Guyana: 2019 Article IV Consultation—Press Release; Staff Report; and Statement by the Executive Director for Guyana

International Monetary Fund. Western Hemisphere Dept.

doi:10.5089/9781513514093.002.A001

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International Monetary Fund. Western Hemisphere Dept.

International Monetary Fund. Western Hemisphere Dept.
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Publication Date:: 17 Sep 2019

eISBN:: 9781513514093

ISBN:: 9781513514093

Language:: English

Keywords:: ISCR; CR; debt; authority; Guyanese authorities; CARTAC; oil GDP; oil revenue; U.S. dollar; IMF staff calculation; present value; Oil production; Oil; Caribbean

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2019 Article IV Consultation-Press Release; Staff Report; and Statement by the Executive Director for Guyana

Abstract

2019 Article IV Consultation-Press Release; Staff Report; and Statement by the Executive Director for Guyana

Background

1. Income from Guyana’s oil, which is on schedule to start production in early 2020, has the potential to transform the economy but will need to be managed effectively to minimize macroeconomic distortions related to Dutch disease and governance weaknesses. Oil production is estimated to begin in the first quarter of 2020, averaging 102,000 barrels/day (bpd), and rising to an average of 424,000 bpd in 2025.¹ The main direct effect of the oil sector on the domestic economy will be through fiscal revenue and its use.² The authorities have legislated a Natural Resource Fund (NRF) Act 2019 which provides a framework for establishing a natural resource fund, a Public Accountability and Oversight Committee to report on the Fund, and a transfer rule that determines fiscal transfers from the NRF to the budget (Annex I). In the event of a delay in initial oil production, the NRF Act does not allow the front-loading of oil-financed spending in advance of the materialization of oil revenue.

2. Macroeconomic policies have been broadly in line with Fund advice. Key Fund recommendations in the past include a moderation in fiscal deficit to reduce financing needs and preserve external buffers before oil revenues materialize, refraining from non-concessional external financing, improving the efficiency of public investment management, allowing exchange rate flexibility to play a larger role in facilitating the adjustment to external shocks, and strengthening the supervisory and regulatory framework in line the 2016 FSAP. The authorities’ policies have been broadly consistent with these recommendations (Annex II). In addition, the authorities continue to benefit from Technical Assistance (TA) delivered by the Fund and other providers.

Guyana: Breakdown of Present Value of Oil Revenues ^1/

(In percent of 2018 GDP)

Sources: Authorities da ta; and IMF sta ff calculations.

^{^1/}Based on projections from Liza Phase I and II until 2048.

^{^2/}Based on cost recovery and production sharing agreement.

Recent Developments

3. Economic growth strengthened in 2018 with broad-based expansion across all major sectors. Real GDP grew by 4.1 percent (y/y) in 2018, up from 2.1 percent in 2017, led by construction and services sectors. Better performance in livestock, forestry and other crops helped offset the contraction in sugar production due to delays in the restructuring of the Guyana Sugar Corporation (GuySuCo). Inflation remained steady at 1.6 percent at end-2018, on the back of stable food prices and exchange rate. Core inflation remained close to zero.

4. Guyana’s external position is assessed to be broadly consistent with fundamentals and desirable policy settings (see Annex X). Higher imports, driven by investment-related oil imports, contributed to a temporary worsening of the current account balance, which is projected to reverse as oil exports commence and increase over the medium term. The financial account improved due to higher FDI, particularly in the oil and gas sector. Gross reserve coverage declined to 2.1 months of imports, mainly due to higher imports. In 2018, the real and the nominal effective exchange rates appreciated by about 2.8 and 2.5 percent (end of year basis), respectively, mainly driven by appreciation against non-U.S. trade partners, such as Canada. During the same period, Guyana dollar depreciated against the U.S. dollar by 1 percent (y/y). Guyana’s exchange rate regime remains a de jure float, but a de facto stabilized arrangement with foreign exchange rate interventions.

5. The fiscal outturn was better than expected, supported by stronger revenues and lower growth in expenditure. The central government’s overall deficit came in at 3.5 percent of GDP, better than the 2018 Budget and Article IV estimates of 5.4 percent of GDP. Total revenues grew by 11 percent, supported by the tax amnesty program (which relaxed interest and penalties on payments of outstanding taxes) and a significant increase in corporate remittances which contributed 3.7 percent and 2.4 percent, respectively, to total revenues. Tax reform measures such as the establishment of a Large Taxpayers Unit and electronic tax filing have increased income tax collection. Total expenditure rose at a slower pace, at 6 percent in 2018, compared to 11 percent in 2017, mostly due to weaker capital expenditure. Public debt, including government guarantee on a US$79 million syndicated loan raised by National Industrial and Commercial Investments Limited (NICIL), stood at 55 percent of GDP at end-2018.³

6. Credit to the private sector grew by 4.0 percent in 2018, faster than the growth rate of 2.1 percent in 2017, mostly driven by the business sector. The stronger credit growth bolstered GDP growth in 2018. Credit growth was stronger in the business (5.3 percent) sector, but weaker in the household sector (4.1 percent). The 91-day Treasury Bill rate remained at 1.54 percent at end-2018, unchanged from end-2017. The weighted average of commercial banks’ prime lending rate remained at 10 percent at end-2018, unchanged from end-2017.

7. The financial sector remains stable. The banking sector’s nonperforming loans (NPLs) to total loans ratio has fallen slightly to 11.9 percent as of end-2018, from 12.2 percent a year before, but remained high. Average capital to risk-adjusted assets rose 2 percentage points to 29.6 percent during the period. Correspondent banking relationships remain stable as domestic banks maintain business with two foreign correspondent banks.

8. Political uncertainties have risen. The Caribbean Court of Justice announced its decision in June 2019 to uphold the December 2018 Parliamentary “no-confidence” vote against the government. As a result, fresh parliamentary elections are expected to be held in the coming months, though a date has not yet been set.

Outlook and Risks

9. Guyana’s 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, from 4.1 percent in 2018, as the domestic economy extends the broad-based expansion across all major sectors. Growth will be driven by continued strength in the construction and services sectors ahead of oil production in 2020, and strong recovery in mining. The commencement of oil production in 2020 will substantially improve the medium-and long-term outlook. The oil sector is projected to grow rapidly, accounting for around 40 percent of GDP by 2024 and supporting additional fiscal spending annually of 6.5 percent of non-oil GDP on average. This would boost non-oil GDP growth by 3.5 percentage points on average, based on a multiplier of 0.53 in the Caribbean (Narita, 2014).

10. The external outlook is expected to gradually improve after the start of oil production in 2020. The current account deficit is projected to narrow from -22.7 in 2019 to -18.4 percent of GDP in 2020, with the commencement of oil exports. The deficit will be financed largely by FDI inflows and donor-supported investment. In the medium term, the current account balance will improve further as oil-related imports subside with the completion of oil fields and as oil exports from Liza II commence in 2022. Public debt (including guarantee) is projected to peak at 56.6 percent of GDP in 2019 before declining sharply from 2020, reaching 15.8 percent of GDP by 2024, as the incoming oil revenue significantly reduces borrowing needs and increases GDP. Guyana’s debt-sustainability analysis (DSA) shows that the risk of external and overall debt distress remains moderate at present, but debt dynamics will improve significantly as oil production begins and will give the country substantial space to absorb shocks.⁴

11. The favorable outlook is subject to downside and upside risks. On the downside, increased dependence over time on oil revenue could expose the economy to oil price volatility. In addition, excessively rapid increases in government spending from oil revenues could subject Guyana to the “natural resource curse,” with significant inflationary pressures, eroding competitiveness, and governance concerns. A slowing global economy could also affect non-oil exports, particularly sugar, rice, and other commodities. On the upside, further oil discoveries and production, if managed effectively, could significantly improve Guyana’s economic welfare over the long-term. Concrete measures are needed to address issues relating to capacity constraints to mitigate the risks of under-execution of public capital investments.

Policy Discussions

A. Fiscal Policy

12. The fiscal stance remains appropriately expansionary in 2019 ahead of oil production, driven by significant need for capacity building and infrastructure development (Annex III). The central government’s overall deficit is projected at 5 percent of GDP, on the back of higher capital and current expenditures. The increase in capital expenditure, projected at 25.7 percent, reflects the substantial infrastructural needs to support connectivity and human capital development within the country. Staff projects current expenditure to grow 11.6 percent, driven mainly by an increase in public wages and goods and services on the back of pressing needs to build capacity, and to address skills shortages and over-crowding in schools and hospitals. Increased tax collection efficiency, a higher compliance rate following reforms by the Guyana Revenue Authority (GRA), and broadening growth in the domestic economy will increase VAT and trade taxes collections, supporting an increase in tax revenue by 12.6 percent.

13. The fiscal framework envisages sizable transfers of oil income to the budget over the next five years, together with accumulation of savings in the NRF. Based on projected oil prices and production, transfers to the budget will amount to a cumulative 32.7 percent of nonoil GDP over 2020–24 and the balance in the NRF would amount to 30.1 percent of nonoil GDP by end-2024. This presents an opportunity to scale-up capital and current spending to address infrastructure gaps and human development needs. Staff views the implied roughly equal shares of saving versus spending of the oil income during the first five years as appropriate—it should contain “Dutch Disease” effects (real exchange rate appreciation that could erode export competitiveness and crowd out private investment; Box 1). Staff emphasized the need to continuously monitor the economy’s absorptive capacity and to stand ready to scale back spending if signs of overheating or spending inefficiencies emerge (Annex IV). Staff also highlighted the need to consider the impact on the economy’s productive capacity when apportioning between capital and current expenditure.⁵

14. Complementing the NRF Act with a fiscal responsibility framework is necessary to ensure effective management of the oil wealth. The NRF Act includes a budget transfer rule that ensures in the long-run that fiscal transfers are determined by the expected financial return on the accumulated assets of the NRF. In the medium-term, the rule envisages a transfer of around half of current oil revenue to the budget. To ensure compliance with the principle underlying this rule—that part of the oil revenue is saved as a buffer against shocks and for future generations—and to anchor fiscal policy, a complementary fiscal framework that constrains the annual non-oil deficit to not exceed the expected transfer from the NRF (i.e., a zero-overall fiscal balance) is needed. This would ensure that public expenditure will not lead to debt growing at the same time as the NRF accumulates. Staff recommends that this complementary rule be phased in over the next three years to allow a smooth widening of the non-oil deficit (in relation to non-oil GDP).⁶ It is also necessary to preserve the spirit of the NRF framework, which appropriately aims to save part of the income from oil as net wealth for future generations.

Box 1.

Macroeconomic Impact of Scaling Up Public Investment

This Box analyzes the macroeconomic implications of scaling up the pace of public investment under two illustrative scenarios, using the Debt, Investment, Growth and Natural Resources” (DIGNAR) model

Scenarios Calibration

1. The DIGNAR model is calibrated for Guyana using specific macro- and micro-economic data, and cross-country comparison. Public investment efficiency is assumed at 59 percent, in line with the findings in 2017 PIMA Assessment (relative to 70 percent in LAC and 73 percent in EME). The return on public investment net of depreciation is assumed to be 15 percent based on cross-country estimates of marginal productivity of capital and close to the average rate of returns on Timor-Leste’s public investment projects financed by the World Bank and evaluated by the Independent Evaluation Group.¹ The central government’s oil revenues are projected to rise gradually from 1.6 percent of GDP to a peak of 5.3 percent of GDP in 2028.²

2. The path of public investment scaling-up is simulated in two scenarios based on the pace of spending that depends on the speed of achieving an overall balanced budget.³ The “baseline” scenario models public investment expenditure in a situation where an overall balanced budget is achieved by 2022. “Aggressive” scenario depicts public investment expenditure where a zero-overall balanced budget is achieved slowly in 5 years (by 2025).

Macroeconomic Implications

Dutch disease is lower under the “baseline” approach. Rapid growth in public investment spending in the “aggressive” approach would dampen private consumption and investment significantly due to large crowding out effects. In addition to higher real interest rates from large public sector borrowing in the short term, massive front-loading of government investment spending would lead to higher inflation and more pronounced appreciation of the real exchange rate, adversely affecting export competitiveness. This would feed into a relatively lower output in the traded sector and exacerbate the “Dutch disease” effects. In the “baseline” approach, the crowding out of private consumption and investment from the increase in government spending is less pronounced.

Despite the relatively lower amount of public investment spending to improve infrastructure compared to the “aggressive” approach, non-oil output growth in the medium- and longer-term are higher as public investment reinforces private investment, thus minimizing the effects of “Dutch disease” and crowding out of private demand.

¹ Timor-Leste is a good approximation as the country is a small oil-rich economy with large infrastructure and social development needs. See IMF (2017). Democratic Republic of Timor-Leste: Staff Report for the 2017 Article IV consultation. ² Based on the Fiscal Analysis of Resource Industries (FARI) Model, assuming Liza I and Liza II production based on inputs from the authorities, taking into consideration oil royalty and production profit-sharing with ExxonMobil, and the budget transfer rule in the NRF Act. ³ Based on Staff recommendation of a fiscal responsibility framework that targets an overall balanced budget. While the overall fiscal deficit will narrow and move to a balanced budget, the ratio of non-oil overall balance to non-oil GDP (often used to measure fiscal stance in oil-exporting countries) could still be in deficit, thus underpinning an expansionary fiscal policy.

15. Continued reforms to improve institutional, governance, and management practices will strengthen macroeconomic performance. Staff welcomes the authorities’ continued efforts in enhancing the quality and efficiency of public financial management, including submitting an early national budget to Parliament which allows a full 12 months for implementation, modernizing the revenue administration, and strengthening the public investment management system. As total public spending and current expenditure are among the highest in the region, addressing the weaknesses identified in the 2017 Public Investment Management Assessment (PIMA; Annex V) is important. In addition, undertaking the Fiscal Transparency Evaluations could help strengthen institutional, governance and management practices.⁷ Greater urgency is attached to these reforms ahead of the expected increase in public spending as oil production begins.

16. Staff supports the authorities’ commitment to reform public enterprises. The restructuring of GuySuCo is ongoing as offers have been received for the privatization of 3 of the 6 sugar estates, and all severance payments have been made to the 5,500 displaced workers.⁸ Providing a safety net to protect those affected by this process will be important, considering the socio-economic implications and difficulties that sugar workers may face in transitioning to other occupations. To strengthen Guyana Power and Light’s (GPL) governance structure in order to reduce the cost of electricity, the authorities are assessing the use of domestic natural gas as a transition energy source and planning to increase renewable energy. Acquisition costs for GuyOil have been reduced following the government’s negotiation with CARICOM to suspend the Common External Tariff in February 2019 after the closure of Petroleum Company of Trinidad and Tobago. The Green State Development Strategy (GSDS) also envisions mini hydro plants and wind as future, alternative renewable energy sources.

Authorities’ Views

17. The authorities remain committed to maintaining fiscal discipline. While the prospects of incoming large oil revenues present an opportunity to scale up public expenditure to address social development and infrastructural needs, they indicated that the country’s absorptive capacity remains a challenge due to skills and labor shortages, and weak project implementation capacity in line Ministries. As such, they will take countervailing measures to minimize distortions in the event of overheating. They concurred with Staff’s recommendation of a fiscal framework that constrains the annual non-oil deficit to not exceed the expected transfer from the NRF, to be phased-in gradually, to complement the NRF Act. This would help anchor fiscal policy and ensure that public debt will not increase. To further improve public financial management, the authorities intend to adopt rigorous project selection, prioritization and costing criteria within the context of the new long-term Green State Development Strategy, which will also inform multi-year budgeting. A Public Expenditure and Financial Accountability (PEFA) assessment has been conducted recently to assess the efficiency and effectiveness of public spending, and the authorities are in advanced stages of instituting a Public Investment Management Framework to operationalize the key recommendations of the 2017 PIMA. They are considering mechanisms to further improve fiscal transparency, including the Fiscal Transparency Evaluations.

18. With the onset of oil production and discussions on future oil development plans the authorities indicated their concern that the absence of a ring-fencing arrangement in the Stabroek Production Sharing Agreement could potentially affect the projected flow of government oil revenues. The rapid appraisal and development of multiple oil fields could affect the timing and amount of profit oil to be shared with the government from a producing oil field by allocating costs from various fields under development to the producing field. The authorities are developing strategies to mitigate such a possibility, including a national oil depletion policy to guide extraction and production and clearer ring-fencing rules for new investments.

B. Monetary Policy and External Stability

19. Continually reassessing the monetary policy stance to reflect changes in the macroeconomic outlook and risks remains appropriate. Monetary policy should gradually revert to a neutral stance to contain inflationary pressure as economic growth strengthens and credit expands.

20. Exchange rate flexibility could play a greater role as part of the monetary policy framework for managing large and potentially volatile foreign inflows from oil production. Over the medium-term, developing the necessary infrastructure, supported by IMF Technical Assistance, for a suitable monetary policy framework with increased exchange rate flexibility would facilitate economic expansion and adjustment to oil price shocks while maintaining price stability and safeguarding foreign reserves.

21. The domestic bond market should also be developed further, following the 2017 MCM TA recommendations, in order to enhance financial intermediation. The government had accumulated an overdraft balance at the central bank of 9 percent of GDP at end-2018 (up from around 5 percent at end-2017 and end-2016). Staff recommends settling these balances at the central bank and relying on the issuance of Treasury Bills for future government cash flow management. Over the medium-term, for market development purposes, the authorities could consider extending the maturity of government bonds to help establish a yield curve.

Authorities’ Views

22. The authorities highlighted that price stability will continue to anchor monetary policy. Given the current low inflation rate, the central bank considers the current accommodative monetary stance appropriate. The authorities concurred with the importance of exchange rate flexibility as part of the monetary policy framework, given the expected large and potentially volatile foreign inflows from oil production, and requested IMF Technical Assistance to help design and develop the necessary infrastructure.

C. Strengthening Financial Sector Resilience

23. Financial sector stability should be further strengthened. The Bank of Guyana has been undertaking periodic follow-up examinations, meeting the management of commercial banks to discuss areas of significant concern, and requiring frequent reporting. However, NPLs for some banks remain high. To reduce NPLs and strengthen financial sector stability, further actions could be taken including an Asset Quality Review to examine banks’ credit risks.

