IMF commends Government for economic management; welcomes Government’s commitment to fiscal discipline
-Outlook for Guyana’s growth in the medium-term better than ever before
The International Monetary Fund (IMF) in its 2023 Article IV Consultation report published today has commended the Government of Guyana for economic management, including the implementation of policies and initiatives geared at transforming Guyana’s economy. The findings were published following an official IMF mission visit to Guyana in September.
Rapid Economic Growth Supported by Government Modernisation Plans
The IMF in its findings highlighted that Guyana’s real GDP is expected to continue to grow rapidly, adding that Guyana achieved the highest real GDP growth in the world in 2022 – 62.3 percent. It is estimated that Guyana’s economy should record a 38.4 percent real Gross Domestic Product (GDP) growth rate this year, while the country’s growth should continue with an expansion of an expected 26.6 percent in 2024. Oil production is growing, with a third oil field – Payara – coming online, and growth in the non-oil sector is supported by the implementation of a fast-paced public investment program focused on providing transportation, housing, and flood management infrastructure, and raising human capital. Moreover, spillovers from oil and construction are supporting growth in the services and supplies sectors.
Meanwhile, in relation to inflationary pressures, the IMF noted that the Government introduced a suite of measures in 2022 and 2023, which has contributed to a decline in the inflation rate in 2023. The external current account recorded a large surplus in 2022, of 23.8 percent of GDP, and another large surplus is expected in 2023. The IMF reported too that banks in Guyana are well capitalised and continue to improve their loan portfolios.
Outlook for Medium-Term Growth Better than Ever Before
Guyana is poised for continued rapid expansion, with on average growth of 20 percent per year during 2024-28. IMF projects that non-oil GDP growth will be sustained at 5.5 percent, as the government continues its plans to address the country’s developmental needs.
Recently, at the IMF and World Bank Annual 2023 Meetings in Marrakesh, Morocco, Senior Finance Minister Dr. Ashni Singh noted that Government is ‘using this period to make the strategic investments that are necessary to ensure that in the medium to longer term Guyana is not an economy that is solely dependent on oil. We want to make sure that we have a growing, globally competitive non-oil economy so we are using this period to invest in things like infrastructure to improve connectivity with our neighbours, increase the economic space in which we are operating, and therefore lay the foundation for more trade’.
Guyana’s favourable outlook, IMF notes, is accompanied by upside and downside risks. On the upside, additional oil discoveries would continue to improve growth prospects. Growth in the construction sector, alongside strong public investment could support higher than expected short-term non-oil growth but may also lead to inflationary pressures and the appreciation of the real exchange rate. Furthermore, the IMF highlighted that adverse climate shocks, and volatile commodity prices have the potential to negatively impact the economy.
Appropriate Policy Mix
The IMF reported that Government’s current expansionary fiscal policy stance is appropriate, given the country’s development needs and is appropriately balanced by monetary policy.
IMF Welcomes Government Commitment to Fiscal Discipline
The IMF commended Government’s commitment to fiscal discipline, which allows for a balanced growth path, with the moderation of fiscal impulses over the medium-term projected to achieve a zero overall fiscal balance by 2028. This will allow for an expansion of the economy without creating macroeconomic imbalances.
At the meetings in Marrakesh, Dr. Singh had explained that “we come from a time when Guyana was once one of the most heavily indebted poor countries in the world. There was a time when Guyana’s debt to GDP ratio was more than 600 percent and it took hard work to get us from where we were as a Heavily Indebted Poor Country (HIPC) with debt to GDP exceeding 600 percent and debt service to revenue exceeding 100 percent to bring us to a point where our debt to GDP ratio was about 60 percent and that is before we started producing oil”.
Government Commended by IMF on Progress to Strengthen the Management of Oil Wealth and Fiscal Transparency
The NRF Act, amended in 2021, enhanced transparency and accountability of the use of oil revenues. The IMF highlighted that governance of the NRF was strengthened in 2022 with the appointment of three critical bodies: the NRF Board of Directors, the Public Accountability and Oversight Committee, and the Investment Committee. The year 2022 was also the first year that oil revenues were transferred from the NRF to the national budget. In addition, notification of all receipts is published. This process continued in 2023.
The Government also made progress in implementing the recommendations of the 2019 Extractive Industries Transparency Initiative (EITI).
The IMF noted that the Petroleum (Exploration and Production) Act was modernised and approved by parliament in August 2023, improving the regulation of exploration and production of oil, and further paves the way for developing the oil and gas industry. Further, a new Production Sharing Agreement (PSA) has been designed, which will increase the government’s share of oil profits.
Government Commended by IMF on Climate Efforts
The IMF highlighted that Guyana has made significant progress on climate actions, with Guyana becoming a world leader in forest conservation and supporting global climate change mitigation. The Government of Guyana successfully reestablished the Low Carbon Development Strategy (LCDS), combining the utilisation of natural resources in a sustainable manner to combat climate change with the monetisation of these efforts. In 2022, after being awarded the first jurisdiction scale certification of carbon credits, Guyana sold 37.5 million carbon credits for US$750 million, to be paid during 2022-2032 (a third of the credits Guyana will receive over 2016-30), one of the largest transactions in the world. The LCDS allows for the utilisation of these funds for flood management, diversification of the energy matrix, and the provision of resources for Amerindian communities. The IMF supports the Government’s enhancement of the LCDS-to-LCDS 2030—launched in July 2022, which expands the focus of nature conservation to include biodiversity conservation, watershed management, and the ocean economy, both for protection and by receiving payments for these efforts.
The Government of Guyana’s intention is to continue to manage the economy in a prudent, sustainable manner to continue the success through among other approaches, creating a successful diversified non-oil economy.
IMF Article IV missions are undertaken as part of regular (usually annual) consultations under Article IV of the IMF’s Articles of Agreement, in the context of a request to use IMF resources, as part of discussions of staff monitored programs, or as part of other staff monitoring of economic developments.