price shocks. She said, “In the geopolitical scenarios that we have now, your price can be $100 per barrel a day and tomorrow, it can be $9 dollars per barrel. It is a total set of circumstances over which you have no control. So your price shocks can also lick you out of the water… And these two reasons underscore why your rainy day planning is very important and that your withdrawals from the Fund follow a formula.”
On that note, the former TT Prime Minister said that Guyana’s officials must give careful thought on the structure it wants the Natural Resource Fund to have as well as the rules that will govern its use. She reminded that it was the absence of “careful thought” over the years, that landed Trinidad and Tobago with the deficient Fund that it has today.