24. The divestment of the regional operations of a Canadian bank to a Caribbean bank poses some risk, but its impact on CBRs is expected to be benign. The sale of Scotiabank (Canada) to Republic Bank (Trinidad and Tobago) will increase the latter’s share to about 50 percent of total bank assets in Guyana, potentially sparking concerns on market concentration, systemic and contagion risks. The sale is not expected to affect CBRs, however, as Republic Bank, being a regional bank, has its own panel of correspondent banks.

25. Several steps have been taken to promote financial inclusion. A private credit bureau, CreditInfo, was established in July 2013. In January 2016 the Credit Reporting Act was amended to mandate information sharing to the credit bureau by both credit institutions and public utilities. Since then, the coverage of credit information has expanded to other sectors including mobile phone companies, insurance companies, and utility companies. With the commencement of oil production, more foreign banks may become interested in entering the market. New entrants could promote competition, financial deepening, and efficiency.

26. The authorities have made significant progress in implementing the 2016 FSAP recommendations, though action in some areas remains pending (Annex VI). In 2018, four bills were approved by Parliament: emergency liquidity assistance to deposit-taking financial institutions; orderly resolution of a failing institution; national payment system law; and deposit insurance. The deposit insurance scheme is in place as of July 1, 2019, guaranteeing up to two million Guyanese dollars in the event of a bank failure. The Bank of Guyana is on track to complete Basel II/III implementation and finalize the Crisis Management Framework by end-2019. Remaining steps include eliminating reduced provisioning requirements for “well-secured” proportions of NPLs; reducing the large exposure limit; and raising the minimum capital adequacy requirement to 12 percent.

27. Guyana is making progress in strengthening the AML/CFT framework. Based on the 2017 national risk assessment (NRA), the authorities have set a new guideline on customer due diligence, and reporting by money transfer companies and adopted amendments to the AML/CFT Act and established an AML/CFT National Co-ordination Committee. The Financial Intelligence Unit (FIU) is actively pursuing the membership of Egmont Group—an international group of FIUs—to facilitate information sharing with other FIUs. Guyana is scheduled to undertake a mutual evaluation by the Caribbean Financial Action Task Force (CFATF) in 2022. The authorities are encouraged to strengthen AML measures that support anti-corruption efforts – ensuring that information on the beneficial ownership of companies and trusts is available to authorities without impediments, measures targeted at politically exposed persons are implemented and corruption and the laundering of its proceeds are prosecuted and proceeds of crime confiscated.

Authorities’ Views

28. The authorities remain committed to continuously strengthening AML/CFT framework. They plan to conduct another NRA before the mutual evaluation by the CFATF in 2022.

29. They also remain committed to strengthening the financial sector based on 2016 FSAP recommendations. The BoG continues to closely monitor the banks with high NPLs. The BoG plans to implement a hybrid approach to the Basel framework by end 2019 where the capital definition and operational risk are based on Basel III while market risk and the standard approach to assessing credit risk are based on Basel II. They indicated that they are in the process of finalizing and operationalizing the Crisis Management Plan and remaining FSAP recommendations.

D. Competitiveness, Inclusive Growth, and Governance

30. With the GSDS providing a useful development framework, structural reforms and infrastructure investment are needed to support economic diversification and achieve inclusive economic growth. The GSDS focuses on modernizing traditional economic sectors and expanding high-value adding sectors, while ensuring low carbon and climate resilient development, sound education, social protection and protection of natural resources. An Illustrative analysis suggests that successful implementation of structural reforms to boost public investment efficiency could add around 5 percentage points to non-oil real GDP by 2030 (Annex VII). Reform measures to enhance economic diversification and boost inclusive growth should focus on addressing skilled labor shortages and improving the domestic business environment to facilitate greater private sector involvement in the economy. Also, increased investment in infrastructural development and expanding the generation and transmission capacity of the electricity company will be vital to unlocking growth (Box 2).

Box 2.

Strengthening Competitiveness and Boosting Growth

Structural reform measures to enhance economic diversification and boost inclusive growth include:

Addressing skilled labor shortages. The shortage of skilled manpower continues to constrain medium to long-term growth. Gross school enrolment ratio at tertiary level for Guyana is about 12 percent, much lower than the Latin America and the Caribbean average of 44 percent. The current low expenditure on education of 10 percent relative to the Caribbean average of 18 percent of total government expenditure highlights the need to increase expenditure on education policy reforms aimed at expanding access to education, improving the curriculum to better connect to modern labor market needs and enhancing vocational training. To address skills gap and satisfy an expected increase in labor demand, Guyana could adopt more liberal or open immigration policies, including free movement of all categories of workers from other CARICOM countries. Female labor participation declined slightly from 42.6 percent in 2017 to 41.2 percent in 2018. Promoting more flexible working arrangements could help increase female labor participation.
Improving Infrastructure. Inadequate infrastructure remains a key barrier to investment. Welcome efforts are underway to improve access to roads, electricity and telecommunication services to enhance shared growth, employment opportunities and help to reduce economic disparities between coast and the hinterland. Given Guyana’s vulnerability to climate risks and related natural disasters, more effort should be put on developing climate resilient infrastructure networks.
Energy sector: High energy costs remain a constraint to growth. Plans to use Guyana’s natural gas resources for power generation will help to improve the cost-effectiveness, energy efficiency and sustainability of the current energy matrix, while providing cleaner energy solutions. The expansion of the generation and transmission capacity of GPL would help to meet immediate energy needs while renewable energy initiatives such as solar, wind and bio energy are being pursued. The Low Carbon Development Strategy, under which Guyana commits to reduce emissions and deforestation in exchange for development assistance bodes well for the transition to the green economy.
Improving the business environment will unlock the potential of the private sector. Guyana continues to rank below the regional average, at 134th (out of 190 countries), reflecting challenges in dealing with construction permits, getting electricity, and resolving insolvency; but ranks relatively well in protecting minority investors. Reforms to the ‘doing business’ environment will be necessary to ensure that non-oil industries remain competitive. Key reforms needed to improve the business environment include: amendments to the code of practice to simplify and expedite the issuance of construction permits and inspections; improving the procedures and reducing the time and cost of accessing electricity; and strengthening the legal framework for dealing with insolvency and judicial liquidation.

31. Staff’s assessment of governance in Guyana points to weakness in several key areas that could give rise to corruption vulnerabilities. The main areas include fiscal governance (revenue and spending outcomes and procurement), regulatory framework (ease of doing business, the regulatory management practices, imports licensing, and discretionary foreign exchange allocation), rule of law, and AML/CFT (entity transparency, international cooperation, and aggregate AML).

32. The authorities have taken steps to strengthen governance in the areas highlighted by Staff, but capacity weaknesses continue to impact decisive implementation of policy actions. The authorities are making progress in strengthening governance, in the areas of anti-corruption, transparency in the extractive industry, and procurement (Annex VIII). Guyana completed its first Extractive Industries Transparency Initiative (EITI) Report in 2019 and started implementing its recommendations to further enhance transparency in the extractive industry. The recent re-establishment of the Integrity Commission has reinvigorated compliance with the asset declaration regime. Staff encouraged authorities to make the asset declarations public and develop the methodology for their verification. In public procurement, staff welcomed the steps to enhance the transparency of the bidding process and awarding of contracts, but also encouraged the authorities to ensure timely compliance with existing regulations and take further actions to fortify the transparency of the procurement system. Key governance institutions – Financial Intelligence Unit, National Procurement and Tenders Administration Board, Public Procurement Commission and the Integrity Commission – face significant capacity weaknesses with severe staff shortages, particularly legal and accounting expertise. This severely impacts the ability of the institutions to ensure compliance with existing regulations, conduct investigations including for politically exposed persons (PEPs) and implement additional actions to further strengthen governance systems to address corruption vulnerabilities.

Authorities’ Views

33. The authorities indicated that structural reforms, increased infrastructure investment, and strengthening the education system will be key to achieving inclusive and equitable growth. They emphasized their commitment to implementing the GSDS, which focuses on modernizing traditional economic sectors and expanding high-value adding sectors, while ensuring low carbon and climate resilient development, sound education, social protection and protection of natural resources. In addition, they noted that major obstacles to growth include infrastructure bottlenecks, skilled labor shortages, and weaknesses in electricity supply. Therefore, increased investment in improving access to roads, electricity and telecommunication services, healthcare and education would help strengthen growth and bridge the gap between coast and the hinterland. They agreed that increased investment in upgrading the education system should aim to enhance skills and employment prospects, and they saw merit in liberal immigration policies to address skills gaps. They concurred that promoting more flexible working arrangements could help increase female labor participation.

34. The authorities emphasized that strengthening transparency and anti-corruption frameworks is a key priority. The first Extractive Industries Transparency Initiative (EITI) Report was completed in 2019 and the authorities have started implementation of the key recommendations to further enhance transparency in the extractive industry (Annex IX). The recent re-establishment of the Integrity Commission has resulted in over 50 percent of politically exposed persons (PEPs) and other required officers making asset declarations within the first year. They agreed that ensuring greater compliance with the asset declaration regime over time would underscore their support and commitment to the UN convention against corruption. The authorities also underscored their efforts to strengthen the procurement system. They are instituting mandatory procurement plans, reviewing debarment procedures, amending thresholds for restrictive tendering and developing a e-procurement system.

Other Issues

35. Data provision has been broadly adequate but should be strengthened to enhance effective surveillance. Quality and timeliness of macroeconomic indicators, due to low staffing and coverage issues, remain a challenge. Improvements are being made to coverage, input data, and statistical techniques to produce more robust and internationally comparable GDP estimates. The authorities are finalizing an all-urban CPI, a household budget survey, and a living conditions survey. Capacity constraints remain an obstacle in addressing these statistical weaknesses. Staff welcomed the compilation of balance of payments in line with BPM6, the Multi-Indicator Cluster Survey and efforts to rebase the National accounts to 2012. Improving statistics and further building institutional capacity and competency for statistical reporting on the petroleum sector is important as oil production starts. The compilation and dissemination of IIP data are also needed.

Staff Appraisal

36. Guyana’s macroeconomic outlook is very favorable. Income from oil wealth presents an opportunity to scale-up capital and current spending to address infrastructure gaps and human development needs. To minimize macroeconomic distortions related to Dutch disease and governance weaknesses, a measured pace of public spending expansion will be needed, and the authorities should stand ready to scale back spending if signs of absorptive capacity constraints or spending inefficiencies emerge.

37. The NRF legislation for managing Guyana’s natural resource wealth is a welcome step that should expeditiously be complemented with a fiscal responsibility framework to ensure that fiscal deficits are avoided. The NRF framework commendably aims to save part of the natural resource income as net wealth for future generations. To ensure this and to keep public debt from rising, a zero-overall balance rule which constrains the annual non-oil deficit to not exceed the expected transfer from the NRF is needed. This rule could be phased in over the next three years to allow a smooth widening of the non-oil deficit (in relation to non-oil GDP).

38. The quality, efficiency, and transparency of public financial management should continue to be improved. It is important to address the shortcomings identified by the PIMA and expenditure review before public investment is significantly scaled-up with oil revenues. Undertaking the Fiscal Transparency Evaluations to ascertain compliance with Pillar IV of the Fiscal Transparency Code will help guide future steps to improve fiscal transparency.

39. Monetary policy should gradually revert to a neutral stance to contain inflationary pressure as public spending increases, economic growth strengthens, and credit expands. Over the medium term, developing the infrastructure for greater exchange rate flexibility within the monetary policy framework would help sustain healthy economic growth while maintaining price stability and facilitating adjustment to oil price and other external shocks.

40. Financial sector stability would be enhanced by an asset quality review to ascertain banks’ credit risks. In addition, completing the remaining 2016 FSAP recommendations, especially eliminating reduced provisioning requirements for “well-secured” proportions of NPLs, reducing the large exposure limit, and raising the minimum capital adequacy requirement to 12 percent, would further buttress financial stability. The authorities have also made progress in strengthening the AML/CFT framework, and are encouraged to continue their efforts in this regard, addressing remaining deficiencies and mobilizing the AML/CFT regime before the upcoming CFATF assessment and strengthening AML measures to support anti-corruption efforts, such as ensuring transparency of companies and trusts and implementation of measures targeted at politically exposed persons, notably domestic ones.

41. Structural reforms are needed to support economic diversification, enhance competitiveness, and achieve inclusive and equitable growth. Increased investment to improve access to roads, electricity, and telecommunication services, including the hinterland, would help address infrastructure bottlenecks. Investment in upgrading the education system would enhance skills and employment prospects. To further reduce skilled labor shortages, especially in the near term, more liberal immigration policies, including free movement of workers from other CARICOM countries, could be considered. Promoting more flexible working arrangements could help increase female labor participation. Regulatory and administrative reforms such as expediting the issuance of construction permits, improving the process of accessing electricity; and strengthening the legal framework for dealing with insolvency and judicial liquidation would help to improve the business environment and competitiveness.

42. Continuing the progress that has been made in strengthening transparency and governance would be welcome. Sustained efforts in implementing the recommendations of the 2019 EITI Report would help to further enhance transparency in the extractive industry and promote effective management of the oil wealth. Strengthening anti-corruption frameworks, including by strengthening the asset disclosure framework, will improve governance, support investor confidence and promote growth. Efforts to ensure timely compliance with existing regulations and further actions such as registration and publication of bidders, using CARICOM Public Procurement Notice Board for advertising bids and developing an e-procurement system would help to fortify the transparency of the procurement system. Addressing capacity weaknesses would enable decisive implementation of policy actions and strengthen governance in the key areas highlighted

43. It is proposed that the next Article IV consultation takes place on the standard 12-month cycle.

Table 1.

Guyana: Selected Social and Economic Indicators

Sources: Guyanese authorities; UNDP Human Development Report; World Bank; and IMF staff calculations and projections.

^{^1/}Projected real GDP growth in 2020 is potentially overstated and subject to large subsequent revisions because of the very high growth rate of oil GDP, which in turn is elevated on account of the very low (zero) base in 2019. Hence, even small changes to the projected oil output in 2020 would result in large changes in real oil GDP and overall real GDP growth rates. Work is ongoing to rebase the real GDP series to account for oil-related activities since 2015 in advance of actual oil production in 2020.

^{^2/}Since 2015–16, public debt to GDP ratios have been adjusted to reflect unsettled government balances at the central bank. Th e ratios do not include publicly-guaranteed debt.

^{^3/}The changes in public sector (net) are from a small base, making the series volatile.

^{^4/}The external current account for 2018 onwards includes high value imports of oil goods and services.

^{^5/}Gross reserves in months of imports of goods and services for 2017 onward are affected by high value imports of oil goods and services.

Table 2.

Guyana: Balance of Payments ^1/

Sources: Bank of Guyana; and IMF staff calculations and projections.

^{^1/}Table has been revised to BPM6 presentation.

^{^2/}Includes capital flows of PetroCaribe financing.

^{^3/}The external current account for 2018 onwards includes high value imports of oil goods and services.

^{^4/}Gross reserves in months of imports of goods and services for 2017 onward are affected by high value imports of oil goods and services.

Table 2.

Guyana: Balance of Payments ^1/

							Projections
			2015	2016	2017	2018	2019	2020	2021	2022	2023	2024
			(In millions of U.S. dollars)
Current account (incl. official transfers)			-163.0	13.2	-246.2	-683.3	-935.7	-1,483.6	-1,378.3	-600.2	-103.1	265.2
Current account (excl. official transfers)			-181.4	-12.4	-296.4	-683.3	-980.6	-1,764.9	-1,693.8	-987.3	-626.5	-340.4
Merchandi se trade (net)			-340.3	-30.7	-205.8	-451.2	-685.2	1200.1	1,551.2	3,764.0	6,463.9	7,143.2
	Exports (f.o.b.)		1,151.3	1,434.4	1,438.1	1,373.8	1,490.0	3,943.3	4,211.2	6,506.2	9,415.5	10,213.6
		Bauxite	104.3	92.1	104.5	128.1	120.4	132.0	147.1	163.3	180.4	194.2
		Sugar	78.4	73.4	48.5	27.1	16.5	19.7	20.9	21.9	22.1	22.3
		Rice	220.8	178.8	201.0	186.1	196.6	213.6	221.3	229.9	238.9	252.9
		Gold	501.1	830.7	817.5	766.8	871.5	906.0	946.2	992.0	1,036.1	1,083.2
		Timber	43.7	40.4	35.8	33.3	33.3	33.5	33.9	34.2	34.5	35.2
		Oil	-	-	-	-	-	2,378.1	2,577.5	4,796.7	7,633.1	8,353.1
		Other	202.9	219.0	230.8	232.3	251.6	260.2	264.3	268.3	270.4	272.6
	Imports (c.i.f.)		1,491.6	1,465.1	1,644.0	1,825.0	2,175.2	2,743.1	2,660.0	2,742.2	2,951.7	3,070.4
		Capital goods	329.0	294.0	306.9	343.7	726.4	1,154.5	1,030.5	1,052.2	1,143.0	1,213.2
		Fuel and lubricants	367.4	344.7	411.4	496.0	496.7	507.2	504.5	509.2	525.2	526.9
		Other	795.1	826.4	925.6	985.3	952.1	1,081.4	1,125.0	1,180.7	1,283.5	1,330.3
Services (net)			-282.3	-297.5	-360.8	-702.5	-752.5	-1,390.7	-1,504.4	-1,118.7	-1,047.2	-840.7
Primary income (net)			24.7	-4.6	-11.5	-27.7	-24.0	-2057.9	-2,229.0	-4,125.9	-6,541.4	-7,156.1
Secondary income (net)			434.9	346.0	331.9	498.2	526.1	764.9	803.9	880.4	1,021.6	1,118.8
Financial account			206.0	8.0	232.5	670.4	935.7	1,483.6	1,378.3	600.2	103.1	-265.2
	Nonfinancial public sector (net)		-8.9	12.4	58.9	82.5	62.5	109.7	80.3	110.8	98.6	102.6
		Net official borrowing	-18.1	21.6	51.2	82.5	45.1	109.7	80.3	110.8	98.6	102.6
		Other public sector (net) ^2/	9.2	-9.2	7.7	0.0	17.4	0.0	0.0	0.0	0.0	0.0
	Private sector (net)		147.8	-6.2	160.9	455.6	987.7	1588.7	1,512.1	764.8	246.8	-230.3
		Foreign direct investment (net)	121.7	32.0	212.2	494.8	1021.8	1882.1	1,817.4	1,360.1	1,209.7	822.8
		Portfolio investment (net)	3.3	-33.8	-52.8	-34.4	-47.4	-308.5	-319.9	-609.1	-980.9	-1073.1
		Other (net)	22.7	-4.4	1.6	-4.8	13.4	15.1	14.7	13.8	18.0	19.9
Errors and omissions			-43.0	-21.2	13.7	-10.6	0.0	0.0	0.0	0.0	0.0	0.0
Overall balance			-67.1	-1.8	-12.7	-55.6	114.6	214.8	214.1	275.5	242.2	137.5
Memorandum items:
Current account, incl. off. transfers (in percent of GDP)			-5.1	0.4	-6.8	-17.5	-22.7	-18.4	-15.9	-5.6	-0.7	1.7
Current account, excl. off. transfers (in percent of GDP) ^/3			-5.7	-0.4	-8.2	-17.5	-23.8	-21.9	-19.5	-9.2	-4.5	-2.2
Gross international reserves			598.5	596.7	584.0	528.4	643.0	857.8	1,071.9	1,347.4	1,589.6	1,727.1
	(in months of imports of goods and services) ^/4		3.7	3.3	2.6	2.1	1.8	2.4	3.2	3.8	4.5	4.5
Oil price assumption (US$/b)			50.8	42.8	52.8	68.3	65.5	63.9	60.7	58.5	57.6	57.4
GDP (US$ million)			3,197	3,504	3,606	3,899	…	…	…	…	…	…
			(Annual percent change)
Exports of goods			-1.7	25.3	0.5	-4.5	7.6	167.0	6.8	54.8	44.9	8.5
Imports of goods			-14.2	-1.8	12.2	11.0	19.2	26.1	-3.0	3.1	7.6	4.0
Terms of trade			19.7	12.1	-10.3	-8.7	2.0	1.6	1.4	1.1	0.2	0.5

Sources: Bank of Guyana; and IMF staff calculations and projections.

