## cr18220 ## Source details **Canonical URL:** [cr18220](https://www.imf.org/-/media/files/publications/cr/2018/cr18220.pdf) ## Other formats - [Markdown version](/-/media/files/publications/cr/2018/cr18220.pdf.md) - [Structured JSON version](/-/media/files/publications/cr/2018/cr18220.pdf.json) --- ### Recent developments and macroeconomic outcomes - Real GDP growth: 2.1 percent in 2017 (down from 3.4 percent in 2016). - Non-mining GDP growth: 4.1 percent in 2017. - Inflation: 1.5 percent at end-2017; core inflation close to zero. - Current account: deficit of 6.7 percent of GDP in 2017 (from a surplus of 0.4 percent of GDP in 2016). - Gross reserve cover: 3.2 months of imports in 2017. - Real and nominal effective exchange rates: depreciated by about 6 and 5 percent, respectively, during January-December 2017. - Central government deficit: around 4.5 percent of GDP in 2017, lower than the budgeted 5.6 percent. - Tax revenue to GDP ratio: increased by 1.2 percentage points in 2017. - Non-tax revenue to GDP ratio: declined by 0.4 percentage point in 2017. - Public debt: 52.2 percent of GDP at end-2017. - Credit to the private sector: grew 2.1 percent in 2017. - Banking sector: profitable with adequate capital buffers; non-performing loans (NPLs) 12.2 percent of total loans at end-2017 (down from 12.9 percent at end-2016). ### Outlook and projections (selected numbers) - Oil production: expected to commence in 2020; recoverable resources conservatively estimated at around 3.2 billion barrels of oil. - Real GDP projection: 3.4 percent in 2018; 4.8 percent in 2019; 29.8 percent in 2020; 22.1 percent in 2021; 11.8 percent in 2022; 27.9 percent in 2023. - Current account deficit projections: 6.1 percent of GDP in 2018; 4.3 percent of GDP in 2019; moves to large surpluses from 2020 (501.1 US$ million in 2020; 1,190.5 in 2021; 1,564.7 in 2022; 2,962.1 in 2023). - Central government deficit projections: -5.4 percent of GDP in 2018; -5.1 percent of GDP in 2019. - Public debt projection: Total public sector gross debt 52.2 (end-2017); projected 57.0 (2018); 57.2 (2019); projected to decline to 41.4 (2023). - Selected fiscal ratios (percent of GDP unless otherwise indicated): - Central government revenue: 26.0 (2017); projected 26.7 (2018); 27.6 (2019). - Central government expenditure: 32.1 (2017); projected 33.6 (2018); 34.1 (2019). - Central government overall balance (after grants): -4.5 (2017); projected -5.4 (2018); -5.1 (2019). - Total public sector gross debt: 52.2 (end-2017); projected 57.0 (2018); 57.2 (2019). - External debt: 35.5 (end-2017); projected 36.0 (2018); 32.8 (2019). - Domestic debt: 16.7 (end-2017); projected 21.0 (2018); 24.4 (2019). - Money and credit: broad money -0.7 percent (2017); projected 10.7 percent (2018); 7.0 percent (2019). - Domestic credit of banking system: 1.5 percent (2017); projected 10.1 percent (2018); 10.0 percent (2019). - Private sector credit: 2.1 percent (2017); projected 2.8 percent (2018); 3.2 percent (2019). - Nominal GDP (G$ billion): 748.7 (2017); projected 780.0 (2018); 834.7 (2019). - Per capita GDP, US$: 4,578 (2017); projected 4,649 (2018); 4,939 (2019). ### Fiscal policy assessment and recommendations - Short-term fiscal path: Continued expansionary fiscal policy expected to increase public debt before oil production begins. - Financing advice: - Rely on concessional and non-concessional Multilateral Development Bank financing, and long-term domestic borrowing. - Avoid private external borrowing where possible. - Central bank financing should not be used. - One-off gains: Save one-off gains from the tax amnesty to reduce financing needs and preserve external buffers. - Expenditure quality: Undertake an expenditure review to enhance quality and efficiency of government expenditure; review current expenditures to ensure maximum welfare and inclusion benefits before scaling up public investment with oil revenues. - Fiscal framework for oil wealth: Establish a rules-based fiscal framework consistent with resource fund deposit/withdrawal rules to determine annual allocation for stabilization, domestic capital expenditure, and intergenerational savings; consider fiscal responsibility legislation to reinforce consistency. ### Monetary, exchange rate, and external sector guidance - Monetary policy: Gradually revert towards a neutral stance as the economic recovery gains pace and inflationary pressures arise. - Exchange rate: Allow greater exchange rate flexibility to cushion external shocks and help safeguard foreign reserves. - External vulnerability: Guyana remains vulnerable to external shocks due to export concentration and short-term reliance on imported oil; building an adequate buffer stock of savings from oil revenues is important. - External position assessment: EBA-based estimates indicate current account in 2017 around 1.9 percent of GDP lower than its norm of a 4.8 percent deficit, implying