Press Release: IMF Approves Third Annual Loan for Guyana Under the ESAF
April 16, 1997
The International Monetary Fund (IMF) approved the third annual loan under the Enhanced Structural Adjustment Facility (ESAF)1, in an amount equivalent to SDR 17.92 million (about US$24 million), to support Guyana’s economic program in 1997. The loan is available in two semiannual installments, the first of which will be available on April 30, 1997.
Since 1989, Guyana has implemented a broad range of policies aimed at stabilizing the economy, restoring growth, and alleviating poverty by reducing existing macroeconomic imbalances and restructuring the economy. As a result of these policies there has been a major turnaround in economic performance: in 1996, inflation declined sharply to 4.5 percent; the balance of payment position has strengthened, and after years of stagnation, real GDP has been growing at an annual rate of about 8 percent in recent years. Despite these achievements, the economy remains vulnerable to adverse external shocks, and poverty is widespread. Public sector administration remains with a clear need for restructuring and modernization. In addition, the basic physical infrastructure requires rehabilitation and expansion to attract investment and cope with increasing demand.
The 1997 Program
The key macroeconomic objectives of the 1997 program are to (a) achieve a real GDP growth rate of 7 percent; (b) lower the annual inflation rate to 4 percent by year’s end; (c) limit the deterioration of the current account deficit of the balance of payments to about 12 percent of GDP; and (d) maintain the level of gross official international reserves at about 5 months of imports. To achieve these objectives, fiscal policy will aim to limit the overall public sector deficit to about 4 1/2 percent of GDP. Central government revenues are projected to remain constant in terms of GDP, despite the loss from the reduction in CARICOM’s common external tariff, owing to an intensified effort at collection of customs duties, tax arrears, and expanded coverage of taxpayers. Government expenditure will be carefully managed under the program and program budgeting will be introduced. Monetary and credit policy will continue to promote the attainment of the inflation and the balance of payments objectives, while providing adequate support for private sector activity.
Guyana’s prospects for sustainable high growth over the medium term depend crucially on a deepening of structural reforms. The government intends to complete the privatization of companies offered for sale in 1995 and 1996, and five other enterprises will be brought to the point of sale by June 1997. To face a shortage of skilled staff in the civil service, the government intends to recruit qualified staff and to better align wages in stages to those in the private sector, while at the same time taking measures to further streamline and reorganize the civil service to improve efficiency. The regulatory and incentive regimes for tourism, agroprocessing, and manufacturing will be streamlined and an investment code published by June 1997. In addition, the process of land reform involving the freeing up of land for productive uses will be accelerated.
Addressing Social Needs
The authorities are keenly aware of the need to maintain appropriate social and environmental policies to support human resource development, the authorities intend to raise enrollment rates in primary education and reinvigorate primary health care through greater awareness campaigns and the availability of essential drugs.
The Challenge Ahead
After several years of successful implementation of strong macroeconomic and structural adjustment policies, Guyana’s economy is still fragile. It is essential that the authorities adhere to all aspects of the program. Also, notwithstanding the continued prudent management of its external debt and the favorable effects of the stock-of-debt operation, Guyana’s public debt and debt-service obligations will remain significant over the medium term.
Guyana joined the IMF on September 26, 1966, and its quota [A member ’s quota in the IMF determines, in particular, the amount of its subscription, its voting weight, its access to IMF financing, and its share in the allocation of SDRs.] is SDR 67.20 million (about US$92 million). Its outstanding use of IMF financing currently totals SDR 110.84 million (about US$151 million).
1 The ESAF is a concessional IMF facility for assisting eligible members that are undertaking economic reform programs to strengthen their balance of payments and improve their growth prospects. ESAF loans carry an interest rate of 0.5 percent a year and are repayable over 10 years, with 5½-year grace period.