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IMF Country Report No. 19/296
GUYANA
2019 ARTICLE IV CONSULTATION—PRESS RELEASE; STAFF REPORT; AND STATEMENT BY THE EXECUTIVE DIRECTOR FOR GUYANA
September 2019
Under Article IV of the IMF’s Articles of Agreement, the IMF holds bilateral discussions with members, usually every year. In the context of the 2019 Article IV consultation with Guyana, the following documents have been released and are included in this package:
A Press Release summarizing the views of the Executive Board as expressed during its August 30, 2019 consideration of the staff report that concluded the Article IV consultation with Guyana.
The Staff Report prepared by a staff team of the IMF for the Executive Board’s consideration on August 30, 2019, following discussions that ended on June 14, 2019, with the officials of Guyana on economic developments and policies. Based on information available at the time of these discussions, the staff report was completed on July 23, 2019.
An Informational Annex prepared by the IMF staff.
A Debt Sustainability Analysis prepared by the staffs of the IMF and the International Development Association (IDA).
A Statement by the Executive Director for Guyana.
The IMF’s transparency policy allows for the deletion of market-sensitive information and premature disclosure of the authorities’ policy intentions in published staff reports and other documents.
Copies of this report are available to the public from
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© 2019 International Monetary Fund
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GUYANA
STAFF REPORT FOR THE 2019 ARTICLE IV CONSULTATION
July 23, 2019
Key Issues
Context: Economic activity strengthened in 2018 with broad-based expansion across all major sectors. Inflation remains relatively low, and monetary stance accommodative. Oil production is expected to commence in early 2020, and additional oil discoveries have significantly improved the medium- and long-term outlook. This presents a momentous opportunity to boost inclusive growth by addressing human development needs and infrastructure gaps, provided the oil wealth is managed well.
Focus of the Discussions: 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.
Key Policy Recommendations:
Fiscal framework. The passage of the Natural Resource Fund (NRF) legislation is a critical step toward effective management of Guyana’s natural resource wealth. 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.
Monetary framework. In view of the expected large and potentially volatile receipts from oil exports, the exchange rate can play a valuable role as a shock absorber. Developing over the medium term the necessary infrastructure for increased exchange rate flexibility will facilitate growth while maintaining price stability.
Safeguarding financial stability. The authorities’ efforts to implement legal frameworks recommended in the 2016 FSAP and to strengthen financial sector resilience are welcome. Addressing high non-performing loans and under-provisioning in the banking system should remain a priority.
Boosting inclusive growth. To achieve equitable growth, further efforts are needed to improve the business climate, reform public enterprises, reduce youth unemployment, and boost female labor force participation.
Approved By
Aasim M. Husain (WHD) and Edward R. Gemayel (SPR)
The team, comprising Meredith A. McIntyre (head), Julian Chow, Seedwell Hove, and Ippei Shibata (all WHD), visited Guyana during June 3–14. Aasim M. Husain (Deputy Director, WHD), Alexandre Tombini (Executive Director, OEDBR) joined the concluding meetings. Zahrah Mohammed (Senior Advisor to the Executive Director, OEDBR) participated in the meetings. The team met with Prime Minister Moses Nagamootoo, Finance Minister Winston Jordan, Minister of Legal Affairs and Attorney General Basil Williams, Central Bank Governor Gobind Ganga, other senior government officials, representatives of the labor community, of the private sector, and members of the political opposition. Research support was provided by Giovanni Melina (RES), Pablo A. Bejar and Lulu Shui (WHD); editorial support was provided by Heidi Canelas (WHD).
Contents
BACKGROUND
RECENT DEVELOPMENTS
OUTLOOK AND RISKS
POLICY DISCUSSIONS
A. Fiscal Policy
B. Monetary Policy and External Stability
C. Strengthening Financial Sector Resilience
D. Competitiveness, Inclusive Growth, and Governance
OTHER ISSUES
STAFF APPRAISAL
BOXES
1. Macroeconomic Impact of Scaling Up Public Investment
2. Strengthening Competitiveness and Boosting Growth
FIGURES
1. Comparative Regional Developments
2. Real Sector Indicators
3. External Sector Developments
4. Fiscal Sector Developments
5. Financial Soundness Indicators
6. Monetary Developments
TABLES
1. Selected Social and Economic Indicators
2. Balance of Payments
3a. Public Sector Operations (In billions of Guyanese dollars)
3b. Public Sector Operations (In percent of GDP)
3c. Public Sector Operations (In percent of non-oil GDP)
4. Summary Account of the Bank of Guyana and Monetary Survey
5. Indicators of External and Financial Vulnerability
6. Medium-Term Macroeconomic Framework
7. Risk Assessment Matrix
ANNEXES
I. The NRF Budget Transfer Rule
II. Progress on 2018 Article IV Policy Recommendations
III. Development and Infrastructure Needs
IV. Pitfalls in Spending Oil Money: Lessons from Other Countries
V. Key Recommendations of the 2017 Public Investment Management Assessment
VI. Implementation of 2016 FSAP Recommendations
VII. Efficiency Gains from Structural Reforms
VIII. Strengthening Governance in Guyana
IX. Strengthening Transparency in the Natural Resource Sector in Guyana
X. External Sector Assessment
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GUYANA
STAFF REPORT FOR THE 2019 ARTICLE IV CONSULTATION—INFORMATIONAL ANNEX
July 23, 2019
Prepared By
Western Hemisphere Department
Contents
FUND RELATIONS
COLLABORATION WITH THE BANK AND OTHER INTERNATIONAL FINANCIAL INSTITUTIONS
STATISTICAL ISSUES
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GUYANA
STAFF REPORT FOR THE 2019 ARTICLE IV CONSULTATION— DEBT SUSTAINABILITY ANALYSIS
July 23, 2019
Approved By
Aasim M. Husain and Edward R. Gemayel (IMF), and Marcello Estevão (IDA)
Prepared by the staff of the International Monetary Fund and the International Development Association.
| Risk of external debt distress | Moderate |
| Overall risk of debt distress | Moderate |
| Granularity in the risk rating | Substantial space to absorb shock |
| Application of judgment | No |
| Risk of external debt distress | Moderate |
| Overall risk of debt distress | Moderate |
| Granularity in the risk rating | Substantial space to absorb shock |
| Application of judgment | No |
The risk of external and overall debt distress for Guyana remains moderate, but debt dynamics will improve significantly with the start of oil production in 2020.1 All external debt indicators remain below the relevant indicative vulnerability thresholds under the baseline scenario, which incorporates the average long-term effects of oil on economic growth, fiscal balance, and current account position. The PV of external debt-to-GDP is projected to decline to 3 percent over the long-term as the need for external borrowing is offset by the accumulation of external assets.
Stress tests indicate the susceptibility of Guyana’s external public debt in a very extreme shock which combines simultaneous shocks to real GDP growth, primary balance, exports, other flows (current transfers and FDI), and nominal exchange rate depreciation, as well as second order effects arising from interactions among these shocks. The combined effects of these shocks and their second order effects cause temporary but significant breaches in the external debt thresholds, prompting a moderate risk rating. Nonetheless, Guyana has substantial space to absorb these shocks, reflecting the current low level of external debt.
Guyana’s medium- and long-term outlook is very favorable given the incoming oil production and revenues, which will eventually underpin fiscal surpluses and a reduction in external indebtedness. The authorities reiterated their commitment in preserving fiscal discipline.
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Press Release No. 19/332
FOR IMMEDIATERELEASE
September 17, 2019
International Monetary Fund
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