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    Home»Featured»NRF Withdrawl Cap – Bigger Fund, Smaller Cap (Not 99%)
    Featured

    NRF Withdrawl Cap – Bigger Fund, Smaller Cap (Not 99%)

    Joel BhagwandinBy Joel BhagwandinNo Comments4 Mins Read8,459 Views
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    Joel Bhagwandin
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    ๐“๐ก๐ž ๐ง๐ž๐ฐ ๐๐‘๐… ๐ซ๐ฎ๐ฅ๐ž ๐๐จ๐ž๐ฌ๐งโ€™๐ญ โ€˜๐ญ๐š๐ค๐ž ๐Ÿ—๐Ÿ—%.โ€™ ๐ˆ๐ญโ€™๐ฌ ๐š ๐œ๐š๐ฉ ๐ญ๐ก๐š๐ญ ๐ญ๐ข๐ ๐ก๐ญ๐ž๐ง๐ฌ ๐š๐ฌ ๐ญ๐ก๐ž ๐…๐ฎ๐ง๐ ๐ ๐ซ๐จ๐ฐ๐ฌ. ๐–๐žโ€™๐ซ๐ž ๐ฎ๐ฌ๐ข๐ง๐  ๐จ๐ฎ๐ซ ๐ซ๐ž๐ฏ๐ž๐ง๐ฎ๐ž๐ฌ ๐ญ๐จ ๐›๐ฎ๐ข๐ฅ๐โ€”๐ฐ๐ก๐ข๐ฅ๐ž ๐ค๐ž๐ž๐ฉ๐ข๐ง๐  ๐๐ž๐›๐ญ ๐ฎ๐ง๐๐ž๐ซ ๐Ÿ‘๐ŸŽ% ๐จ๐Ÿ ๐†๐ƒ๐. ๐“๐ก๐š๐ญโ€™๐ฌ ๐Ÿ๐ข๐ฌ๐œ๐š๐ฅ ๐ซ๐ž๐ฌ๐ฉ๐จ๐ง๐ฌ๐ข๐›๐ข๐ฅ๐ข๐ญ๐ฒ, ๐ง๐จ๐ญ ๐๐ž๐ฉ๐ฅ๐ž๐ญ๐ข๐จ๐ง.
    ๐Š๐ž๐ฒ ๐๐จ๐ข๐ง๐ญ๐ฌ
    โ€ข The amended NRF formula is a cap that scales with Fund size and production; it does not enable depletion.
    โ€ข The higher the Fundโ€™s balance, the lower the effective withdrawal rate โ€” by design.
    โ€ข Example: On US$6B: old rule cap = 23%; revised formula ceiling = under 75%, calibrated to production rising from ~120,000 bpd (Dec 2019) to 600,000+ bpd (2024/25).
    โ€ข On US$12B: maximum effective withdrawal rate = 41%. As the Fund grows further, the effective cap declines.
    โ€ข Policy intent: minimise borrowing, keep debt-to-GDP under 30%, and match investment to rapidly rising inflows; in effective terms, the withdrawal rate is virtually unchanged relative to the old rule.
    โ€ข The โ€œ99%โ€ claim is false and not supported by the formula.
    ๐Œ๐ฒ๐ญ๐ก ๐ฏ๐ฌ ๐…๐š๐œ๐ญ
    Myth: Opposition Leader claimsโ€”โ€œThe government changed the law to take 99% of the Natural Resource Fund.โ€
    Fact: The new rule is a moving cap tied to the projected growth in the Fundโ€™s size and production. On US$6B the ceiling is under 75%; on US$12B itโ€™s 41%; and the effective cap tightens as balances grow. No depletion clause.
    ๐๐ซ๐จ๐๐ฎ๐œ๐ญ๐ข๐จ๐ง ๐“๐ข๐ฆ๐ž๐ฅ๐ข๐ง๐ž (๐‚๐จ๐ง๐ญ๐ž๐ฑ๐ญ)
    โ€ข Dec 2019: first oil; ~120,000 bpd.
    โ€ข 2024/25: sustained 600,000+ bpd.
    โ€ข 2030 (planning horizon): ~1.7 million bpd capacity as additional FPSOs come online.
    Iโ€™ve heard the line: government โ€œchanged the law to take ninety-nine per cent of the Fund.โ€ It sounds explosive. Itโ€™s also wrong.
    The revised NRF rule is a cap, not a siphon. It scales with reality โ€” the size of the Fund and the volume of production โ€” and it tightens as the Fund grows. Bigger balance, lower effective withdrawal rate. Thatโ€™s by design.
    Now for the math. On a US$6B balance, the old formula capped withdrawals at 23%. Under the revised ruleโ€”calibrated to oil output rising from 120,000 bpd in 2019 to 600,000+ bpd in 2024/25โ€”the ceiling is under 75%, not 99%.
    At US$12B, the new cap is 41%, while the old formula would lock it at 13%.
    And hereโ€™s the kicker: as the fund grows, that effective cap keeps falling. No โ€œ99%.โ€ No raid. Just a rule aligned with production growth and fiscal prudence.
    Why adjust the cap? Because Guyana is rapidly transforming. Output is expected to peak at nearly 1.7 million bpd by 2030, more than double current output level. Freezing a smaller-economy cap in a much larger economy would push us into more foreign borrowing to finance the national budget. Therefore, the reform enables utility of more of our own cash now, save more as the Fund grows, and pay less in interest โ€” all while keeping debt under 30% of GDP. That is fiscal discipline, not depletion.
    Why adjust the cap? Because the economy is rapidly transforming and expanding. Oil output is set to peak near 1.7 million bpd by 2030โ€”more than double todayโ€™s level. Freezing an old cap in a booming economy would force more foreign borrowing to fund the budget. The reform fixes that: use more of our own cash now, save more as the Fund grows, and pay less in interestโ€”all while keeping debt under 30% of GDP. Thatโ€™s not depletion. Thatโ€™s fiscal discipline in action.
    Governance still matters. Transfers are published, debated, and scrutinised โ€” as they should be. But politics shouldnโ€™t replace arithmetic literacy. The new formula is a guardrail, not a getaway car. Bigger Fund, smaller cap. Build more, borrow less. Thatโ€™s how you turn oil into broad-based prosperity without mortgaging Guyanaโ€™s future.
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    Joel Bhagwandin
    Joel Bhagwandin

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