GUYANA’s long-discussed Sovereign Wealth Fund (SWF) is one step closer to reality with last week’s release of a Government “Green Paper” outlining the proposed plan for managing oil revenues. The new draft plan outlines how petroleum revenues will be incorporated into the budget, how they will be saved and invested, and what agencies and ministers have authority over how and when funds are spent.

The plan was created with input from the World Bank, International Monetary Fund, the Inter-American Development Bank and the Commonwealth Secretariat and is line with the Santiago Principles—24 generally accepted practices for good governance of resource revenues created by the International Forum of Sovereign Wealth Funds.

The plan would hold petroleum and excess mining revenues in a “Natural Resources Fund”—a US dollar denominated Sovereign Wealth Fund at the Bank of Guyana. Holding funds in an international currency like US dollars is a common practice with Sovereign Wealth Funds, since it prevents inflation and distortion in the local currency. Housing fund management responsibilities within the central bank is done by most countries with SWFs, like Norway and Malaysia, as a way to prevent revenues from being used for political purposes.

As stated in the Green Paper, the three goals for the fund are: stabilisation, inter-generational savings, and domestic investment “in keeping with the vision of the national development plan.”

These three are standard goals for Sovereign Wealth Funds all over the world and help prevent the impacts of Dutch Disease by setting aside money to stabilize the Guyanese dollar and help increase the competitiveness of other sectors, as well as reduce budget and revenue fluctuations caused by the changing price of oil.

By setting aside funds for intergenerational savings, Guyana is putting itself on the path of countries like Norway who saved enough during the first few decades of their oil booms that they now have massive funds that can finance continued development through the interest they generate alone.

Domestic investment, in keeping with the national development plan, is also a key and sometimes overlooked goal for revenue management. Though the exact priorities for domestic spending are always going to be fiercely debated, there is broad agreement in Guyana that investments in health, education, and infrastructure, like new bridges and roads, are needed to build a diverse economy and a healthy society.

Despite these clearly positive steps towards responsible revenue management, one provision in the Green Paper has stirred up significant debate: the power vested in the Economy Ministry to manage requested withdrawals and to appoint the five-member Macroeconomic Committee as well as the Sovereign Investment Committee. A central role for the Ministry of Finance is not unusual and as structured, the Green Paper ensures that Parliament has a key oversight role through the annual budget process which will include approval of the amount to be withdrawn from the Natural Resource Fund.

The Macroeconomic Committee will have the crucial role of setting the economically sustainable amount—the level of funds that can be safely and reasonably withdrawn each year and fed into the budget without compromising the fund’s long-term integrity.

The Green Paper also omits the controversial idea of direct cash payments to the poorest in Guyana. Direct payments are relatively rare. Other countries have found that direct cash payments can cause harmful inflation, tend to be spent on imported products rather than local investment and can be an opportunity for corruption and political favoritism.

The Green Paper shouldn’t be viewed as a final piece of legislation. Instead, it’s meant to stimulate a discussion and act as a starting point.

The government has heard from global experts—now it’s time to listen to local voices and ensure that the needs of Guyanese are incorporated as well, while ensuring that global best practices are not just heard but also followed.

The Green Paper represents a strong but initial step in the right direction. Now it’s up to the government and the people to ensure that the job is finished before 2020 so that Guyana can take full advantage of this incredible opportunity.