^{^1/}Table has been revised to BPM6 presentation.

^{^2/}Includes capital flows of PetroCaribe financing.

^{^3/}The external current account for 2018 onwards includes high value imports of oil goods and services.

^{^4/}Gross reserves in months of imports of goods and services for 2017 onward are affected by high value imports of oil goods and services.

Table 2.

Guyana: Balance of Payments ^1/

							Projections
			2015	2016	2017	2018	2019	2020	2021	2022	2023	2024
			(In millions of U.S. dollars)
Current account (incl. official transfers)			-163.0	13.2	-246.2	-683.3	-935.7	-1,483.6	-1,378.3	-600.2	-103.1	265.2
Current account (excl. official transfers)			-181.4	-12.4	-296.4	-683.3	-980.6	-1,764.9	-1,693.8	-987.3	-626.5	-340.4
Merchandi se trade (net)			-340.3	-30.7	-205.8	-451.2	-685.2	1200.1	1,551.2	3,764.0	6,463.9	7,143.2
	Exports (f.o.b.)		1,151.3	1,434.4	1,438.1	1,373.8	1,490.0	3,943.3	4,211.2	6,506.2	9,415.5	10,213.6
		Bauxite	104.3	92.1	104.5	128.1	120.4	132.0	147.1	163.3	180.4	194.2
		Sugar	78.4	73.4	48.5	27.1	16.5	19.7	20.9	21.9	22.1	22.3
		Rice	220.8	178.8	201.0	186.1	196.6	213.6	221.3	229.9	238.9	252.9
		Gold	501.1	830.7	817.5	766.8	871.5	906.0	946.2	992.0	1,036.1	1,083.2
		Timber	43.7	40.4	35.8	33.3	33.3	33.5	33.9	34.2	34.5	35.2
		Oil	-	-	-	-	-	2,378.1	2,577.5	4,796.7	7,633.1	8,353.1
		Other	202.9	219.0	230.8	232.3	251.6	260.2	264.3	268.3	270.4	272.6
	Imports (c.i.f.)		1,491.6	1,465.1	1,644.0	1,825.0	2,175.2	2,743.1	2,660.0	2,742.2	2,951.7	3,070.4
		Capital goods	329.0	294.0	306.9	343.7	726.4	1,154.5	1,030.5	1,052.2	1,143.0	1,213.2
		Fuel and lubricants	367.4	344.7	411.4	496.0	496.7	507.2	504.5	509.2	525.2	526.9
		Other	795.1	826.4	925.6	985.3	952.1	1,081.4	1,125.0	1,180.7	1,283.5	1,330.3
Services (net)			-282.3	-297.5	-360.8	-702.5	-752.5	-1,390.7	-1,504.4	-1,118.7	-1,047.2	-840.7
Primary income (net)			24.7	-4.6	-11.5	-27.7	-24.0	-2057.9	-2,229.0	-4,125.9	-6,541.4	-7,156.1
Secondary income (net)			434.9	346.0	331.9	498.2	526.1	764.9	803.9	880.4	1,021.6	1,118.8
Financial account			206.0	8.0	232.5	670.4	935.7	1,483.6	1,378.3	600.2	103.1	-265.2
	Nonfinancial public sector (net)		-8.9	12.4	58.9	82.5	62.5	109.7	80.3	110.8	98.6	102.6
		Net official borrowing	-18.1	21.6	51.2	82.5	45.1	109.7	80.3	110.8	98.6	102.6
		Other public sector (net) ^2/	9.2	-9.2	7.7	0.0	17.4	0.0	0.0	0.0	0.0	0.0
	Private sector (net)		147.8	-6.2	160.9	455.6	987.7	1588.7	1,512.1	764.8	246.8	-230.3
		Foreign direct investment (net)	121.7	32.0	212.2	494.8	1021.8	1882.1	1,817.4	1,360.1	1,209.7	822.8
		Portfolio investment (net)	3.3	-33.8	-52.8	-34.4	-47.4	-308.5	-319.9	-609.1	-980.9	-1073.1
		Other (net)	22.7	-4.4	1.6	-4.8	13.4	15.1	14.7	13.8	18.0	19.9
Errors and omissions			-43.0	-21.2	13.7	-10.6	0.0	0.0	0.0	0.0	0.0	0.0
Overall balance			-67.1	-1.8	-12.7	-55.6	114.6	214.8	214.1	275.5	242.2	137.5
Memorandum items:
Current account, incl. off. transfers (in percent of GDP)			-5.1	0.4	-6.8	-17.5	-22.7	-18.4	-15.9	-5.6	-0.7	1.7
Current account, excl. off. transfers (in percent of GDP) ^/3			-5.7	-0.4	-8.2	-17.5	-23.8	-21.9	-19.5	-9.2	-4.5	-2.2
Gross international reserves			598.5	596.7	584.0	528.4	643.0	857.8	1,071.9	1,347.4	1,589.6	1,727.1
	(in months of imports of goods and services) ^/4		3.7	3.3	2.6	2.1	1.8	2.4	3.2	3.8	4.5	4.5
Oil price assumption (US$/b)			50.8	42.8	52.8	68.3	65.5	63.9	60.7	58.5	57.6	57.4
GDP (US$ million)			3,197	3,504	3,606	3,899	…	…	…	…	…	…
			(Annual percent change)
Exports of goods			-1.7	25.3	0.5	-4.5	7.6	167.0	6.8	54.8	44.9	8.5
Imports of goods			-14.2	-1.8	12.2	11.0	19.2	26.1	-3.0	3.1	7.6	4.0
Terms of trade			19.7	12.1	-10.3	-8.7	2.0	1.6	1.4	1.1	0.2	0.5

Sources: Bank of Guyana; and IMF staff calculations and projections.

^{^1/}Table has been revised to BPM6 presentation.

^{^2/}Includes capital flows of PetroCaribe financing.

^{^3/}The external current account for 2018 onwards includes high value imports of oil goods and services.

^{^4/}Gross reserves in months of imports of goods and services for 2017 onward are affected by high value imports of oil goods and services.

Table 3a.

Guyana: Public Sector Operations

(In billions of Guyanese dollars)

Sources: Ministry of Finance; and IMF staff calculations and projections.

^{^1/}Reflects interest and amortization after total debt relief.

^{^2/}Includes statistical discrepancies.

Table 3a.

Guyana: Public Sector Operations

(In billions of Guyanese dollars)

								Projections
				2015	2016	2017	2018	2019	2020	2021	2022	2023	2024
Central government revenue				162.7	177.3	195.1	216.7	238.3	310.6	340.9	394.3	474.4	576.3
	Tax revenue			142.9	151.7	171.1	198.5	223.6	235.2	258.5	287.1	333.8	399.6
		Income taxes		54.5	60.6	67.7	78.2	88.7	94.6	103.9	115.5	134.6	161.0
		Consumption taxes		68.8	68.7	76.3	88.0	99.7	105.6	116.1	128.7	149.5	179.1
		Trade taxes		14.0	16.9	18.5	22.0	24.5	22.5	24.7	27.4	31.8	38.2
		Other		5.6	5.5	8.6	10.3	10.8	12.5	13.8	15.3	17.9	21.4
	Non-tax revenue			18.8	25.6	23.9	18.2	14.7	75.3	82.4	107.3	140.6	176.7
		Of which:
			Oil revenue	0.0	0.0	0.0	0.0	0.0	48.1	52.7	74.2	101.8	131.7
			Net revenue from PE and statutory bodies	12.4	15.3	15.3	9.3	6.3	7.9	8.4	9.5	11.4	12.2
	Capital revenue			1.0	0.0	0.0	0.0	0.0	0.0	0.0	0.0	0.0	0.0
Grants				6.3	7.9	12.2	10.2	11.2	9.3	8.1	4.2	5.5	0.0
Central government expenditure				178.3	216.8	240.0	254.8	292.2	330.9	362.4	399.0	480.1	576.6
Current expenditure				147.6	170.2	181.4	199.7	222.9	243.8	254.8	272.1	315.7	377.9
	Wages and salaries			44.7	49.4	54.4	59.5	70.2	75.4	82.9	92.0	106.8	127.9
	Other goods and services			43.2	46.8	49.2	51.3	61.0	74.5	69.5	67.3	89.0	108.1
	Transfers			53.3	67.3	69.7	80.4	83.1	84.1	92.5	102.6	109.5	131.2
	Interest ^1/			6.5	6.7	8.0	8.5	8.7	9.7	9.9	10.3	10.4	10.7
			Domestic	1.7	1.9	2.0	1.3	1.1	3.8	3.6	3.6	3.3	3.1
			External	4.8	4.8	6.1	7.2	7.6	5.9	6.3	6.7	7.1	7.5
Capital expenditure				30.7	46.6	58.6	55.1	69.3	87.1	107.5	126.9	164.4	198.7
	External PSIP			9.7	15.4	19.8	19.9	24.1	38.1	40.0	44.1	44.5	35.1
	Local PSIP			21.0	31.2	38.9	35.2	45.2	5.8	20.1	16.0	28.3	45.0
	Oil-financed projects			0.0	0.0	0.0	0.0	0.0	43.3	47.4	66.8	91.7	118.5
Overall balance (before grants)				-15.6	-39.4	-44.9	-38.1	-53.8	-20.3	-21.5	-4.6	-5.7	-0.3
Overall balance (after grants)				-9.3	-31.6	-32.8	-27.8	-42.6	-11.0	-13.4	-0.4	-0.3	-0.3
Primary balance (after grants)				-2.8	-24.8	-24.7	-19.3	-34.0	-1.3	-3.5	9.8	10.2	10.4
Financing				9.3	31.6	32.8	27.8	42.6	11.0	13.4	0.4	0.3	0.3
Net foreign financing				-5.3	7.8	8.7	8.0	8.7	22.83	16.91	23.64	21.25	22.32
Net domestic financing ^2/				14.6	23.7	24.0	19.8	34.0	-11.81	-3.52	-23.21	-20.99	-22.05

Sources: Ministry of Finance; and IMF staff calculations and projections.

^{^1/}Reflects interest and amortization after total debt relief.

^{^2/}Includes statistical discrepancies.

Table 3a.

Guyana: Public Sector Operations

(In billions of Guyanese dollars)

								Projections
				2015	2016	2017	2018	2019	2020	2021	2022	2023	2024
Central government revenue				162.7	177.3	195.1	216.7	238.3	310.6	340.9	394.3	474.4	576.3
	Tax revenue			142.9	151.7	171.1	198.5	223.6	235.2	258.5	287.1	333.8	399.6
		Income taxes		54.5	60.6	67.7	78.2	88.7	94.6	103.9	115.5	134.6	161.0
		Consumption taxes		68.8	68.7	76.3	88.0	99.7	105.6	116.1	128.7	149.5	179.1
		Trade taxes		14.0	16.9	18.5	22.0	24.5	22.5	24.7	27.4	31.8	38.2
		Other		5.6	5.5	8.6	10.3	10.8	12.5	13.8	15.3	17.9	21.4
	Non-tax revenue			18.8	25.6	23.9	18.2	14.7	75.3	82.4	107.3	140.6	176.7
		Of which:
			Oil revenue	0.0	0.0	0.0	0.0	0.0	48.1	52.7	74.2	101.8	131.7
			Net revenue from PE and statutory bodies	12.4	15.3	15.3	9.3	6.3	7.9	8.4	9.5	11.4	12.2
	Capital revenue			1.0	0.0	0.0	0.0	0.0	0.0	0.0	0.0	0.0	0.0
Grants				6.3	7.9	12.2	10.2	11.2	9.3	8.1	4.2	5.5	0.0
Central government expenditure				178.3	216.8	240.0	254.8	292.2	330.9	362.4	399.0	480.1	576.6
Current expenditure				147.6	170.2	181.4	199.7	222.9	243.8	254.8	272.1	315.7	377.9
	Wages and salaries			44.7	49.4	54.4	59.5	70.2	75.4	82.9	92.0	106.8	127.9
	Other goods and services			43.2	46.8	49.2	51.3	61.0	74.5	69.5	67.3	89.0	108.1
	Transfers			53.3	67.3	69.7	80.4	83.1	84.1	92.5	102.6	109.5	131.2
	Interest ^1/			6.5	6.7	8.0	8.5	8.7	9.7	9.9	10.3	10.4	10.7
			Domestic	1.7	1.9	2.0	1.3	1.1	3.8	3.6	3.6	3.3	3.1
			External	4.8	4.8	6.1	7.2	7.6	5.9	6.3	6.7	7.1	7.5
Capital expenditure				30.7	46.6	58.6	55.1	69.3	87.1	107.5	126.9	164.4	198.7
	External PSIP			9.7	15.4	19.8	19.9	24.1	38.1	40.0	44.1	44.5	35.1
	Local PSIP			21.0	31.2	38.9	35.2	45.2	5.8	20.1	16.0	28.3	45.0
	Oil-financed projects			0.0	0.0	0.0	0.0	0.0	43.3	47.4	66.8	91.7	118.5
Overall balance (before grants)				-15.6	-39.4	-44.9	-38.1	-53.8	-20.3	-21.5	-4.6	-5.7	-0.3
Overall balance (after grants)				-9.3	-31.6	-32.8	-27.8	-42.6	-11.0	-13.4	-0.4	-0.3	-0.3
Primary balance (after grants)				-2.8	-24.8	-24.7	-19.3	-34.0	-1.3	-3.5	9.8	10.2	10.4
Financing				9.3	31.6	32.8	27.8	42.6	11.0	13.4	0.4	0.3	0.3
Net foreign financing				-5.3	7.8	8.7	8.0	8.7	22.83	16.91	23.64	21.25	22.32
Net domestic financing ^2/				14.6	23.7	24.0	19.8	34.0	-11.81	-3.52	-23.21	-20.99	-22.05

Sources: Ministry of Finance; and IMF staff calculations and projections.

^{^1/}Reflects interest and amortization after total debt relief.

^{^2/}Includes statistical discrepancies.

Table 3b.

Guyana: Public Sector Operations

(In percent of GDP)

Sources: Ministry of Finance; and IMF staff calculations and projections.

^{^1/}The decline in fiscal accounts’ GDP shares after 2019 are due to the large GDP increase after the start of oil production.

^{^2/}Reflects interest and amortization after total debt relief.

^{^3/}Includes statistical discrepancies.

Table 3b.

Guyana: Public Sector Operations

(In percent of GDP)

								Projections ^1/
				2015	2016	2017	2018	2019	2020	2021	2022	2023	2024
Central government revenue				246	245	26.2	26.9	28.0	18.5	187	17.3	15.7	17.1
	Tax revenue			21.6	21.0	23.0	24.6	26.2	14.0	14.2	12.6	11.1	11.9
		Income taxes		83	8.4	9.1	9.7	10.4	5.6	5.7	5.1	4.5	4.8
		Consumption taxes		10.4	9.5	10.2	10.9	11.7	6.3	6.4	5.6	5.0	5.3
		Trade taxes		2.1	23	2.5	2.7	2.9	1.3	1.4	1.2	1.1	1.1
		Other		0.8	0.8	1.2	1.3	1.3	0.7	0.8	0.7	0.6	0.6
	Non-tax revenue			2.8	3.5	3.2	2.3	1.7	4.5	4.5	4.7	4.7	5.3
		Of which:
		Oil revenue		0.0	0.0	0.0	0.0	0.0	2.9	2.9	3.3	3.4	3.9
		Net revenue from PE and statutory bodies		1.9	2.1	2.0	1.2	0.7	0.5	0.5	0.4	0.4	0.4
	Capital revenue			0.2	0.0	0.0	0.0	0.0	0.0	0.0	0.0	0.0	0.0
Grants				1.0	1.1	1.6	1.3	1.3	0.6	0.4	0.2	0.2	0.0
Central government expenditure				27.0	30.0	32.2	31.6	34.3	19.7	19.8	17.5	15.9	17.2
Current expenditure				22.4	23.5	24.4	24.8	26.1	14.5	14.0	11.9	10.5	11.2
	Wages and salaries			6.8	6.8	7.3	7.4	8.2	4.5	4.5	4.0	3.5	3.8
	Other goods and services			6.5	6.5	6.6	6.4	7.2	4.4	3.8	3.0	2.9	3.2
	Transfers			8.1	9.3	9.4	10.0	9.7	5.0	5.1	4.5	3.6	3.9
	Interest ^2/			1.0	0.9	1.1	1.1	1.0	0.6	0.5	0.5	0.3	0.3
			Domestic	03	0.3	0.3	0.2	0.1	0.2	0.2	0.2	0.1	0.1
			External	0.7	0.7	0.8	0.9	0.9	0.4	0.3	0.3	0.2	0.2
Capital expenditure				4.6	6.4	7.9	6.8	8.1	5.2	5.9	5.6	5.4	5.9
	External PSIP			1.5	2.1	2.7	2.5	2.8	2.3	2.2	1.9	1.5	1.0
	Local PSIP			3.2	4.3	5.2	4.4	5.3	0.3	1.1	0.7	0.9	1.3
	Oil-financed projects			0.0	0.0	0.0	0.0	0.0	2.6	2.6	2.9	3.0	3.5
Overall balance (before grants)				-2.4	-5.4	-60	-4.7	-6.3	-1.2	-1.2	-0.2	-0.2	0.0
Overall balance (after grants)				-1.4	-4.4	-4.4	-3.5	-5.0	-0.7	-0.7	0.0	0.0	0.0
Primary balance (after grants)				-0.4	-3.4	-3.3	-2.4	-4.0	-0.1	-0.2	0.4	0.3	0.3
Financing				1.4	44	44	3.5	5.0	0.7	0.7	0.0	0.0	0.0
Net foreign financing				-0.8	1.1	1.2	1.0	1.0	1.4	0.9	1.0	0.7	0.7
Net domestic financing ^3/				2.2	3.3	3.2	2.5	4.0	-0.7	-0.2	-1.0	-0.7	-0.7

Sources: Ministry of Finance; and IMF staff calculations and projections.

