Guyana may have a Natural Resource Fund (NRF) but it is no panacea when it comes to the effective management of its oil revenue. According to the Inter-American Development Bank (IDB), Guyana has serious work to do in four key areas of its fiscal framework so as to ensure macroeconomic stability. The IDB said these areas include appropriate levels of stabilization savings, a strong institutional framework, effective spending policies, and effective use of taxation to reduce revenue volatility.
Further to this, the Bank said that implementing sound tax and expenditure policies including public investment management, enhancing human capital in key institutions, improving institutional capacity within key government ministries to improve budget execution, improving procurement rules, and increasing transparency and good governance are some of the other critical areas that are essential for Guyana to be able to translate the expected boom in natural resource wealth into long- term inclusive growth and prosperity.
The financial institution said, “…Itemizing reforms to Guyana’s fiscal framework at a granular level can easily result in a long laundry list that may require several years, or perhaps another decade to achieve—time that policymakers do not have. Thus, some prioritization of reforms is required over the next three to five years.”
Since the focus of the fiscal policy is more likely to emphasize public investments along with an increased level of social spending in initially, the IDB posited that strengthening expenditure policies may be a key area that can yield more desirable benefits over the medium to long term, especially as it relates to improving productivity of public investment, reducing the wastage of public funds , and reducing the perception of corruption in the decision- making process related to public investment.
It noted that the experiences of nations such as Nigeria and Norway provide important lessons and perspective for policymakers in Guyana to reflect on as the country works towards these reforms.