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Business and Economics > Public Finance

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Cover IMF Staff Country Reports
Suriname: 2024 Article IV Consultation and the Eighth Review Under the Extended Arrangement Under the Extended Fund Facility, Requests for Modification of Performance Criteria, Waivers of Nonobservance of Performance Criteria, and Financing Assurances Review-Press Release; Staff Report; and Statement by the Executive Director for Suriname
International Monetary Fund. Western Hemisphere Dept.
The authorities’ commitment to a range of policy reforms continues to strengthen macroeconomic stability. The economy is growing, inflation is receding, donor support is increasing, the public debt is declining, and international bond spreads are at historic lows. The Final Investment Decision (FID) to develop a large offshore oil field was announced on October 1. Moody’s has upgraded Suriname’s sovereign debt rating and changed the outlook to positive.
Keywords:
Surinamese authorities; tax authorities; debt sustainability outlook; recapitalization plan; B. data standard; governance reform agenda; policy priority; management framework; government procurement; Monetary base; International reserves; Exchange rates; Arrears; Caribbean
Cover IMF Working Papers
A Suggested Medium-Term Fiscal Framework for Guyana
Rina Bhattacharya
and
Do Yeon Park
Guyana is growing rapidly, and fiscal policy plays a critical role in ensuring that the country’s wealth is managed effectively and equitably. The paper analyzes crucial elements of a comprehensive fiscal policy framework, anchored on a medium-term fiscal framework, that would help in balancing several, and sometimes competing, fiscal policy objectives common to natural resource rich developing countries.
Keywords:
Fiscal policy framework; Fiscal rules, Non-renewable resources; Natural Resource Funds; resource wealth; fiscal policy path; Guyana's oil; expenditure growth rule; Fiscal sustainability; Natural resources; Oil production; Global
Cover IMF Staff Country Reports
Guyana: 2023 Article IV Consultation-Press Release; and Staff Report
International Monetary Fund. Western Hemisphere Dept.
The 2023 Article IV Consultation highlights that the Guyanese economy continues to experience record growth, supported by the government’s modernization plans and unparalleled oil and gas sector expansion. Guyana’s oil reserves per capita are one of the highest in the world. Going forward, oil production will continue to expand rapidly as four new fields will come on stream by end-2028. Sustained real non-oil gross domestic product growth is also expected, as the government continues to invest in human capital, lower energy costs, and build infrastructure, including for climate change adaptation. On the upside, further oil discoveries would continue to improve Guyana’s long-term economic prospects and a construction boom would support higher short-term growth than projected. The main downside risks are overheating, leading to inflationary pressures and appreciation of the real exchange rate beyond the level implied by a balanced expansion of the economy. Policy discussions focused on the authorities’ ambitious plans to rapidly transform Guyana using revenues from oil extraction, while ensuring macroeconomic and financial stability, mitigating risks, and adapting to climate change.
Keywords:
IMF FSAP; Guyanese economy; monetary policy stance; development needs; ocean economy; construction boom; Public sector; Oil; Caribbean; Global
Cover IMF Staff Country Reports
Guyana: 2022 Article IV Consultation-Press Release; Staff Report; and Statement by the Executive Director for Guyana
International Monetary Fund. Western Hemisphere Dept.
Following the pandemic-induced recession in 2020, economic growth recovered in 2021, with non-oil GDP growth reaching 4.6 percent, despite being negatively impacted by floods. Inflation increased markedly since 2021 owing to the floods and supply-side disruptions, as well as continually rising fuel and food prices. Oil production increased and will ramp up substantially over the medium term.
Keywords:
IMF FSAP; Guyanese authorities; climate change policy framework; capital investment; anti-corruption framework; Oil; External sector statistics; Global; Caribbean
Cover IMF Working Papers
The 'Fiscal Presource Curse': Giant Discoveries and Debt Sustainability
Matteo Ruzzante
and
Nelson Sobrinho
This paper investigates the dynamic impact of natural resource discoveries on government debt sustainability. We use a ‘natural experiment’ framework in which the timing of discoveries is treated as an exogenous source of within-country variation. We combine data on government debt, fiscal stress and debt distress episodes on a large panel of countries over 1970-2012, with a global repository of giant oil, gas, and mineral discoveries. We find strong and robust evidence of a ‘fiscal presource curse’, i.e., natural resources can jeopardize fiscal sustainability even before ‘the first drop of oil is pumped’. Specifically, we find that giant discoveries, mostly of oil and gas, lead to permanently higher government debt and, eventually, debt distress episodes, specially in countries with weaker political institutions and governance. This evidence suggest that the curse can be mitigated and even prevented by pursuing prudent fiscal policies and borrowing strategies, strengthening fiscal governance, and implementing transparent and robust fiscal frameworks for resource management.