^{^1/}The decline in fiscal accounts’ GDP shares after 2019 are due to the large GDP increase after the start of oil production.

^{^2/}Reflects interest and amortization after total debt relief.

^{^3/}Includes statistical discrepancies.

Table 3b.

Guyana: Public Sector Operations

(In percent of GDP)

								Projections ^1/
				2015	2016	2017	2018	2019	2020	2021	2022	2023	2024
Central government revenue				246	245	26.2	26.9	28.0	18.5	187	17.3	15.7	17.1
	Tax revenue			21.6	21.0	23.0	24.6	26.2	14.0	14.2	12.6	11.1	11.9
		Income taxes		83	8.4	9.1	9.7	10.4	5.6	5.7	5.1	4.5	4.8
		Consumption taxes		10.4	9.5	10.2	10.9	11.7	6.3	6.4	5.6	5.0	5.3
		Trade taxes		2.1	23	2.5	2.7	2.9	1.3	1.4	1.2	1.1	1.1
		Other		0.8	0.8	1.2	1.3	1.3	0.7	0.8	0.7	0.6	0.6
	Non-tax revenue			2.8	3.5	3.2	2.3	1.7	4.5	4.5	4.7	4.7	5.3
		Of which:
		Oil revenue		0.0	0.0	0.0	0.0	0.0	2.9	2.9	3.3	3.4	3.9
		Net revenue from PE and statutory bodies		1.9	2.1	2.0	1.2	0.7	0.5	0.5	0.4	0.4	0.4
	Capital revenue			0.2	0.0	0.0	0.0	0.0	0.0	0.0	0.0	0.0	0.0
Grants				1.0	1.1	1.6	1.3	1.3	0.6	0.4	0.2	0.2	0.0
Central government expenditure				27.0	30.0	32.2	31.6	34.3	19.7	19.8	17.5	15.9	17.2
Current expenditure				22.4	23.5	24.4	24.8	26.1	14.5	14.0	11.9	10.5	11.2
	Wages and salaries			6.8	6.8	7.3	7.4	8.2	4.5	4.5	4.0	3.5	3.8
	Other goods and services			6.5	6.5	6.6	6.4	7.2	4.4	3.8	3.0	2.9	3.2
	Transfers			8.1	9.3	9.4	10.0	9.7	5.0	5.1	4.5	3.6	3.9
	Interest ^2/			1.0	0.9	1.1	1.1	1.0	0.6	0.5	0.5	0.3	0.3
			Domestic	03	0.3	0.3	0.2	0.1	0.2	0.2	0.2	0.1	0.1
			External	0.7	0.7	0.8	0.9	0.9	0.4	0.3	0.3	0.2	0.2
Capital expenditure				4.6	6.4	7.9	6.8	8.1	5.2	5.9	5.6	5.4	5.9
	External PSIP			1.5	2.1	2.7	2.5	2.8	2.3	2.2	1.9	1.5	1.0
	Local PSIP			3.2	4.3	5.2	4.4	5.3	0.3	1.1	0.7	0.9	1.3
	Oil-financed projects			0.0	0.0	0.0	0.0	0.0	2.6	2.6	2.9	3.0	3.5
Overall balance (before grants)				-2.4	-5.4	-60	-4.7	-6.3	-1.2	-1.2	-0.2	-0.2	0.0
Overall balance (after grants)				-1.4	-4.4	-4.4	-3.5	-5.0	-0.7	-0.7	0.0	0.0	0.0
Primary balance (after grants)				-0.4	-3.4	-3.3	-2.4	-4.0	-0.1	-0.2	0.4	0.3	0.3
Financing				1.4	44	44	3.5	5.0	0.7	0.7	0.0	0.0	0.0
Net foreign financing				-0.8	1.1	1.2	1.0	1.0	1.4	0.9	1.0	0.7	0.7
Net domestic financing ^3/				2.2	3.3	3.2	2.5	4.0	-0.7	-0.2	-1.0	-0.7	-0.7

Sources: Ministry of Finance; and IMF staff calculations and projections.

^{^1/}The decline in fiscal accounts’ GDP shares after 2019 are due to the large GDP increase after the start of oil production.

^{^2/}Reflects interest and amortization after total debt relief.

^{^3/}Includes statistical discrepancies.

Table 3c.

Guyana: Public Sector Operations

(In percent of non-oil GDP)

Sources: Ministry of Finance; and IMF staff calculations and projections.

Table 3c.

Guyana: Public Sector Operations

(In percent of non-oil GDP)

				Projections
				2020	2021	2022	2023	2024
Central government revenue				32.1	32.1	33.5	34.7	35.1
	Tax revenue			24.3	24.3	24.3	24.4	24.4
		Income taxes		9.8	9.8	9.8	9.8	9.8
		Consumption taxes		10.9	10.9	10.9	10.9	10.9
		Trade taxes		2.3	2.3	2.3	2.3	2.3
		Other		1.3	1.3	1.3	1.3	1.3
	Non-tax revenue			7.8	7.8	9.1	10.3	10.8
		Of which:
		Oil revenue		5.0	5.0	6.3	7.4	8.0
		Net revenue from PE and statutory bodies		0.8	0.8	0.8	0.8	0.7
	Capital revenue			0.0	0.0	0.0	0.0	0.0
Grants				1.0	0.8	0.4	0.4	0.0
Central government expenditure				34.2	341	33.8	35.1	35.2
Current expenditure				25.2	24.0	23.1	23.1	23.0
	Wages and salaries			7.8	7.8	7.8	7.8	7.8
	Other goods and services			7.7	6.5	5.7	6.5	6.6
	Transfers			8.7	8.7	8.7	8.0	8.0
	Interest			1.0	0.9	0.9	0.8	0.7
			Domestic	0.4	0.3	0.3	0.2	0.2
			External	0.6	0.6	0.6	0.5	0.5
Capital expenditure				9.0	10.1	10.8	12.0	12.1
	External PSIP			3.9	3.8	3.7	3.3	2.1
	Local PSIP			0.6	1.9	1.4	2.1	2.7
	Oil-financed projects			4.5	4.5	5.7	6.7	7.2
Overall balance (before grants)				-2.1	-2.0	-0.4	-0.4	0.0
Overall balance (after grants)				-1.1	-1.3	0.0	0.0	0.0
Primary balance (after grants)				-0.1	-0.2	0.4	0.3	0.3
Non-oil overall balance (after grants)				-6.1	-6.2	-6.3	-7.5	-8.0
Financing				1.1	1.3	0.0	0.0	0.0
Net foreign financing				2.4	1.6	2.0	2.0	1.0
Net domestic financing				-1.2	-0.3	-2.0	-2.0	-1.0

Sources: Ministry of Finance; and IMF staff calculations and projections.

Table 3c.

Guyana: Public Sector Operations

(In percent of non-oil GDP)

				Projections
				2020	2021	2022	2023	2024
Central government revenue				32.1	32.1	33.5	34.7	35.1
	Tax revenue			24.3	24.3	24.3	24.4	24.4
		Income taxes		9.8	9.8	9.8	9.8	9.8
		Consumption taxes		10.9	10.9	10.9	10.9	10.9
		Trade taxes		2.3	2.3	2.3	2.3	2.3
		Other		1.3	1.3	1.3	1.3	1.3
	Non-tax revenue			7.8	7.8	9.1	10.3	10.8
		Of which:
		Oil revenue		5.0	5.0	6.3	7.4	8.0
		Net revenue from PE and statutory bodies		0.8	0.8	0.8	0.8	0.7
	Capital revenue			0.0	0.0	0.0	0.0	0.0
Grants				1.0	0.8	0.4	0.4	0.0
Central government expenditure				34.2	341	33.8	35.1	35.2
Current expenditure				25.2	24.0	23.1	23.1	23.0
	Wages and salaries			7.8	7.8	7.8	7.8	7.8
	Other goods and services			7.7	6.5	5.7	6.5	6.6
	Transfers			8.7	8.7	8.7	8.0	8.0
	Interest			1.0	0.9	0.9	0.8	0.7
			Domestic	0.4	0.3	0.3	0.2	0.2
			External	0.6	0.6	0.6	0.5	0.5
Capital expenditure				9.0	10.1	10.8	12.0	12.1
	External PSIP			3.9	3.8	3.7	3.3	2.1
	Local PSIP			0.6	1.9	1.4	2.1	2.7
	Oil-financed projects			4.5	4.5	5.7	6.7	7.2
Overall balance (before grants)				-2.1	-2.0	-0.4	-0.4	0.0
Overall balance (after grants)				-1.1	-1.3	0.0	0.0	0.0
Primary balance (after grants)				-0.1	-0.2	0.4	0.3	0.3
Non-oil overall balance (after grants)				-6.1	-6.2	-6.3	-7.5	-8.0
Financing				1.1	1.3	0.0	0.0	0.0
Net foreign financing				2.4	1.6	2.0	2.0	1.0
Net domestic financing				-1.2	-0.3	-2.0	-2.0	-1.0

Sources: Ministry of Finance; and IMF staff calculations and projections.

Table 4.

Guyana: Summary Account of the Bank of Guyana and Monetary Survey

Sources: Bank of Guyana, and IMF staff calculations and projections.

Table 4.

Guyana: Summary Account of the Bank of Guyana and Monetary Survey

								Projections
				2015	2016	2017	2018	2019	2020	2021	2022	2023	2024
				(In billions of Guyanese dollars, end of period)
				Bank of Guyana
Net foreign assets				92.3	96.5	92.3	81.1	104.7	153.9	204.1	268.4	325.2	360.5
	Foreign assets			124.0	127.1	121.7	110.6	134.2	180.4	228.0	290.0	344.6	378.0
	Foreign liabilities			31.7	30.6	29.4	29.5	29.5	26.6	23.9	21.5	19.4	17.4
Net domestic assets				42.2	58.1	64.0	98.0	95.5	89.6	79.9	66.8	67.2	87.1
	Of which:
		Credit to public sector (net)		46.7	67.1	70.8	106.1	102.9	93.0	79.5	63.3	45.7	10.3
		Liabilities to commercial banks		-3.4	-3.7	-6.2	-6.2	-6.6	-7.5	-8.2	-9.1	-10.6	-12.6
Currency in circulation				83.2	90.9	100.5	112.0	118.5	134.5	147.8	163.9	190.3	228.1
Base money				134.4	154.5	156.1	179.0	200.1	243.4	284.0	335.2	392.4	447.6
	Of which: Excess reserves			9.2	19.2	11.8	...	...	...	...	...	...	...
				Monetary Survey
Net foreign assets				145.9	150.0	146.0	135.8	156.7	203.2	251.0	313.0	367.5	400.8
	Bank of Guyana			92.3	96.5	92.3	81.1	104.7	153.9	204.1	268.4	325.2	360.5
	Commercial banks			53.6	53.5	53.7	54.7	52.0	49.4	46.9	44.6	42.3	40.2
Net domestic assets				297.1	316.9	317.9	355.6	376.1	401.4	413.4	423.9	472.3	596.2
	Credit to public sector (net)			97.9	121.1	121.6	152.9	184.3	156.8	137.3	101.9	67.4	10.8
	Private sector credit			259.2	264.3	269.8	280.8	292.6	307.2	321.0	335.8	351.5	368.4
Broad money				442.9	466.9	463.7	491.4	532.7	604.5	664.4	736.8	839.7	997.0
				(Percentage change, 12–month basis)
Net foreign assets				-10.2	2.8	-2.6	-7.0	15.4	29.7	23.5	24.7	17.4	9.0
Net domestic assets				12.2	6.7	0.3	11.9	5.8	6.7	3.0	2.5	11.4	26.3
Domestic credit				12.3	7.8	1.5	10.8	9.9	-2.7	-1.2	-4.5	-4.3	-9.5
	Of which:
		Private sector credit		5.8	2.0	2.1	4.0	4.2	5.0	4.5	4.6	4.7	4.8
			Business sector	0.8	-0.4	0.9	5.3	...	...	...	...	...	...
			Household sector	11.0	7.3	2.7	4.1	...	...	...	...	...	...
			Mortgage sector	11.7	4.0	4.5	5.0	...	...	...	...	...	...
			Other sectors	17.3	0.9	-23.4	-22.4	...	...	...	...	...	...
		Public sector net		34.4	23.6	0.4	25.8	20.5	-14.9	-12.4	-25.8	-33.8	-84.0
Broad money				3.7	5.4	-0.7	6.0	8.4	13.5	9.9	10.9	14.0	18.7
				(Contribution to changes in base money, 12–month basis)
Base money				7.1	15.0	1.0	14.7	11.8	21.6	16.7	18.0	17.1	14.1
	Net foreign assets			-9.0	3.1	-2.7	-7.2	13.2	24.6	20.6	22.7	16.9	9.0
	Other including net credit to public sector			16.1	11.9	3.8	21.8	-1.4	-2.9	-4.0	-4.6	0.1	5.1
				(In million of U.S. dollars, unless otherwise indicated)
Memorandum items:
Bank of Guyana’s net foreign assets				446.9	467.3	447.0	392.1	505.9	735.6	963.1	1,250.5	1,502.9	1,649.6
Commercial banks’ net foreign assets				259.4	259.2	260.3	264.6	251.3	236.1	221.4	207.7	195.7	184.1
Money multiplier				3.3	3.0	3.0	2.7	2.7	2.5	2.3	2.2	2.1	2.2
Income velocity of broad money				1.5	1.5	1.6	1.6	1.6	1.6	1.6	1.6	1.6	1.6
Excess reserves (ratio to required reserves)				0.3	0.5	1.2	1.7	…	…	…	…	…	…
Average lending rates (in percent)				10.6	10.4	10.2	10.0	…	…	…	…	…	…

Sources: Bank of Guyana, and IMF staff calculations and projections.

Table 4.

Guyana: Summary Account of the Bank of Guyana and Monetary Survey

								Projections
				2015	2016	2017	2018	2019	2020	2021	2022	2023	2024
				(In billions of Guyanese dollars, end of period)
				Bank of Guyana
Net foreign assets				92.3	96.5	92.3	81.1	104.7	153.9	204.1	268.4	325.2	360.5
	Foreign assets			124.0	127.1	121.7	110.6	134.2	180.4	228.0	290.0	344.6	378.0
	Foreign liabilities			31.7	30.6	29.4	29.5	29.5	26.6	23.9	21.5	19.4	17.4
Net domestic assets				42.2	58.1	64.0	98.0	95.5	89.6	79.9	66.8	67.2	87.1
	Of which:
		Credit to public sector (net)		46.7	67.1	70.8	106.1	102.9	93.0	79.5	63.3	45.7	10.3
		Liabilities to commercial banks		-3.4	-3.7	-6.2	-6.2	-6.6	-7.5	-8.2	-9.1	-10.6	-12.6
Currency in circulation				83.2	90.9	100.5	112.0	118.5	134.5	147.8	163.9	190.3	228.1
Base money				134.4	154.5	156.1	179.0	200.1	243.4	284.0	335.2	392.4	447.6
	Of which: Excess reserves			9.2	19.2	11.8	...	...	...	...	...	...	...
				Monetary Survey
Net foreign assets				145.9	150.0	146.0	135.8	156.7	203.2	251.0	313.0	367.5	400.8
	Bank of Guyana			92.3	96.5	92.3	81.1	104.7	153.9	204.1	268.4	325.2	360.5
	Commercial banks			53.6	53.5	53.7	54.7	52.0	49.4	46.9	44.6	42.3	40.2
Net domestic assets				297.1	316.9	317.9	355.6	376.1	401.4	413.4	423.9	472.3	596.2
	Credit to public sector (net)			97.9	121.1	121.6	152.9	184.3	156.8	137.3	101.9	67.4	10.8
	Private sector credit			259.2	264.3	269.8	280.8	292.6	307.2	321.0	335.8	351.5	368.4
Broad money				442.9	466.9	463.7	491.4	532.7	604.5	664.4	736.8	839.7	997.0
				(Percentage change, 12–month basis)
Net foreign assets				-10.2	2.8	-2.6	-7.0	15.4	29.7	23.5	24.7	17.4	9.0
Net domestic assets				12.2	6.7	0.3	11.9	5.8	6.7	3.0	2.5	11.4	26.3
Domestic credit				12.3	7.8	1.5	10.8	9.9	-2.7	-1.2	-4.5	-4.3	-9.5
	Of which:
		Private sector credit		5.8	2.0	2.1	4.0	4.2	5.0	4.5	4.6	4.7	4.8
			Business sector	0.8	-0.4	0.9	5.3	...	...	...	...	...	...
			Household sector	11.0	7.3	2.7	4.1	...	...	...	...	...	...
			Mortgage sector	11.7	4.0	4.5	5.0	...	...	...	...	...	...
			Other sectors	17.3	0.9	-23.4	-22.4	...	...	...	...	...	...
		Public sector net		34.4	23.6	0.4	25.8	20.5	-14.9	-12.4	-25.8	-33.8	-84.0
Broad money				3.7	5.4	-0.7	6.0	8.4	13.5	9.9	10.9	14.0	18.7
				(Contribution to changes in base money, 12–month basis)
Base money				7.1	15.0	1.0	14.7	11.8	21.6	16.7	18.0	17.1	14.1
	Net foreign assets			-9.0	3.1	-2.7	-7.2	13.2	24.6	20.6	22.7	16.9	9.0
	Other including net credit to public sector			16.1	11.9	3.8	21.8	-1.4	-2.9	-4.0	-4.6	0.1	5.1
				(In million of U.S. dollars, unless otherwise indicated)
Memorandum items:
Bank of Guyana’s net foreign assets				446.9	467.3	447.0	392.1	505.9	735.6	963.1	1,250.5	1,502.9	1,649.6
Commercial banks’ net foreign assets				259.4	259.2	260.3	264.6	251.3	236.1	221.4	207.7	195.7	184.1
Money multiplier				3.3	3.0	3.0	2.7	2.7	2.5	2.3	2.2	2.1	2.2
Income velocity of broad money				1.5	1.5	1.6	1.6	1.6	1.6	1.6	1.6	1.6	1.6
Excess reserves (ratio to required reserves)				0.3	0.5	1.2	1.7	…	…	…	…	…	…
Average lending rates (in percent)				10.6	10.4	10.2	10.0	…	…	…	…	…	…

Sources: Bank of Guyana, and IMF staff calculations and projections.

