CBR
search
Economy

The New York Federal Reserve (Photo: bloomberg.com)

Guyana creates account at NY Federal Reserve for oil earnings

The New York Federal Reserve (Photo: bloomberg.com)

The Natural Resource Fund (NRF) which will serve as the depository for Guyana’s oil earnings has been set up at the New York Federal Reserve Bank.

An aerial view of Georgetown, the capital of Guyana.

Buyers of Guyana’s oil, the first shipment of which was lifted last week, will make their deposits to that account, according to a report by the News Room.

The NRF, established by the Natural Resource Fund Act 2019, will manage the earnings for the sustainable development of the country. Additionally, under the Act, the Bank of Guyana has been charged with the operational management of the NFR which will see its inflows made in American dollars.

“…fairly transfer natural resource wealth across generations to ensure that future generations benefit from natural resource wealth.”

– The Natural Resource Fund Act 2019

The objectives of the Fund, as laid out in the NRF Act, are to:

  1. ensure that volatility in natural resource revenues do not lead to volatile public spending;
  2. ensure that natural resource revenues do not lead to a loss of economic competitiveness;
  3. fairly transfer natural resource wealth across generations to ensure that future generations benefit from natural resource wealth; and
  4. use natural resource wealth to finance national development priorities, including any initiative aimed at realising an inclusive green economy.

The Ministry of Finance will provide general oversight and is responsible for the overall management of the NRF. This means that the Ministry will prepare and submit requests for withdrawals to the National Assembly as part of budgetary proposals.

The Yannis P which transported Guyana’s first shipment of crude oil.

According to the International Forum of Sovereign Wealth Funds, the only other withdrawals permitted from the NRF is in the event of a “major natural disaster” which would then require a supplemental Bill be presented to the National Assembly for approval. “This Bill must include a detailed account of why the emergency withdrawal is necessary and how the monies will be used to ameliorate the effects of the disaster.”

Oil was first discovered in Guyana in May 2015 by ExxonMobil which initiated exploration in 2008. Since then, there have been 17 oil finds in Guyana so far.

The first shipment of one million barrels of crude oil was lifted from the country last weekend when the tanker Yannis P arrived to remove the resource from the Stabroek Block offshore the country.