Keywords:
Natural resources; Resource curse; Oil; Mines; Debt sustainability; Fiscal policy; Political institutions; debt distress episode; debt measure; giant discovery; A.II governance indicator; government financial assets; Non-renewable resources; Global
Cover IMF Working Papers
Riding the Storm: Fiscal Sustainability in the Caribbean
Mr. Serhan Cevik
and
Vibha Nanda
Fiscal sustainability remains a paramount challenge for small economies with high debt and greater vulnerability to climate change. This paper applies the model-based sustainability test for fiscal policy in a panel of 16 Caribbean countries during the period 1980–2018. The results indicate that the coefficient on lagged government debt is positive and statistically significant, implying that fiscal policy in the Caribbean takes corrective actions to counteract an increase in the debt-to-GDP ratio. Nonlinear estimations, however, show that the quadratic debt parameter is negative, which indicates that fiscal policy response is not adequate to ensure sustainability at higher levels of debt. We also find that the fiscal stance tends to be countercyclical on average during the sample period. These empirical results confirm that maintaining prudent fiscal policies and implementing growth-enhancing structural reforms are necessary to build fiscal buffers and ensure debt sustainability with high probability even when negative shocks occur over the long term.
Keywords:
WP; potential GDP; government; Debt sustainability; fiscal reaction function; fiscal policy; fiscal solvency; output gap variable; reaction to an increase; debt accumulation; prudent fiscal policies; fiscal policy reaction; interest rate; fiscal policy response; fiscal policy path; sustainability of fiscal policy; expenditure series; expenditure policy; output gap in the Caribbean; Fiscal stance; Fiscal sustainability; Output gap; Caribbean
Cover IMF Staff Country Reports
Guyana: 2019 Article IV Consultation-Press Release; Staff Report; and Statement by the Executive Director for Guyana
International Monetary Fund. Western Hemisphere Dept.
This 2019 Article IV Consultation highlights that Guyana’s economic growth strengthened in 2018 with broad-based expansion across all major sectors. The medium-term prospects are very favorable as oil production is on schedule to begin in early 2020. Economic growth is projected at 4.4 percent in 2019, extending the broad-based expansion across all major sectors. Policies to fortify the fiscal policy framework to ensure effective use of the new-found oil wealth; develop the necessary infrastructure for a suitable monetary policy framework that facilitates adjustment to oil price shocks while maintaining price stability; and reforms to enhance competitiveness, promote economic diversification, strengthen governance, and achieve inclusiveness. The passage of the Natural Resource Fund legislation is a critical step toward effective management of Guyana’s natural resource wealth. In order to ensure that fiscal discipline is maintained and spending ramps up at a pace in line with absorptive capacity, the fiscal framework should be enhanced to prevent deficits.
Keywords:
ISCR; CR; debt; authority; Guyanese authorities; CARTAC; authorities project inflation; IMF FSAP; government procurement; GDP ratio; Oil production; Oil; Caribbean; Global
Cover IMF Staff Country Reports
Guyana: 2018 Article IV Consultation-Press Release and Staff Report
International Monetary Fund. Western Hemisphere Dept.
Economic growth slowed down, but became more broad-based. In 2017, real GDP growth was 2.1 percent, with the non-mining GDP rebounding from its contraction in 2016. The external balance turned negative due to weaker than expected export growth and higher oil prices. Inflation remains relatively low, and the monetary stance accommodative. Oil production is expected to commence in 2020, and additional oil discoveries have significantly improved the medium- and long-term outlook.
Keywords:
ISCR; CR; center; Guyana; U.S. dollar; financing needs; executive board assessment; core inflation; central bank financing; GDP ratio; IDA portfolio; Oil; gas and mining taxes; Oil production; Caribbean; Global
Cover IMF Staff Country Reports
Guyana: 2017 Article IV Consultation-Press Release; Staff Report; and Statement by the Executive Director for Guyana
International Monetary Fund. Western Hemisphere Dept.
This 2017 Article IV Consultation highlights the expansion of Guyana’s real economic activity by 3.3 percent in 2016. Subdued agricultural commodity prices, bad weather, and delays in public investment weighed down activity, while large increases in gold output helped support growth. Consumer prices increased by 1.5 percent in the 12 months ending in December 2016 as weather-related shocks to food prices reversed the deflationary trend. The macroeconomic outlook is positive for 2017 and the medium term. Growth is projected at 3.5 percent in 2017, supported by an increase in public investment, continued expansion in the extractive sector, and a recovery in rice production.
Keywords:
ISCR; CR; deficit; authority; debt; Guyanese authorities; IT system; GDP ratio; U.S. dollar; authorities' action; Public sector; Agricultural commodities; Public and publicly-guaranteed external debt; Caribbean
Cover IMF Working Papers
Public Investment Scaling-up and Debt Sustainability: The Case of Energy Sector Investments in the Caribbean
Ahmed El-Ashram
The question of how scaling up public investment could affect fiscal and debt sustainability is key for countries needing to fill infrastructure gaps and build resilience. This paper proposes a bottom-up approach to assess large public investments that are potentially self-financing and reflect their impact in macro-fiscal projections that underpin the IMF’s Debt Sustainability Analysis Framework. Using the case of energy sector investments in Caribbean countries, the paper shows how to avoid biases against good projects that pay off over long horizons and ensure that transformative investments are not sacrificed to myopic assessments of debt sustainability risks. The approach is applicable to any macro-critical investment for which user fees can cover financing costs and which has the potential to raise growth without crowding-out.
Keywords:
WP; cost saving; energy investment; investment project; investment scaling-up; management framework; Public Investment; Debt Sustainability; Growth; Energy Reform; Caribbean; User Fees; Public investment spending; Public investment and public-private partnerships (PPP); Public sector