Table 5.

Guyana: Indicators of External and Financial Vulnerability

(In percent, unless otherwise indicated)

Sources: Bank of Guyana; and IMF staff calculations and projections.

^{^1/}Since, 2015–16, the public debt to GDP ratios have been adjusted to reflect unsettled government balances at the central bank. Th e ratios do not include publicly-guaranteed debt.

Table 5.

Guyana: Indicators of External and Financial Vulnerability

(In percent, unless otherwise indicated)

					Projections
	2015	2016	2017	2018	2019	2020	2021	2022	2023	2024
Financial indicators
Public sector debt-to-GDP ^1/	50.1	50.7	51.4	52.9	55.4	29.3	28.0	23.0	17.9	15.5
NPV of public sector debt-to-GDP	…	…	38.9	43.8	45.6	23.5	22.2	17.6	13.1	11.7
NPV of public sector debt-to revenue	…	…	153.5	163.0	163.2	127.1	118.9	101.5	83.5	68.1
Share of nonperforming loans in total loans	11.5	12.9	12.2	11.9	…	…	…	…	…	…
Share of nonperforming loans to total assets	5.6	6.1	5.8	5.6	…	…	…	…	…	…
Loan loss provisions to nonperforming loans	38.0	45.8	48.5	39.0	…	…	…	…	…	…
Risk-based capital-asset ratio (end of period)	23.9	25.4	27.1	28.7	…	…	…	…	…	…
Return on assets	2.7	2.2	2.3	0.6	…	…	…	…	…	…
Three-month T-bill rate (end of period)	1.9	1.7	1.5	1.5	…	…	…	…	…	…
CPI-inflation (end of period)	-1.8	1.5	1.5	1.6	2.7	3.5	3.5	3.5	3.1	2.5
External indicators
Exchange rate (per US$, end of period)	206.5	206.5	206.5	206.8	…	…	…	…	…	…
Current account balance-to-GDP	-5.1	0.4	-6.8	-17.5	-22.7	-18.4	-15.9	-5.6	-0.7	1.7
Gross official reserves (in millions of U.S. dollars)	599	597	584	528	643	858	1,072	1,347	1,590	1,727
Gross official reserves in months of imports	3.7	3.3	2.6	2.1	1.8	2.4	3.2	3.8	4.5	4.5
Gross official reserves to short-term external public sector debt	652	1,473	1,453	959	1,182	1,642	1,963	2,383	2,789	2,939
External public sector debt to GDP	35.7	33.2	34.4	33.9	33.2	18.4	18.1	15.7	12.7	11.1
NPV of external public debt (in millions of U.S. dollars)	…	…	799	888	922	995	1,050	1,128	1,206	1,298
NPV of external public sector debt to exports	…	…	49.9	58.3	56.2	24.2	23.9	16.8	12.5	12.4
NPV of external public debt-to-GDP	…	…	22.2	22.8	22.4	12.3	12.1	10.5	8.6	8.4

Sources: Bank of Guyana; and IMF staff calculations and projections.

^{^1/}Since, 2015–16, the public debt to GDP ratios have been adjusted to reflect unsettled government balances at the central bank. Th e ratios do not include publicly-guaranteed debt.

Table 5.

Guyana: Indicators of External and Financial Vulnerability

(In percent, unless otherwise indicated)

					Projections
	2015	2016	2017	2018	2019	2020	2021	2022	2023	2024
Financial indicators
Public sector debt-to-GDP ^1/	50.1	50.7	51.4	52.9	55.4	29.3	28.0	23.0	17.9	15.5
NPV of public sector debt-to-GDP	…	…	38.9	43.8	45.6	23.5	22.2	17.6	13.1	11.7
NPV of public sector debt-to revenue	…	…	153.5	163.0	163.2	127.1	118.9	101.5	83.5	68.1
Share of nonperforming loans in total loans	11.5	12.9	12.2	11.9	…	…	…	…	…	…
Share of nonperforming loans to total assets	5.6	6.1	5.8	5.6	…	…	…	…	…	…
Loan loss provisions to nonperforming loans	38.0	45.8	48.5	39.0	…	…	…	…	…	…
Risk-based capital-asset ratio (end of period)	23.9	25.4	27.1	28.7	…	…	…	…	…	…
Return on assets	2.7	2.2	2.3	0.6	…	…	…	…	…	…
Three-month T-bill rate (end of period)	1.9	1.7	1.5	1.5	…	…	…	…	…	…
CPI-inflation (end of period)	-1.8	1.5	1.5	1.6	2.7	3.5	3.5	3.5	3.1	2.5
External indicators
Exchange rate (per US$, end of period)	206.5	206.5	206.5	206.8	…	…	…	…	…	…
Current account balance-to-GDP	-5.1	0.4	-6.8	-17.5	-22.7	-18.4	-15.9	-5.6	-0.7	1.7
Gross official reserves (in millions of U.S. dollars)	599	597	584	528	643	858	1,072	1,347	1,590	1,727
Gross official reserves in months of imports	3.7	3.3	2.6	2.1	1.8	2.4	3.2	3.8	4.5	4.5
Gross official reserves to short-term external public sector debt	652	1,473	1,453	959	1,182	1,642	1,963	2,383	2,789	2,939
External public sector debt to GDP	35.7	33.2	34.4	33.9	33.2	18.4	18.1	15.7	12.7	11.1
NPV of external public debt (in millions of U.S. dollars)	…	…	799	888	922	995	1,050	1,128	1,206	1,298
NPV of external public sector debt to exports	…	…	49.9	58.3	56.2	24.2	23.9	16.8	12.5	12.4
NPV of external public debt-to-GDP	…	…	22.2	22.8	22.4	12.3	12.1	10.5	8.6	8.4

Sources: Bank of Guyana; and IMF staff calculations and projections.

^{^1/}Since, 2015–16, the public debt to GDP ratios have been adjusted to reflect unsettled government balances at the central bank. Th e ratios do not include publicly-guaranteed debt.

Table 6.

Guyana: Medium-Term Macroeconomic Framework

Sources: Guyanese authorities; and IMF staff calculations and projections.

^{^1/}Projected real GDP growth in 2020 is potentially overstated and subject to large subsequent revisions because of the very high grow th rate of oil GDP, w hich in turn is elevated on account of the very low (zero) base in 2019. Hence, even small changes to the projected oil output in 2020 would result in large changes in real oil GDP and overall real GDP growth rates. Work is ongoing to rebase the real GDP series to account for oil-related activities since 2015 in advance of actual oil production in 2020.

^{^2/}Includes debt service savings under HIPC and MDRI.

^{^3/}Reflects interest and amortizations after debt stock operations.

^{^4/}Since 2015–16, the public debt to GDP ratios have been adjusted to reflect unsettled government balances at the central bank. The ratios do not include publicly-guaranteed debt.

Table 6.

Guyana: Medium-Term Macroeconomic Framework

									Projections
					2015	2016	2017	2018	2019	2020	2021	2022	2023	2024
					(Annual percent change)
Production and prices
Real GDP ^1/					3.1	3.4	2.1	4.1	4.4	85.6	4.8	20.6	26.2	3.2
Non-oil real GDP					3.1	3.4	2.1	4.1	4.4	4.8	4.6	4.7	4.9	5.0
Consumer prices (average)					-0.9	0.8	1.9	1.3	2.1	3.3	3.5	3.5	3.3	2.8
Consumer prices (end of period)					-1.8	1.5	1.5	1.6	2.7	3.5	3.5	3.5	3.1	2.5
Terms of trade					19.7	12.1	-10.3	-8.7	2.0	1.6	1.4	1.1	0.2	0.5
					(In percent of GDP)
Central government
	Revenue				24.6	24.5	26.2	26.9	28.0	18.5	18.7	17.3	15.7	17.1
			Tax revenue		21.6	21.0	23.0	24.6	26.2	14.0	14.2	12.6	11.1	11.9
			Non-tax revenue		2.8	3.5	3.2	2.3	1.7	4.5	4.5	4.7	4.7	5.3
				of which: Oil-related revenue	0.0	0.0	0.0	0.0	0.0	2.9	2.9	3.3	3.4	3.9
			Capital revenue		0.2	0.0	0.0	0.0	0.0	0.0	0.0	0.0	0.0	0.0
	Grants ^2/				1.0	1.1	1.6	1.3	1.3	0.6	0.4	0.2	0.2	0.0
	Expenditure				27.0	30.0	32.2	31.6	34.3	19.7	19.8	17.5	15.9	17.2
		Current ^3/			22.4	23.5	24.4	24.8	26.1	14.5	14.0	11.9	10.5	11.2
		Capital			4.6	6.4	7.9	6.8	8.1	5.2	5.9	5.6	5.4	5.9
	Overall balance (before grants)				-2.4	-5.4	-6.0	-4.7	-6.3	-1.2	-1.2	-0.2	-0.2	0.0
	Overall balance (after grants)				-1.4	-4.4	-4.4	-3.5	-5.0	-0.7	-0.7	0.0	0.0	0.0
	Financing				1.4	4.4	4.4	3.5	5.0	0.7	0.7	0.0	0.0	0.0
		Net external financing ^3/			-0.8	1.1	1.2	1.0	1.0	1.4	0.9	1.0	0.7	0.7
		Net domestic financing			2.2	3.3	3.2	2.5	4.0	-0.7	-0.2	-1.0	-0.7	-0.7
Total public sector gross debt ^4/					50.1	50.7	51.4	52.9	55.4	29.3	28.0	23.0	17.9	15.5
	External				35.7	33.2	34.4	33.9	33.2	18.4	18.1	15.7	12.7	11.1
	Domestic				14.4	17.6	16.9	19.0	22.2	10.9	9.9	7.3	5.2	4.4
					(Annual percentage change)
Money and credit
Broad money					3.7	5.4	-0.7	6.0	8.4	13.5	9.9	10.9	14.0	18.7
Domestic credit of the banking system					12.3	7.8	1.5	10.8	9.9	-2.7	-1.2	-4.5	-4.3	-9.5
	Public sector (net) ^2/				34.4	23.6	0.4	25.8	20.5	-14.9	-12.4	-25.8	-33.8	-84.0
	Private sector				5.8	2.0	2.1	4.0	4.2	5.0	4.5	4.6	4.7	4.8
					(In percent of GDP, unless otherwise indicated)
External sector
Current account balance, incl. off. transfers					-5.1	0.4	-6.8	-17.5	-22.7	-18.4	-15.9	-5.6	-0.7	1.7
Gross official reserves (US$ million)					599	597	584	528	643	858	1,072	1,347	1,590	1,727
	Months of imports of goods and services				3.7	3.3	2.6	2.1	1.8	2.4	3.2	3.8	4.5	4.5
					(In percent of GDP, unless otherwise indicated)
Memorandum items:
Nominal GDP (G$ billion)					660	724	745	806	852	1,678	1,826	2,280	3,018	3,361
Central government Primary balance					-0.4	-3.4	-3.3	-2.4	-4.0	-0.1	-0.2	0.4	0.3	0.3
General government overall balance (CG and NIS)					-1.2	-4.3	-4.3	-3.5	-4.8	-0.5	-0.6	0.1	0.1	0.1
Per capita GDP, US$					4,168	4,531	4,636	4,984	5,252	10,249	10,990	13,502	17,636	19,405
Guyana dollar/U.S. dollar (period average)					206.5	206.5	206.5	206.7	…	…	…	…	…	…

Sources: Guyanese authorities; and IMF staff calculations and projections.

^{^1/}Projected real GDP growth in 2020 is potentially overstated and subject to large subsequent revisions because of the very high grow th rate of oil GDP, w hich in turn is elevated on account of the very low (zero) base in 2019. Hence, even small changes to the projected oil output in 2020 would result in large changes in real oil GDP and overall real GDP growth rates. Work is ongoing to rebase the real GDP series to account for oil-related activities since 2015 in advance of actual oil production in 2020.

^{^2/}Includes debt service savings under HIPC and MDRI.

^{^3/}Reflects interest and amortizations after debt stock operations.

^{^4/}Since 2015–16, the public debt to GDP ratios have been adjusted to reflect unsettled government balances at the central bank. The ratios do not include publicly-guaranteed debt.

Table 6.

Guyana: Medium-Term Macroeconomic Framework

									Projections
					2015	2016	2017	2018	2019	2020	2021	2022	2023	2024
					(Annual percent change)
Production and prices
Real GDP ^1/					3.1	3.4	2.1	4.1	4.4	85.6	4.8	20.6	26.2	3.2
Non-oil real GDP					3.1	3.4	2.1	4.1	4.4	4.8	4.6	4.7	4.9	5.0
Consumer prices (average)					-0.9	0.8	1.9	1.3	2.1	3.3	3.5	3.5	3.3	2.8
Consumer prices (end of period)					-1.8	1.5	1.5	1.6	2.7	3.5	3.5	3.5	3.1	2.5
Terms of trade					19.7	12.1	-10.3	-8.7	2.0	1.6	1.4	1.1	0.2	0.5
					(In percent of GDP)
Central government
	Revenue				24.6	24.5	26.2	26.9	28.0	18.5	18.7	17.3	15.7	17.1
			Tax revenue		21.6	21.0	23.0	24.6	26.2	14.0	14.2	12.6	11.1	11.9
			Non-tax revenue		2.8	3.5	3.2	2.3	1.7	4.5	4.5	4.7	4.7	5.3
				of which: Oil-related revenue	0.0	0.0	0.0	0.0	0.0	2.9	2.9	3.3	3.4	3.9
			Capital revenue		0.2	0.0	0.0	0.0	0.0	0.0	0.0	0.0	0.0	0.0
	Grants ^2/				1.0	1.1	1.6	1.3	1.3	0.6	0.4	0.2	0.2	0.0
	Expenditure				27.0	30.0	32.2	31.6	34.3	19.7	19.8	17.5	15.9	17.2
		Current ^3/			22.4	23.5	24.4	24.8	26.1	14.5	14.0	11.9	10.5	11.2
		Capital			4.6	6.4	7.9	6.8	8.1	5.2	5.9	5.6	5.4	5.9
	Overall balance (before grants)				-2.4	-5.4	-6.0	-4.7	-6.3	-1.2	-1.2	-0.2	-0.2	0.0
	Overall balance (after grants)				-1.4	-4.4	-4.4	-3.5	-5.0	-0.7	-0.7	0.0	0.0	0.0
	Financing				1.4	4.4	4.4	3.5	5.0	0.7	0.7	0.0	0.0	0.0
		Net external financing ^3/			-0.8	1.1	1.2	1.0	1.0	1.4	0.9	1.0	0.7	0.7
		Net domestic financing			2.2	3.3	3.2	2.5	4.0	-0.7	-0.2	-1.0	-0.7	-0.7
Total public sector gross debt ^4/					50.1	50.7	51.4	52.9	55.4	29.3	28.0	23.0	17.9	15.5
	External				35.7	33.2	34.4	33.9	33.2	18.4	18.1	15.7	12.7	11.1
	Domestic				14.4	17.6	16.9	19.0	22.2	10.9	9.9	7.3	5.2	4.4
					(Annual percentage change)
Money and credit
Broad money					3.7	5.4	-0.7	6.0	8.4	13.5	9.9	10.9	14.0	18.7
Domestic credit of the banking system					12.3	7.8	1.5	10.8	9.9	-2.7	-1.2	-4.5	-4.3	-9.5
	Public sector (net) ^2/				34.4	23.6	0.4	25.8	20.5	-14.9	-12.4	-25.8	-33.8	-84.0
	Private sector				5.8	2.0	2.1	4.0	4.2	5.0	4.5	4.6	4.7	4.8
					(In percent of GDP, unless otherwise indicated)
External sector
Current account balance, incl. off. transfers					-5.1	0.4	-6.8	-17.5	-22.7	-18.4	-15.9	-5.6	-0.7	1.7
Gross official reserves (US$ million)					599	597	584	528	643	858	1,072	1,347	1,590	1,727
	Months of imports of goods and services				3.7	3.3	2.6	2.1	1.8	2.4	3.2	3.8	4.5	4.5
					(In percent of GDP, unless otherwise indicated)
Memorandum items:
Nominal GDP (G$ billion)					660	724	745	806	852	1,678	1,826	2,280	3,018	3,361
Central government Primary balance					-0.4	-3.4	-3.3	-2.4	-4.0	-0.1	-0.2	0.4	0.3	0.3
General government overall balance (CG and NIS)					-1.2	-4.3	-4.3	-3.5	-4.8	-0.5	-0.6	0.1	0.1	0.1
Per capita GDP, US$					4,168	4,531	4,636	4,984	5,252	10,249	10,990	13,502	17,636	19,405
Guyana dollar/U.S. dollar (period average)					206.5	206.5	206.5	206.7	…	…	…	…	…	…

Sources: Guyanese authorities; and IMF staff calculations and projections.

^{^1/}Projected real GDP growth in 2020 is potentially overstated and subject to large subsequent revisions because of the very high grow th rate of oil GDP, w hich in turn is elevated on account of the very low (zero) base in 2019. Hence, even small changes to the projected oil output in 2020 would result in large changes in real oil GDP and overall real GDP growth rates. Work is ongoing to rebase the real GDP series to account for oil-related activities since 2015 in advance of actual oil production in 2020.

^{^2/}Includes debt service savings under HIPC and MDRI.

^{^3/}Reflects interest and amortizations after debt stock operations.

