Gov’t can withdraw all oil revenues when Natural Resources Fund becomes law

The government can, in the first instance, withdraw all oil revenues accumulated in the Natural Resource Fund (NRF) in the year that the new law comes into force and thereafter a limit will be set for future withdrawals.

The proposal is for the funds to be used for “national development priorities including any initiative aimed at realising an inclusive green economy” and “essential projects that are directly related to ameliorating the effects of a major natural disaster.”

The Natural Resource Fund refers to the law which will determine how the country’s petroleum revenues will be spent – this includes monies earned from oil sales, royalties and any signing bonuses.

The legislation governing the fund was passed by the former government but the new PPP government proposed several amendments. Those proposed amendments were tabled in the National Assembly on Thursday by Dr Ashni Singh, Senior Minister within the Office of the President with responsibility for Finance.

It proposes that the government can, on the very date the law is signed by the President, withdraw “the total balance accumulated” in the account at the Federal Reserve Bank of New York. Oil sales and royalties thus far stand at US$534 million.

After the first withdrawal, the proposed legislation sets out a limit or ceiling on withdrawals. In any given year, US$500 million can be withdrawn and then a reducing percentage of what remains, starting with 75% from the second five hundred million; 50% on the third five hundred million; 25% on the fourth five hundred million; 5% on the fifth five hundred million, and then 3% of any amounts in excess of US$2.5 B.

The amendments state that at the time of submission of the annual budget proposal to the National Assembly for a fiscal year and the actual amount of deposits paid into the Fund in the immediately preceding fiscal year is not yet available, the best estimate of that amount shall be substituted.

According to Section 16(2) of the amendments, all withdrawals from the Fund shall be deposited into the Consolidated Fund.

Any withdrawals must be detailed in the annual budget proposals and the amount to be withdrawn should not include the various ceilings listed.