Norway built its country with oil money for 25 years, before establishing oil fund – Ramson

Minister of Culture, Youth and Sport, Charles Ramson Jr. said that the Kingdom of Norway used its oil revenues to build its country up for 25 years before it established a sovereign wealth fund with the relevant legislation.

Speaking during Budget 2022 debates in Parliament on Tuesday, Minister Ramson noted this vital context which has been missing from the discussion on the management of Guyana’s oil revenues.

Minister of Culture, Youth and Sport, Charles Ramson Jr.

He was responding to members of the Opposition who would criticise the government’s decision to utilise Guyana’s oil revenues now to finance the country’s pressing development needs. Norway is often referred to as an example of a country which has managed its oil industry well.

“[On] the sovereign wealth fund, many times the debate is confused by making reference to Norway, and why I want to clarify this position, Mr. Speaker, is [that] Norway found oil in 1969. It started producing first in 1971 from [Norway’s first commercial oilfield] Ekofisk, and it did not set up its sovereign wealth fund until 1990.”

Norway’s Parliament established the Government Petroleum Fund with an Act of Parliament, in 1990, purposed to support the government’s long-term management of the country’s petroleum revenue.

Minister Ramson noted that the Kingdom did not transfer its first capital to the Fund until 1996, and had in the years prior, spent oil money on infrastructure, for schools, hospitals, buildings, roads and bridges.

“So, why should it be any different for us here in Guyana where we have a weakness in our public infrastructure stock in the country?” he asked.

The PPP/C Administration has decided to withdraw the balance at present in Guyana’s Natural Resource Fund to support the country’s economic expansion. The withdrawal will provide about $126 billion, nearly quarter of the proposed 2022 Budget of $552.9 billion.

In addition to helping finance Guyana’s infrastructural and economic transformation, using Guyana’s oil money will have other positive impacts.

It will mitigate Guyana’s budget deficit, reducing its reliance on loans. Minister Ramson told the House that Guyana’s budget deficit as a percentage of its gross domestic product (GDP) is lower.

He noted too that net domestic borrowing is lower.

“It has fallen by half from $100 billion to $50 billion+ in 2022. Government is not competing with the private sector on loans. Our money supply is higher. That means more money in circulation.”

This is a turnaround which came after a term of the previous APNU+AFC administration widening the fiscal deficit, competing with the local private sector for loans, and shrinking Guyana’s foreign reserves. Given the setbacks which occurred in the years leading up to 2020, the PPP/C government has already demonstrated its competence in financial management, since, as Minister Ramson noted, it has improved Guyana’s macro-economic position. And it will continue to do so.

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