^{^4/}Since 2015–16, the public debt to GDP ratios have been adjusted to reflect unsettled government balances at the central bank. The ratios do not include publicly-guaranteed debt.

Table 7.

Guyana: Risks Assessment Matrix¹

^¹The Risk Assessment Matrix (RAM) shows events that could materially alter the baseline path (the scenario most likely to materialize in the view of IMF staff). The relative likelihood of risks listed is the staff’s subjective assessment of the risks surrounding the baseline (“low” indicates a probability below 10 percent, “medium” a probability between 10 and 30 percent, and “high” a probability between 30 and 50 percent). The RAM reflects staff views on the source of risks and overall level of concern as of the time of discussions with the authorities. Non-mutually exclusive risks may interact and materialize jointly. Low (L), Medium (M), High (H).

Table 7.

Guyana: Risks Assessment Matrix¹

Source of Risk	Likelihood	Impact	Policy Response
Global Risks
Tighter global financial conditions, including strengthening of the U.S. dollar and/or higher rates.	L	M	Allow the exchange rate to play a more active automatic stabilizer role; tighten monetary policy to prevent interest rate differential with the U.S. from narrowing.
Weaker-than-expected global growth in key advanced economies and China.	M	M	Allow the exchange rate to play a more active automatic stabilizer role; accelerate structural reforms to support growth.
Large swings in energy prices.	M	M	This would make volatile the oil import bill and the exchange rate in the short-run, and could adversely affect investments in the oil sector, which would call for active fiscal and monetary responses; allow the exchange rate to play a more active automatic stabilizer role; accelerate structural reforms to support non-oil sector growth.
Country-specific risks
More volatility in macroeconomic variables including GDP growth, fiscal revenues, expenditures, inflation and exchange rates due to excessive dependence on oil revenue and risk of a delay start in oil production.	H	H	A fiscal rule to contain excessive spending needs to be adhered to. Monetary policy needs to carefully monitor the impact of large inflows of government revenue on the exchange rate market and inflation rate to keep the competitiveness of non-oil exporting sector. Allow automatic stabilizers to work in the short-term.
Rapid ramping up of public spending could result in “Dutch disease” and a decline in public expenditure efficiency.	H	H	Fiscal policy needs to keep the pace of scaling-up of public spending gradual to not exceed capacity constraints, avoid inflationary pressure and ensure medium- and long-term economic and debt sustainability.
Reduced financial services by correspondent banks (“de-risking”), following Scotiabank’s exit.	L	M	Monitor the status of CBRs; address drivers behind CBR pressure, including AML/CFT compliance and impediments to information sharing; effectively communicate efforts.

Table 7.

Guyana: Risks Assessment Matrix¹

Source of Risk	Likelihood	Impact	Policy Response
Global Risks
Tighter global financial conditions, including strengthening of the U.S. dollar and/or higher rates.	L	M	Allow the exchange rate to play a more active automatic stabilizer role; tighten monetary policy to prevent interest rate differential with the U.S. from narrowing.
Weaker-than-expected global growth in key advanced economies and China.	M	M	Allow the exchange rate to play a more active automatic stabilizer role; accelerate structural reforms to support growth.
Large swings in energy prices.	M	M	This would make volatile the oil import bill and the exchange rate in the short-run, and could adversely affect investments in the oil sector, which would call for active fiscal and monetary responses; allow the exchange rate to play a more active automatic stabilizer role; accelerate structural reforms to support non-oil sector growth.
Country-specific risks
More volatility in macroeconomic variables including GDP growth, fiscal revenues, expenditures, inflation and exchange rates due to excessive dependence on oil revenue and risk of a delay start in oil production.	H	H	A fiscal rule to contain excessive spending needs to be adhered to. Monetary policy needs to carefully monitor the impact of large inflows of government revenue on the exchange rate market and inflation rate to keep the competitiveness of non-oil exporting sector. Allow automatic stabilizers to work in the short-term.
Rapid ramping up of public spending could result in “Dutch disease” and a decline in public expenditure efficiency.	H	H	Fiscal policy needs to keep the pace of scaling-up of public spending gradual to not exceed capacity constraints, avoid inflationary pressure and ensure medium- and long-term economic and debt sustainability.
Reduced financial services by correspondent banks (“de-risking”), following Scotiabank’s exit.	L	M	Monitor the status of CBRs; address drivers behind CBR pressure, including AML/CFT compliance and impediments to information sharing; effectively communicate efforts.

Annex I. The NRF Budget Transfer Rule

1. The Ministry of Finance prioritized the development of a framework for managing the incoming petroleum revenue. The framework was articulated in the NRF Bill presented to Parliament in November 2018 and assented to law by the President in January 2019.

2. The legislation establishes a Natural Resource Fund (NRF).¹ All petroleum revenues (defined in Article 21 of the Act) flow into the NRF. A fiscal transfer rule determines the ‘fiscally sustainable amount (FSA)’ transfer from the NRF to the annual budget.² However, the Macroeconomic Committee can recommend a lower “Economically Sustainable” transfer.³

Annex Table 1.

Guyana: Natural Resource Fund Budget Transfer Rule ^1/

Source: Ministry of Finance.

^{^1/}If in a past fiscal year, 3 percent of the NRF balance for that past fiscal year exceeded Production Constrained Benchmark Petroleum Revenues for that past fiscal year, then for all future fiscal years the Fiscally Sustainable Amount shall not exceed 3 percent of the projected balance of the NRF for that fiscal year.

3. Guyana’s fiscal transfer rule shares many characteristics with other small petroleum-producing countries, such as Timor-Leste and Ghana.

Timor-Leste established a fund under the Petroleum Fund Law 2005. The law provides mechanisms to manage oil revenue, defines risk limits and asset allocation of the fund, governs the collection and management of receipts from the investment, and regulates transfers to the government budget Under the law, the entire oil revenue is transferred to the fund and invested in financial assets abroad. Withdrawals require parliamentary approval. The central bank manages its operation following the guidelines established by the Ministry of Finance.
In Ghana, the Petroleum Revenue Management Act 2011 (PRMA) governs the management of oil revenues and provides a framework for withdrawals. Under the PRMA, oil revenues are deposited in the Petroleum Holding Fund. The revenues are disbursed firstly to the national oil company to finance its operations, and secondly to the government consolidated fund to support the national budget. Thirdly, the revenues are disbursed to the Ghana Petroleum Funds (Heritage and Stabilization Funds) for purposes of savings and investments, and finally for exceptional purposes such as tax refunds. The PRMA mandates the management of oil revenues and savings to be performed in accordance with the highest internationally accepted standards of transparency and good governance. The government is required to publish an annual report for transparency.

Annex II. Progress on 2018 Article IV Policy Recommendations

IMF 2018 Article IV Recommendations	Authorities’ Response
Fiscal policy A moderation of the deficit would reduce financing needs and preserve external buffers. The rules-based fiscal framework for managing oil wealth should be transparent and consistent with the resource fund deposit/withdrawal rules	Broadly consistent The central government overall deficit (after grants) improved to 3.6 percent of GDP in 2018 from 4.4 percent of GDP in 2017. The NRF legislation was assented to law in January 2019, providing a legal framework for managing Guyana’s natural resource wealth and includes provisions for public oversight; withdrawals, including parliamentary approval and amounts to be withdrawn; eligible investments; accounting, reporting and auditing of records; and codes of conduct for members of the Oversight and Investment Committee.
Monetary and exchange rate policies Maintain an accommodative monetary policy stance, but gradually move towards a neutral stance in 2018. Allow greater exchange rate flexibility to play a larger role in facilitating external adjustment.	Broadly consistent The monetary stance remained accommodative, due to low inflation. The exchange rate remains broadly stable. In June 2018, the exchange rate against USD has slightly increased by 0.8 percent.
Financial sector policy Strengthen supervisory and regulatory framework in line with the 2016 FSAP recommendations. Operationalize the crisis management framework. Continue to strengthen the AML/CFT framework.	Broadly consistent The authorities have made significant progress in implementing recommendations from the 2016 FSAP by passing: amendments to the Bank of Guyana’s Act to provide emergency liquidity assistance (ELA) to deposit taking financial institutions; amendments to Part VIII of the Financial Institutions Act (FIA) for orderly resolution of a failing institution; the National Payment System (NPS) law to facilitate the establishment, regulation and oversight of a modern national payment system; and the Deposit Insurance Act to foster financial stability by protecting depositors and by contributing to the resolution of member institutions. The authorities remain committed to strengthening the AML/CFT framework.
Structural reforms Continue with further improvements to the business climate, diversification efforts, inclusive growth and structural reforms of key economic sector.	Broadly consistent The authorities continue to reduce the cost of doing business through the public investment program and administrative reforms. They remain committed to a cleaner and more affordable energy matrix, to eliminating infrastructure deficits, and integrating remote regions in the Hinterland, as per GSDS.

IMF 2018 Article IV Recommendations	Authorities’ Response
Fiscal policy A moderation of the deficit would reduce financing needs and preserve external buffers. The rules-based fiscal framework for managing oil wealth should be transparent and consistent with the resource fund deposit/withdrawal rules	Broadly consistent The central government overall deficit (after grants) improved to 3.6 percent of GDP in 2018 from 4.4 percent of GDP in 2017. The NRF legislation was assented to law in January 2019, providing a legal framework for managing Guyana’s natural resource wealth and includes provisions for public oversight; withdrawals, including parliamentary approval and amounts to be withdrawn; eligible investments; accounting, reporting and auditing of records; and codes of conduct for members of the Oversight and Investment Committee.
Monetary and exchange rate policies Maintain an accommodative monetary policy stance, but gradually move towards a neutral stance in 2018. Allow greater exchange rate flexibility to play a larger role in facilitating external adjustment.	Broadly consistent The monetary stance remained accommodative, due to low inflation. The exchange rate remains broadly stable. In June 2018, the exchange rate against USD has slightly increased by 0.8 percent.
Financial sector policy Strengthen supervisory and regulatory framework in line with the 2016 FSAP recommendations. Operationalize the crisis management framework. Continue to strengthen the AML/CFT framework.	Broadly consistent The authorities have made significant progress in implementing recommendations from the 2016 FSAP by passing: amendments to the Bank of Guyana’s Act to provide emergency liquidity assistance (ELA) to deposit taking financial institutions; amendments to Part VIII of the Financial Institutions Act (FIA) for orderly resolution of a failing institution; the National Payment System (NPS) law to facilitate the establishment, regulation and oversight of a modern national payment system; and the Deposit Insurance Act to foster financial stability by protecting depositors and by contributing to the resolution of member institutions. The authorities remain committed to strengthening the AML/CFT framework.
Structural reforms Continue with further improvements to the business climate, diversification efforts, inclusive growth and structural reforms of key economic sector.	Broadly consistent The authorities continue to reduce the cost of doing business through the public investment program and administrative reforms. They remain committed to a cleaner and more affordable energy matrix, to eliminating infrastructure deficits, and integrating remote regions in the Hinterland, as per GSDS.

Annex III. Development and Infrastructure Needs

This Annex discusses the trends in Guyana’s public investment spending and socio-infrastructural development needs.

1. Guyana’s public investment spending has been weak although it has started to recover slightly since 2015. After reaching its peak in 2003 (at 14.5 percent of GDP), the ratio of public investment spending to GDP was on a declining trend although it was still higher relative to most Caribbean countries until 2011. The ratio started to dip below 10 percent of GDP in 2013. In 2015, infrastructure spending started to improve following oil discovery, but remained below levels seen in early-2000.

2. Basic infrastructures are relatively well developed, but health services are weak. Despite its relatively low-income levels, around 98 percent of the population have access to clean water, higher than the Caribbean’s median of 95 percent. Guyana also scores relatively well in improved sanitation, with 83 percent of its population having access, slightly higher than the region’s median of 82 percent. However, infant mortality rate and life expectancy are among the weakest relative to the region and EMDE.

3. Human development in Guyana has lagged the region. A report by the World Bank suggests that the country’s human capital is lower than the median for its region and income group. Guyana’s human capital index (HCI) is 0.49, below the medians in the Caribbean (0.50) and EMDE (0.51).¹ The report also indicates that children in Guyana can expect to complete 12.1 years of pre-primary, primary and secondary school by age 18, but when years of schooling are adjusted for quality of learning, it is only equivalent to 6.7 years: a learning gap of 5.4 years. A recent Inter-American Development Bank (IDB) report concurs with this finding, highlighting that although enrollment at the primary and secondary level is high, the quality of schooling varies as students’ performance at the Caribbean Examination Council Examination is below the Caribbean average.

4. Emigration has compounded the weaknesses in human capital formation. The IDB Report noted that Guyana has the world’s seventh-highest rate of emigration, and most emigrants are skilled and/or with university education. The report suggests that the development and growth challenges are due to low investment (about one third of the LAC average), high cost of domestic financing, and lack of access to international capital markets.

5. The government is aware of these challenges and is actively working to improve infrastructure and human capital with development partners. Recent infrastructure projects funded by the Inter-American Development Bank (IADB) and Chinese government include, among others, widening of the East Coast Demerara road, and rehabilitation of bridges and culverts that connect major coastal highways. On education, the government is collaborating with the World Bank through the Education Sector Improvement Project to improve teaching practices and student achievement in mathematics at the primary level in selected schools; and strengthen the teaching capacity and improve the learning environment of the University of Guyana faculty of health sciences.²

Annex IV. Pitfalls in Spending Oil Money: Lessons from Other Countries

1. Rapid scaling up of public expenditure risks fueling macroeconomic distortions and inflationary pressures, and eroding competitiveness. Trinidad and Tobago benefited from large increases in oil prices in the 1970s. Surpluses from oil revenues enabled the government to invest in large projects—in sectors such as steel and petrochemicals—with the intention of reducing the country’s dependence on oil. As domestic expenditure expanded rapidly, and wage awards exceeded increases in productivity by a significant margin, inflationary pressures emerged, eroding the competitiveness of the non-oil economy. Prices of non-tradables, such as real estate, rose sharply in relation to prices of imports and exports. In 1982–83, as global oil prices weakened, and petroleum output declined from peak levels in 1978, the country began to face serious economic problems. The overall public sector fiscal position shifted from a surplus in 1981 to deficits amounting to around 15 percent of GDP in 1982–83 as outlays rose and the decline in oil revenues more than offset increases in other revenues. Four fifths of the public sector deficit originated from central government operations, reflecting higher public sector wages and transfers to cover operating losses and capital outlays of the nonfinancial public enterprises. The economy contracted by 7.5 percent (y/y) in 1983 as the decline in petroleum output was reinforced by the fall in the nonpetroleum sector. The country became increasingly uncompetitive with an appreciating real exchange rate, leading to considerable pressures on the balance of payments. Consequently, the large stock of foreign exchange reserves accumulated during the oil boom was depleted. Significant adjustment started in mid-1980s when the government tightened import and exchange controls and devalued the currency.

2. Public debt could grow unsustainably at the same time as the sovereign wealth fund accumulates in the absence of a medium-term anchor that is consistent with SWF withdrawal rules. Ghana started producing oil in 2011 and established the Petroleum Revenue Management Act (PRMA) in the same year. The onset of oil production attracted large inflows of foreign direct investment (FDI) and boosted its economic growth. As its per capita income rose to US$1,879 in 2013 (US$1,358 in 2010), Ghana’s status improved to a Low Middle-Income Country (LMIC). However, the change into LMIC status constrained the country from accessing grants and concessional financing, and the rapidly rising public debt had also resulted in higher interest payments. In addition, the rapid increase in public wage bill and other current spending more than offset the increase in oil revenue. The rigid legal framework in the PRMA also did not allow the government to accommodate unexpected large shocks, forcing Ghana to continue financing large deficits with debt while transferring the oil revenues to the petroleum funds. In 2014, following the large drop in world oil prices, Ghana’s exchange rate depreciation increased input costs and put pressure on growth, particularly in the industrial and services sectors, prompting the government to request an IMF program in 2015.

Annex V. Key Recommendations of the 2017 Public Investment Management Assessment

1. Public investment management (PIM) in Guyana has many desirable features and further improvements will help close its efficiency gap. Capital and recurrent budgets are prepared within the Ministry of Finance (MoF), information on capital spending is quite extensive, elements of a medium-term budget framework are being put in place, and the coordination between the central and lower levels of government is relatively orderly. Nevertheless, despite a relatively high capital stock, Guyana has an estimated efficiency gap of 41 percent compared to 30 percent in Latin America and the Caribbean (LAC), and 27 percent in Emerging Market Economies (EMEs). The efficiency of the PIM system is affected by weaknesses in the planning, budgeting, appraisal, selection, procurement, and implementation of capital projects. These weaknesses have important implications for key areas of public investment management.

2. The ten key recommendations made by the 2017 PIMA are:

Put in place by 2020 a transparent rules-based fiscal framework, either excluding capital spending from budget balance targets, or introducing a floor on the overall level of capital spending.
The GSDS being finalized should provide allocations for key sectors and identify key strategic public investment projects to guide medium-term budgeting, this requires significant involvement by the MoF.
Complete and publish the policy framework on PPPs, with tightened fiscal safeguards and an enhanced oversight role for the MoF; prepare implementing regulations; and ensure that new PPPs are not implemented until essential PIM preconditions are satisfied (e.g., rigorous procedures for project appraisal).
Improve the monitoring of SOEs to coordinate their public investments and to monitor fiscal risks, including by providing better resources for the Enterprise Monitoring Division, and consider reviewing the size and number of public enterprises to reduce fiscal risk and oversight costs and to achieve economies of scale.
Introduce ceilings for agencies at the start of the budget cycle, aligned to improvements in budget discipline at cabinet level, and capacity of budget agencies to cost their strategic plans.
Prepare and disseminate detailed guidance on project preparation and appraisal, allocate sufficient resources to pre-investment planning, and increase the capacity to undertake appraisals in budget agencies.
Define minimum documentation requirements for inclusion of projects in the budget and build a pipeline of ready-to-implement projects.
Enhance access to public procurement information, update regulatory framework to international standards, including the requirement for procurement planning
Issue detailed guideline on project management, enforce ex-post reviews for major projects, and build a database for monitoring project implementation.
Take small but gradual steps in monitoring public assets by conducting regular surveys, keeping record of value, condition, and location of non-financial assets.

Annex VI. Implementation of 2016 FSAP Recommendations

^¹I: immediate; NT: near term; MT: medium term. Paragraph numbers refer to the FSSA.

Recommendations	Time¹	Authorities’ Responses
*To improve systemic risk monitoring and stress testing:*
Analyze system-wide risks by clearly mapping upstream and downstream ownership of banks, collecting data on housing market developments; and corporate and household balance sheets. ¶20, ¶50	I	The ownership structure of the banks is in the process of being updated. Data on upstream ownership will be obtained. Initial discussions have been held with the Bureau of Statistics on collecting data on housing market development and corporate and household balance sheets.
Assess credit risk without considering collateral values, given difficulties in collateral recovery. ¶20, ¶29	I	Stress tests were completed in June 2016. A new model is currently being reviewed which applies haircuts instead to total removal of collateral.
Develop real estate price indices (possibly the Bureau of Statistics). ¶20, ¶50	NT	Initial discussions have been held with the Bureau of Statistics.
Expand BoG’s stress testing toolkit to incorporate macro financial scenarios; collect more detailed data; and carry out validity checks to ensure data accuracy and reliability. ¶27	NT	The BoG has requested TA from IMF in the modelling and implementation of macro-financial scenarios for its stress testing toolkit.
*To enhance banking supervision, regulations, and financial safety nets:*
Ensure consistency across the continuum of supervisory functions, from routine supervision to intervention and resolution. ¶42	I	Revised Risk-Based Supervision Manual has been revised. CARTAC’s RBS workshop held in September 3–5, 2018. Additional amendments for manual are ongoing.
Continue to enforce timely and effective remedial actions from banks, as recently initiated by the BoG, to ensure bank compliance with requirements of bank examinations. ¶44	I	The BoG has continued to intensify its follow-up action to ensure all recommendations of examinations are adequately addressed prior to the next examination cycle. Some of the initiatives undertaken are: - More frequent follow-up examinations - More frequent periodic reporting - Meetings are convened with the Board of Directors and senior management of institutions to discuss areas of significant concern.
Eliminate reduced provisioning requirements for “well-secured” portions of NPLs and ensure that loan classification and provisioning reflect borrowers’ true financial conditions. ¶45	I	SG No. 5 is currently being reviewed. Intention to implement this has been conveyed to Guyana Association of Bankers.
Fill information gaps on banks’ condition and group structures to facilitate consolidated supervision and to design ex-ante contingency plans for takeover when necessary. ¶46, ¶50, ¶56	I	Ownership structure was updated, and questionnaire will be sent.
Require banks to develop contingency funding plans to manage liquidity risks due to deposit concentration. ¶35, ¶37, ¶56	I	First draft of guideline received as part of TA from World Bank’s (Financial Sector Reform and Strengthening Initiative) FIRST Initiative.
Clarify the instruments, policies, required collateral and procedures for providing ELA. ¶58	I	The Bank of Guyana Act was amended in 2018 (Bank of Guyana (Amendment) Act) 2018).
Reinforce the role of the Financial Stability Committee as a forum for rigorous systemic assessments, including activation of crisis protocols. ¶52, ¶55	I	A Financial Stability Unit was established in July 2017 and focuses on, inter alia, identifying and measuring systemic risks.
Amend the FIA to make the definition of banks’ related parties more stringent and reduce the large exposure limit from 40 percent to 25 percent of capital. Start mapping the amounts and types of related-party transactions to quantify hidden concentrations and wind-up excess risks as soon as possible. ¶45–46	NT	Several amendments to the FIA have been drafted, but a policy decision was taken to prioritize amendments to Part VIII of the FIA on bank resolution. Currently ongoing.
Increase the minimum capital adequacy requirement, including charges for market and operational risk, to at least 12 percent. ¶50	NT	TA was provided by CARTAC on Basel II/III – Pillar I implementation, which reviewed the increase in the capital adequacy requirement and the risk weights. Guideline is now completed, and industry sensitization conducted, and QIS issued on September 19, 2018.
Phase out the zero-risk weighting of CARICOM government securities and align the weights with individual countries’ risks. ¶45	NT
Encourage banks to cease the practice of overdraft lending. ¶47	NT	Commercial banks were notified of FSAP recommendations.
Streamline and operationalize the draft Crisis Management Plan. ¶52	NT	The draft Crisis Management Plan will be revisited since all the required legislation (amendments to the FIA, amendments to BoG and Deposit Insurance Law) were passed in 2018.
*Legislative Amendments:*
Provide resolution powers to the BoG and, to the extent possible, limit courts’ ability to reverse the BoG’s decisions. ¶54	NT	Amendments to the Part VIII of the Financial Institutions Act (the Financial Institutions (Amendment) Act 2018) was passed in July 2018.
Organize a small group at the BoG to develop resolution plans for vulnerable financial institutions. ¶57	NT
Amend FIA (Part VIII) to enable effective resolution of failing or about-to-fail banks. ¶53–54	NT
Set up a resolution group for regionally active entities and request group recovery and resolution plans. ¶57	NT
Review the draft DIS, eliminate its participation in open bank assistance, and ensure that all preconditions for its introduction are satisfied. ¶59	NT	The Deposit Insurance Act 2018 was passed in 2018.
Amend the BOG Act 1998 to facilitate the ELA framework.	NT	The Bank of Guyana Act was amended in July 2018 (Bank of Guyana (Amendment) Act 2018).
*To further develop the financial system and promote responsible access to finance:*
Expedite preparation of required regulations to support the recently adopted insurance law. ¶48	I	Completed. Regulations came into effect in 2018.
Adopt a robust law to govern the NPS and enable the safe and efficient use of electronic payments and strengthen the regulatory framework. Grant the BoG enforcement powers. ¶64	I	The National Payments Systems laws has been passed by the Parliament in July 2018.
Strengthen the AML/CFT framework in line with international standards. ¶65	I	Completed. The legislation has been amended.
Extend maturities of government securities to facilitate capital market development and use in sterilizing structural liquidity. ¶39	NT	IMF TA was provided in July 2017. The implementation of TA recommendations is being examined.

^¹I: immediate; NT: near term; MT: medium term. Paragraph numbers refer to the FSSA.

Recommendations	Time¹	Authorities’ Responses
*To improve systemic risk monitoring and stress testing:*
Analyze system-wide risks by clearly mapping upstream and downstream ownership of banks, collecting data on housing market developments; and corporate and household balance sheets. ¶20, ¶50	I	The ownership structure of the banks is in the process of being updated. Data on upstream ownership will be obtained. Initial discussions have been held with the Bureau of Statistics on collecting data on housing market development and corporate and household balance sheets.
Assess credit risk without considering collateral values, given difficulties in collateral recovery. ¶20, ¶29	I	Stress tests were completed in June 2016. A new model is currently being reviewed which applies haircuts instead to total removal of collateral.
Develop real estate price indices (possibly the Bureau of Statistics). ¶20, ¶50	NT	Initial discussions have been held with the Bureau of Statistics.
Expand BoG’s stress testing toolkit to incorporate macro financial scenarios; collect more detailed data; and carry out validity checks to ensure data accuracy and reliability. ¶27	NT	The BoG has requested TA from IMF in the modelling and implementation of macro-financial scenarios for its stress testing toolkit.
*To enhance banking supervision, regulations, and financial safety nets:*
Ensure consistency across the continuum of supervisory functions, from routine supervision to intervention and resolution. ¶42	I	Revised Risk-Based Supervision Manual has been revised. CARTAC’s RBS workshop held in September 3–5, 2018. Additional amendments for manual are ongoing.
Continue to enforce timely and effective remedial actions from banks, as recently initiated by the BoG, to ensure bank compliance with requirements of bank examinations. ¶44	I	The BoG has continued to intensify its follow-up action to ensure all recommendations of examinations are adequately addressed prior to the next examination cycle. Some of the initiatives undertaken are: - More frequent follow-up examinations - More frequent periodic reporting - Meetings are convened with the Board of Directors and senior management of institutions to discuss areas of significant concern.
Eliminate reduced provisioning requirements for “well-secured” portions of NPLs and ensure that loan classification and provisioning reflect borrowers’ true financial conditions. ¶45	I	SG No. 5 is currently being reviewed. Intention to implement this has been conveyed to Guyana Association of Bankers.
Fill information gaps on banks’ condition and group structures to facilitate consolidated supervision and to design ex-ante contingency plans for takeover when necessary. ¶46, ¶50, ¶56	I	Ownership structure was updated, and questionnaire will be sent.
Require banks to develop contingency funding plans to manage liquidity risks due to deposit concentration. ¶35, ¶37, ¶56	I	First draft of guideline received as part of TA from World Bank’s (Financial Sector Reform and Strengthening Initiative) FIRST Initiative.
Clarify the instruments, policies, required collateral and procedures for providing ELA. ¶58	I	The Bank of Guyana Act was amended in 2018 (Bank of Guyana (Amendment) Act) 2018).
Reinforce the role of the Financial Stability Committee as a forum for rigorous systemic assessments, including activation of crisis protocols. ¶52, ¶55	I	A Financial Stability Unit was established in July 2017 and focuses on, inter alia, identifying and measuring systemic risks.
Amend the FIA to make the definition of banks’ related parties more stringent and reduce the large exposure limit from 40 percent to 25 percent of capital. Start mapping the amounts and types of related-party transactions to quantify hidden concentrations and wind-up excess risks as soon as possible. ¶45–46	NT	Several amendments to the FIA have been drafted, but a policy decision was taken to prioritize amendments to Part VIII of the FIA on bank resolution. Currently ongoing.
Increase the minimum capital adequacy requirement, including charges for market and operational risk, to at least 12 percent. ¶50	NT	TA was provided by CARTAC on Basel II/III – Pillar I implementation, which reviewed the increase in the capital adequacy requirement and the risk weights. Guideline is now completed, and industry sensitization conducted, and QIS issued on September 19, 2018.
Phase out the zero-risk weighting of CARICOM government securities and align the weights with individual countries’ risks. ¶45	NT
Encourage banks to cease the practice of overdraft lending. ¶47	NT	Commercial banks were notified of FSAP recommendations.
Streamline and operationalize the draft Crisis Management Plan. ¶52	NT	The draft Crisis Management Plan will be revisited since all the required legislation (amendments to the FIA, amendments to BoG and Deposit Insurance Law) were passed in 2018.
*Legislative Amendments:*
Provide resolution powers to the BoG and, to the extent possible, limit courts’ ability to reverse the BoG’s decisions. ¶54	NT	Amendments to the Part VIII of the Financial Institutions Act (the Financial Institutions (Amendment) Act 2018) was passed in July 2018.
Organize a small group at the BoG to develop resolution plans for vulnerable financial institutions. ¶57	NT
Amend FIA (Part VIII) to enable effective resolution of failing or about-to-fail banks. ¶53–54	NT
Set up a resolution group for regionally active entities and request group recovery and resolution plans. ¶57	NT
Review the draft DIS, eliminate its participation in open bank assistance, and ensure that all preconditions for its introduction are satisfied. ¶59	NT	The Deposit Insurance Act 2018 was passed in 2018.
Amend the BOG Act 1998 to facilitate the ELA framework.	NT	The Bank of Guyana Act was amended in July 2018 (Bank of Guyana (Amendment) Act 2018).
*To further develop the financial system and promote responsible access to finance:*
Expedite preparation of required regulations to support the recently adopted insurance law. ¶48	I	Completed. Regulations came into effect in 2018.
Adopt a robust law to govern the NPS and enable the safe and efficient use of electronic payments and strengthen the regulatory framework. Grant the BoG enforcement powers. ¶64	I	The National Payments Systems laws has been passed by the Parliament in July 2018.
Strengthen the AML/CFT framework in line with international standards. ¶65	I	Completed. The legislation has been amended.
Extend maturities of government securities to facilitate capital market development and use in sterilizing structural liquidity. ¶39	NT	IMF TA was provided in July 2017. The implementation of TA recommendations is being examined.

^¹I: immediate; NT: near term; MT: medium term. Paragraph numbers refer to the FSSA.

Annex VII. Efficiency Gains from Structural Reforms

This Annex illustrates the potential economic gains from structural reforms which increases the rate of return of public capital spending by enhancing efficiency. It extends the analysis in Box 1, using the DIGNAR model.

Assumptions

1. Given that lack of history on Guyana’s experience in investing natural resource revenue in public infrastructure, the DIGNAR model is calibrated for a reform scenario based on the assumptions that public investment efficiency increases gradually by 10 percentage points relative to baseline over 2020–30, supported by structural and institutional reforms to improve governance and execution in the public sector.¹ This positively affects capital stock accumulation.

Implications

2. Over time, the structural reform measures enhance growth in non-oil output. They increase the extent to which public capital affects the productivity of private factors of production, bringing a more positive impact on growth and incomes. In this illustration, reforms and further improvements to institutional arrangements would deliver an additional 5 percentage points gain in non-resource output in 2030, supported by higher private consumption and investment. Improving public investment efficiency over time could also quickly build up public capital and to a higher level.

Annex VIII. Strengthening Governance in Guyana

1. Anti-corruption: Guyana ranks 93 out of 180 countries in the 2018 Transparency International corruption perception index, marginally sliding from 2017. Authorities are taking measures to fight corruption and align with the United Nations Convention against corruption. These include: the enactment of the State Asset Recovery Act (2017), Protective Disclosures (Whistle Blower) Act (2018), the establishment of the Special Organized Crime Unit (SOCU) and the Financial Intelligence Unit (FIU) and launch of the anti-corruption and sensitization seminars. There is progress on the asset declaration regime. The reestablished Integrity Commission has received submissions from over 50 percent of the 1300 people required to declare assets in the 2018–19 cycle. The authorities are developing a framework for verification of declarations across time and against other sources of information. Sanctions for non-declaration or false declarations range from fines to prosecution. To strengthen the asset declaration regime, the authorities are reviewing some regulations to allow access to information, expanding coverage of people to declare assets, developing management information systems and operationalizing the whistle blower policy.

2. Extractive Industry Transparency Framework: Guyana continues to improve transparency. It published its first Extractive Industries Transparency Initiative (EITI) report in 2019 which highlights important recommendations to strengthen transparency and accountability in the extractive sector. These include: the creation of an open database for EITI, reporting EITI data at project level, accuracy and comprehensiveness of production and export data, public disclosure of the register of licenses, public disclosure of mineral agreements, more disclosure on the allocation of licenses and permits, acceleration of legislative reforms in the oil and gas sector, the restructuring of the Guyana Geological and Mines Commission (GGMC) to enhance efficiency, use of credible and audited financial statements for assessing payments and revenues to the government, enhancement of more industry participation on reporting, and waiving of legal confidentiality restrictions. The authorities have started implementing the recommendations. Going forward, sustained efforts in implementing the recommendations would help to fortify transparency and accountability in the extractive industry. Validation to assess the status of EITI progress on compliance is scheduled for April 2020. The authorities have launched the Beneficial Ownership Disclosure Roadmap, to enhance transparency from the extractive sector.

3. Public procurement: Guyana is making progress in reforming its procurement system, which is critical considering the envisaged scaling up of public investments. The authorities established the National Procurement and Tender Administration Board (NPTAB) in 2015, to administer the procurement system, and the Public Procurement Commission (PPC) in 2016 to regulate the procurement system. Several reforms are being implemented to strengthen the procurement system. These include: mandatory procurement plans, setting 20 percent of procurement to small businesses, in line with the provisions of the Small Business Act, registration of bidders, debarment procedures for contractors who do poor work, procedure for the operation of the Public Procurement Commission, and amendments of the thresholds for restrictive tendering and the quotation method. The authorities are developing an e-procurement system expected to be completed in 2021 that will help to improve the efficiency of the procurement system. Bids for large projects are also published on the UNDP development business website. Access to CARICOM’s Public Procurement Notice Board and publication of bids and tenders will help to further boost transparency of the procurement system.

Annex IX. Strengthening Transparency in the Natural Resource Sector in Guyana

1. Guyana joined the Extractive Industries Transparency Initiative (EITI) in 2017 after announcing commitment in 2010. It aims to ensure transparency and accountability in the governance of the natural resource sector. The Guyana EITI is governed by a national Multi-Stakeholder Group (MSG) consisting of government, industry and civil society, supported by a Secretariat which oversees the day-to-day operations and implementation of its work plan.

2. Under the EITI standards, Guyana commits to: (i) high standards of transparency and accountability in government operations and business, (ii) full disclosure of laws, procedures and conditions under which contracts and licenses to extract and develop the resources are issued, including institutional responsibilities of the State, (iii) full disclosure of exploration, production and exports in the extractive sector (iv) report ownership structures, transactions and financial flows in the extractive sector, (v) disclose the fiscal regime for managing natural resource revenues and expenditures as articulated in the Natural Resource Fund Act (vi) report the contribution of the extractive sector in the economy.

EITI Practice in Other Countries:

3. Ghana joined EITI in 2007 to improve transparency and accountability in the extractive sector. Ghana Extractive Industry Transparency Initiative (GHEITI) is governed by a Multi-Stakeholder Group (MSG) made up of government, civil society and industry and supported by a Secretariat. GHEITI has made progress in implementing EITI standards, with disclosures of rules and regulations for the award of exploration and production rights, contracts, beneficial owners, management of resource revenues and contribution of the extractive industries to the economy in various online portals. It has drafted the Ghana EITI bill (yet to be passed in parliament) to enforce reporting requirements and institutionalize the EITI process. The Public Revenue Management Act guides revenue disclosures, allocations and management in the oil and gas sector. EITI is contributing to the reduction in corruption in Ghana: the corruption perception index has been declining since 2014.

4. Timor-Leste joined EITI in 2008. The Ministry of Petroleum and Mineral Resources oversees EITI implementation, with the help of the Multi-sector working group. Timor-Leste’s commitment to the principles of the EITI has helped to improve transparency of the legal framework, licensing and contracting processes, production and fiscal regime for managing oil revenues. It continues to make progress in systematic disclosures and reporting of various information on the extractive sector in government online portals. Companies also publish information on production, export and taxes paid, allowing reconciliation of figures with government receipts. The Petroleum Fund stipulates how the resource funds are managed and spent in the national budget. Stakeholders in the MSG provides inputs to the EITI process, with open information sharing contributing to public debate. Timor-Leste has yet to establish EITI (Transparency) Law.

Annex X. External Sector Assessment

Guyana’s external position in 2018 is assessed to be broadly consistent with fundamentals and desirable policy settings. The real exchange rate appreciated against currencies of trading partners. More flexibility in the nominal exchange rate would help Guyana cope with potential external shocks, and fiscal consolidation would help preserve external buffers. Further, staff’s assessment indicated that international reserves are below traditional and risk-weighted measures in the short term. However, over the medium-term, foreign reserves will rise above those thresholds as oil exports increase.

A. External Balance Assessment

1. The real effective exchange rate (REER) appreciated by about 2.8 percent during 2018. Similarly, the Nominal Effective Exchange Rate (NEER) appreciated by around 2.5 percent during that same period. This appreciation largely reflects developments in the exchange rates against its non-U.S. trading partners including Canada.

2. Staff’s bottom line assessment is that the external position in 2018 was broadly consistent with medium-term fundamentals and desirable policy settings. EBA-Lite based estimates suggest that the external position in 2018 was substantially stronger than the levels consistent with medium-term fundamentals and desirable policy settings. Meanwhile, under the EBA-lite methodology, the cyclically adjusted (multilaterally consistent) current account norm was -27.1 percent compared with a cyclically adjusted actual level of ˗19.6 percent of GDP, resulting in an estimated current account gap of about 7.5 percent and a policy gap of 1.7 percent of GDP. That implies a substantial real exchange rate undervaluation. The Real Effective Exchange Rate Gap based on the Current Account model showed a substantial undervaluation of 20 percent. However, short-term real GDP growth rates fluctuate with the commencement of oil production, resulting in a large current account deficit norm. Moreover, the current account deficit of -17.5 percent of GDP in 2018 reflects FDI-financed large-scale imports of equipment for oil extraction, which resulted in a sharp widening of the current account deficit. Once these large temporary imports and abnormal high future growth rates are accounted for, staff estimates that the cyclically adjusted current account would be around -8.9 percent of GDP, which will be close to a multilaterally consistent cyclically adjusted norm of -8.7 percent of GDP.¹ This would imply adjusted current account gap of 0.2 percent of GDP, which in turn translates into a one percent overvaluation of real effective exchange rate. Thus, the staff bottom line assessment suggests that the external position in 2018 was broadly consistent with the medium-term fundamentals. As oil exports increase and extraction equipment imports decline, the current account is projected to strengthen over the medium term. Developments in the external sector will continue to be prone to idiosyncratic shocks, such as sharp changes in the prices of oil, gold, rice and sugar given the large concentration of exports in these commodities.

Current Account Approach

^{^1/}Adjusted CA and REER Gaps reflect adjustments for large, FDI-financed imports related to oil exploration and development activities. The elasticity is computed using the exchange rate elasticities for imports (0.29) and the values of goods and services as a share of GDP.

Current Account Approach

(In percent of GDP, unless otherwise indicated)		Model results	Staff adjustment
CA-Actual		-17.5%	-6.9%
	Cyclical Contributions (from model)	2.1%	2.1%
Cyclically adjusted CA		-19.6%	-8.9%
CA-Norm		-25.0%	-6.6%
Multilaterally Consistent Cyclically adjusted CA Norm		-27.1%	-8.7%
CA-Gap		7.5%	-0.2%
	of/which Policy gap	1.66%	1.66%
Elasticity ^1/		-0.38	-0.38
REER Gap		-20%	1%
CA-Fitted		-23.3%	-4.9%

Current Account Approach

(In percent of GDP, unless otherwise indicated)		Model results	Staff adjustment
CA-Actual		-17.5%	-6.9%
	Cyclical Contributions (from model)	2.1%	2.1%
Cyclically adjusted CA		-19.6%	-8.9%
CA-Norm		-25.0%	-6.6%
Multilaterally Consistent Cyclically adjusted CA Norm		-27.1%	-8.7%
CA-Gap		7.5%	-0.2%
	of/which Policy gap	1.66%	1.66%
Elasticity ^1/		-0.38	-0.38
REER Gap		-20%	1%
CA-Fitted		-23.3%	-4.9%

B. Reserve Adequacy

3. The level of international reserves is temporarily below traditional non-risk-based adequacy metrics but exceeds them over the medium term.² Foreign reserves are estimated to be 2.1 months of imports in 2018 but are expected to return to 3.8 months of imports in 2022 after oil production commences. This temporally low level of foreign reserves in months of imports is attributed to the large inflow of imports for oil exploration and development. As of end-2018, reserves are above 20 percent of broad money (M2) and around 959 percent of short-term debt, providing enough buffers against capital flight and limited market access in the event of adverse shocks.

4. Guyana’s international reserves are broadly above various metrics and will be above most risk-weighted metrics over the medium term.³ Guyana’s level of international reserves stood at 90 percent of the Assessing Reserve Adequacy (ARA) metric at end-2018, placing it below the 100–150 percent adequacy range. However, its international reserves comfortably exceeded the adequate level in terms of broad money and short-term debt at end-2018. Level of reserves as months of imports is initially low due to large inflows of imports related to oil production and development in the short term. Over the medium term, Guyana’s international reserves will exceed the adequate level in terms of ARA metric, broad money, and short-term debt, and months of imports once the impact of oil production on reserve accumulation fully takes place. The risk-weighted measures for Small Island Developing States (SIDS) provide an anomalous result of less-than enough adequacy level due to very rapidly rising oil exports and should not be used in the assessment.

Ratios of Reserves to Optimal Reserves Based on Various Measures

(In percent)

Source: IMF staff claculations.

Ratios of Reserves to Optimal Reserves Based on Various Measures

(In percent)

	Risk-Weighted Measure	SIDS Measure	3 months Import	20% of Broad Money	Short Term Debt
2007	109	74	94	149	2,592
2008	109	74	87	152	2,848
2009	178	132	173	243	3,275
2010	195	139	177	260	4,628
2011	169	115	145	235	2,962
2012	158	105	136	224	2,911
2013	134	85	132	193	424
2014	121	81	123	161	440
2015	114	80	125	140	735
2016	108	73	124	132	1,653
2017	103	71	107	130	1,453
2018	90	64	79	111	959
2019	102	73	84	125	1,182
2020	93	48	80	148	1,641
2021	109	56	99	171	1,962
2022	108	49	133	196	2,385
2023	101	42	150	205	2,792
2024	100	41	165	189	2,944
Adequate Range	100–150	75–100	100	100	100

Source: IMF staff claculations.

Ratios of Reserves to Optimal Reserves Based on Various Measures

(In percent)

	Risk-Weighted Measure	SIDS Measure	3 months Import	20% of Broad Money	Short Term Debt
2007	109	74	94	149	2,592
2008	109	74	87	152	2,848
2009	178	132	173	243	3,275
2010	195	139	177	260	4,628
2011	169	115	145	235	2,962
2012	158	105	136	224	2,911
2013	134	85	132	193	424
2014	121	81	123	161	440
2015	114	80	125	140	735
2016	108	73	124	132	1,653
2017	103	71	107	130	1,453
2018	90	64	79	111	959
2019	102	73	84	125	1,182
2020	93	48	80	148	1,641
2021	109	56	99	171	1,962
2022	108	49	133	196	2,385
2023	101	42	150	205	2,792
2024	100	41	165	189	2,944
Adequate Range	100–150	75–100	100	100	100

Source: IMF staff claculations.

Based on Liza I and Liza II. Additional discoveries have also been made but their oil production prospects are not known at this time and therefore excluded in the baseline.

Oil sector output will raise overall GDP and exports substantially, but its direct impact on the domestic economy will be mostly offset by higher imports of oil extraction equipment and payments to the operators.

This loan was intended for restructuring state-owned GuySuCo.

The DSA report provides further details.

Empirical studies (Alichi, et. al. (2019), Gonzales-Garcia, et. al. (2013), and Doumbia and Kinda (forthcoming)), on average, find that 1 percentage point (ppt) increase in capital spending could increase real GDP growth by 0.9 ppt while the same increase in current spending could increase real GDP growth by 0.1 ppt, in the medium-term.

As the authorities have not announced a medium-term fiscal path, the baseline assumes they will gradually adjust the nonoil deficit to nonoil GDP to the level compatible with the NRF transfer rule (in line with staff’s recommended path).

Pillar IV focuses on resource rights and ownership; resource revenue mobilization; resource revenue utilization; and resource activity reporting and disclosure, complementing Pillars I-III which focus on fiscal reporting; fiscal forecasting & budgeting; and fiscal risk analysis & management.

Government subsidies to GuySuCo amounted to 1–2 percent of GDP per year from 2015–17.

The NRF will be an offshore sovereign wealth fund.

The fiscal transfer rule is designed to ensure that in the long run, fiscal transfers are determined by the expected financial return on the NRF (a Bird-in-Hand), while in the medium term enabling some gradual, front-loading of fiscal transfers (a flexible Permanent Income Hypothesis).

For example, the Committee can recommend a lower fiscal transfer if increases in public spending are assessed to generate undesirable macroeconomic effects, such as inflation or large crowding out of private investment.

The HCI measures the amount of human capital that a child born today can expect to attain by age 18. It conveys the productivity of the next generation of workers compared to a benchmark of complete education and full health.

For further details, see World Bank Guyana Education Sector Improvement Project.

Based on Guyana’s 2017 PIMA, the public investment efficiency rate was 59 percent compared to LAC efficiency rate of 70 percent. The 10-percentage point improvement assumed under the reform scenario would, in effect, close the efficiency gap between Guyana and the LAC.

The balance of payments data do not permit disaggregation of imports into those related to oil extraction facilities. Hence, the corresponding adjustment is estimated based on past import patterns. The current account deficit that is adjusted for oil related imports in 2018 is projected as the past 5-year historical average. Staff adjusted growth rate uses a GDP growth rate in 2024 of 3.2 percent to avoid abnormal large fluctuations in GDP growth rate during the first few years after the commencement of oil production.

Though traditional indicators (“rules of thumb”) are simple and transparent, they may underestimate other potential outflows pressures (e.g., falling export income, outflows from other debt and equity liabilities).

The Assessing Reserve Adequacy (ARA) Board paper in 2011 proposed a new metric for assessing the adequacy of reserve held by emerging market economies. The ARA 2015 updated some of the weights.

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Guyana: 2019 Article IV Consultation-Press Release; Staff Report; and Statement by the Executive Director for Guyana

Author:

International Monetary Fund. Western Hemisphere Dept.

Volume/Issue:: Volume 2019: Issue 296

Publisher:: International Monetary Fund

ISBN:: 9781513514093

ISSN:: 1934-7685

Pages:: 91

DOI:: https://doi.org/10.5089/9781513514093.002

Keywords
Background
Recent Developments
Outlook and Risks
Policy Discussions
Other Issues
Staff Appraisal
Annex I. The NRF Budget Transfer Rule
Annex II. Progress on 2018 Article IV Policy Recommendations
Annex III. Development and Infrastructure Needs
Annex IV. Pitfalls in Spending Oil Money: Lessons from Other Countries
Annex V. Key Recommendations of the 2017 Public Investment Management Assessment
Annex VI. Implementation of 2016 FSAP Recommendations
Annex VII. Efficiency Gains from Structural Reforms
- Assumptions
- Implications
Annex VIII. Strengthening Governance in Guyana
Annex IX. Strengthening Transparency in the Natural Resource Sector in Guyana
- EITI Practice in Other Countries:
Annex X. External Sector Assessment
- A. External Balance Assessment
- B. Reserve Adequacy

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Present Value of Oil Reserves ^1/

(In percent of 2018 GDP)

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Present Value of Oil Reserves per Capita ^1/

(In US$)

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Guyana: Oil Production and Government Oil Revenue ^1/

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Headline and Core Inflation

(Period average yoy, in percent)

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Real and Nominal Effective Exchange Rates

(REER/NEER 2010 = 100, increase = appreciation)

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Monetary Indicators

(12-month percent change)

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Guyana: NRF Transfers to Budget, 2020–2024 ^1/

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Guyana: Fiscal Overall Balance and Non-oil Overall Balance

(In percent of non-ail GDP)

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Guyana: Public Investment

(In percent of non-oil GDP)

View raw image

Guyana: Deviation in Non-Resource Output under “Aggressive” Scenario

(Relative to “Baseline”, in percent)

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Guyana: Deviation in Real Exchange Rate under “Aggressive” Scenario ^1/

(Relative to “Baseline”, in percent)

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Guyana: Deviation in Tradable Output under “Aggressive” Scenario

(Relative to “Baseline”, in percent)

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Guyana: Deviation in Private Consumption under “Aggressive” Scenario

(Relative to “Baseline”, in percent)

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Guyana: Deviation in Private Investment under “Aggressive” Scenario

(Relative to “Baseline”, in percent)

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Overdraft from the Bank of Guyana ^1/

(In percent of GDP)

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Guyana: Financial Development Effect on Growth

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Guyana: ATMs and Commercial Bank Branches

(Number per 100,000 adults)

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Doing Business Ranking 2019

(Score, 100 is the best)

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Figure 1.

Guyana: Comparative Regional Developments ^1/

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Figure 2.

Guyana: Real Sector Indicators

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Figure 3.

Guyana: External Sector Developments

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Figure 4.

Guyana: Fiscal Sector Developments

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Figure 5.

Guyana: Financial Soundness Indicators

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Figure 6.

Guyana: Monetary Developments

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Guyana: NRF Framework

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Public Investment

(In percent of GDP)

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Annex Figure 1.

Demographic and Social Indicators

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Guyana: Deviation in Non-Resource Output under “Reform” Scenario

(Relative to “Baseline”, in percent)

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Impact of Structural Reforms

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Timeline for EITI implementation in Guyana

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Real and Nominal Effective Exchange Rates

(REER/NEER 2010 = 100, increase = appreciation)

View raw image

Current Account Balance

(In percent of GDP)

View raw image

Gross International Reserves and Adequacy Metrics

(US$ millions)

Foresee

Ratios of Reserves to Optimal Reserves Based on Various Measures

(In percent)

	Risk-Weighted Measure	SIDS Measure	3 months Import	20% of Broad Money	Short Term Debt
2007	109	74	94	149	2,592
2008	109	74	87	152	2,848
2009	178	132	173	243	3,275
2010	195	139	177	260	4,628
2011	169	115	145	235	2,962
2012	158	105	136	224	2,911
2013	134	85	132	193	424
2014	121	81	123	161	440
2015	114	80	125	140	735
2016	108	73	124	132	1,653
2017	103	71	107	130	1,453
2018	90	64	79	111	959
2019	102	73	84	125	1,182
2020	93	48	80	148	1,641
2021	109	56	99	171	1,962
2022	108	49	133	196	2,385
2023	101	42	150	205	2,792
2024	100	41	165	189	2,944
Adequate Range	100–150	75–100	100	100	100

Source: IMF staff claculations.

Gross Total Oil Revenue		1,178
Total petroleum revenue for transfer to private oil company ^2/		1,007
Total petroleum revenue for NRF		171
	o/w: Petroleum revenue for transfer to budget	114

Gross Total Oil Revenue		1,178
Total petroleum revenue for transfer to private oil company ^2/		1,007
Total petroleum revenue for NRF		171
	o/w: Petroleum revenue for transfer to budget	114

Sustainability Test: Has 3% of the balance of the NRF exceeded BPR in the past?
Yes	No
	Production Test: Is production low, moderate or high?
	Low = < 200,000 bpd		= < Modeme < 400,000 bpd		High = > 400,000 bpd
	Ceiling Test: Is 2/3 of BPR > FSA Ceiling?		Ceiling Test: is 1/2 of BPR > FSA Ceiling?		Ceiling Test: Is 1/3 of BPR > FSA Ceiling?
	Yes	No	Yes	No	Yes	No
FSA = 3% of the NRF	FSA = FSA Ceiling	FSA = 2/3 of BPR	FSA = FSA Ceiling	FSA = 1/2 of BPR	FSA = FSA Ceiling	FSA = 1/3 BPR
Key
BPR: Benchmark Petroleum Revenues (that year's petroleum revenues assuming a long-term oil price)
FSA: Fiscally Sustainable Amount that can be withdrawn from NRF each year.
FSA Ceiling: Fiscally Sustainable Amount Ceiling = the larger of 3% of the NRF's balance and 25% of non-oil revenue.
Bpd: barrels of petroleum per day
NRF: Natural Resource Fund

Sustainability Test: Has 3% of the balance of the NRF exceeded BPR in the past?
Yes	No
	Production Test: Is production low, moderate or high?
	Low = < 200,000 bpd		= < Modeme < 400,000 bpd		High = > 400,000 bpd
	Ceiling Test: Is 2/3 of BPR > FSA Ceiling?		Ceiling Test: is 1/2 of BPR > FSA Ceiling?		Ceiling Test: Is 1/3 of BPR > FSA Ceiling?
	Yes	No	Yes	No	Yes	No
FSA = 3% of the NRF	FSA = FSA Ceiling	FSA = 2/3 of BPR	FSA = FSA Ceiling	FSA = 1/2 of BPR	FSA = FSA Ceiling	FSA = 1/3 BPR
Key
BPR: Benchmark Petroleum Revenues (that year's petroleum revenues assuming a long-term oil price)
FSA: Fiscally Sustainable Amount that can be withdrawn from NRF each year.
FSA Ceiling: Fiscally Sustainable Amount Ceiling = the larger of 3% of the NRF's balance and 25% of non-oil revenue.
Bpd: barrels of petroleum per day
NRF: Natural Resource Fund

Topics

Countries

Series

About

Resources

Abstract

Background

Recent Developments

Outlook and Risks

Policy Discussions

A. Fiscal Policy

Authorities’ Views

B. Monetary Policy and External Stability

Authorities’ Views

C. Strengthening Financial Sector Resilience

Authorities’ Views

D. Competitiveness, Inclusive Growth, and Governance

Authorities’ Views

Other Issues

Staff Appraisal

Annex I. The NRF Budget Transfer Rule

Annex II. Progress on 2018 Article IV Policy Recommendations

Annex III. Development and Infrastructure Needs

Annex IV. Pitfalls in Spending Oil Money: Lessons from Other Countries

Annex V. Key Recommendations of the 2017 Public Investment Management Assessment

Annex VI. Implementation of 2016 FSAP Recommendations

Annex VII. Efficiency Gains from Structural Reforms

Assumptions

Implications

Annex VIII. Strengthening Governance in Guyana

Annex IX. Strengthening Transparency in the Natural Resource Sector in Guyana

EITI Practice in Other Countries:

Annex X. External Sector Assessment

A. External Balance Assessment

B. Reserve Adequacy

Same Series

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Asian Development Bank

Food and Agriculture Organization

Inter-American Development Bank

The World Bank

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Table of Contents

Headings

Figures

Metrics

Foresee