a moderate real exchange rate overvaluation. - Reserves: Gross international reserves (US$ millions) 584.6 (2017); projected 612.1 (2018); 631.6 (2019); projected 833.2 (2020); 1,136.4 (2021); 1,557.6 (2022); 2,270.0 (2023). - Months of imports of goods and services: 3.2 (2017); projected 3.2 (2018); 3.1 (2019); projected increase to 6.6 (2023). ### Financial sector stability and reforms - FSAP implementation: Significant progress made on 2016 FSAP recommendations, but further work needed. - Priority financial sector actions: - Ensure internal consistency of supervisory function from routine supervision to intervention and resolution. - Eliminate reduced provisioning requirements for “well-secured” portions of NPLs. - Refine definition of “related parties” to align with international standards. - Reduce reliance on overdraft lending. - Clarify upstream and downstream ownership of institutions. - Raise minimum capital adequacy requirement to 12 percent. - Reduce banks’ large exposure limits (reduce from 40 percent to 25 percent of capital). - Supervisory and legislative progress: - Draft amendments submitted for Bank of Guyana Act (ELA), Part VIII of the Financial Institutions Act (resolution), National Payment System law, and Deposit Insurance Act (April 2018 submissions noted). - Financial Stability Unit established in July 2017. - CARTAC TA on Basel II/III; completion target for Pillar I implementation review: June 30, 2019. - Banking indicators: - NPLs: 12.2 percent of total loans at end-2017 (down from 12.9 percent at end-2016). - Provisioning: low compared with regional peers; provisioning and asset quality remain priorities. - Interest rates: 91-day Treasury Bill rate 1.54 percent at end-2017 (from 1.68 percent at end-2016), implying negative ex ante real rates. ### Competitiveness, inclusion, and statistical priorities - Competitiveness and inclusion: - Lower cost of doing business by addressing infrastructure bottlenecks, reducing energy costs, and cutting red tape. - Increase female labor force participation and bridge gaps with the Hinterland to boost growth and spread benefits more widely. - Reform public enterprises and reduce youth unemployment. - Electricity sector: - Technical losses in transmission about 10 percent; commercial losses about 30 percent. - GPL reported a loss of US$ 3 million in 2017 and has requested government financial support. - Statistics and national accounts: - Include oil exploration and production in the national accounts when rebased, and in BOP statistics. - Strengthen external sector statistics and compile an international investment position. - BoS plans: launch All-Urban CPI, Households Budget Survey, and Living Conditions Survey later in 2018; disseminate quarterly GDP; rebase GDP. - Data gaps and priorities: timely high-frequency data, revision of national accounts and BOP to include oil, dissemination of IIP, submission of FSI data, compilation of house price indexes. ### Debt sustainability, oil revenue expectations, and NICIL bond - Oil discoveries and production plans: - Additional discoveries in the Stabroek block bring total gross recoverable resources to 3.2 billion oil-equivalent barrels. - Commercial production planned to commence mid-2020, conservatively 100,000 barrels/day (Liza Phase I). - Liza Phase II expected in 2022 with capacity of 220,000 barrels/day; combined Liza Phases I and II close to 45 percent of total oil reserves (14.1 percent and 30.7 percent respectively). - Combined production of Liza Phase I and II estimated around 300,000 bpd by 2025. - Revenue-sharing and fiscal assumptions: - 75 percent of oil production initially allocated to “cost recovery”; 25 percent “profit oil” shared 50-50 with the government. - Royalty of 2 percent on gross earnings yields initial government share of 14.5 percent of total oil revenues. - Breakeven price for Liza Phase 2 around $35 per barrel. - Oil prices trajectory from April 2018 WEO: US$52 per barrel in 2017 rising to around US$54 by 2023, long-run US$55 thereafter. - Debt dynamics and NICIL bond: - NICIL issuing G$30 billion five-year syndicated external bond (3.7 percent of GDP) with 4.75 percent interest, publicly guaranteed, to finance GuySuCo restructuring. - Total public and publicly-guaranteed debt pushed slightly above 60 percent of GDP in 2018–19 by the NICIL bond. - Public and publicly-guaranteed debt projected to decline to 41.4 percent by 2023. - DSA baseline outcomes: - Total gross public-sector debt projected: rise to 61 percent in 2018; stabilize at 56.3 percent in 2020; decline to 21.9 percent by 2038. - PV of external debt-to-GDP ratio peaks at 27 percent in 2018, declines to 2 percent in the long term. - Fiscal surpluses in excess of 20 percent of GDP per year in the late 2020s assumed under a permanent-income type approach with accumulation in a Sovereign Wealth Fund. - Stress-test results and cautions: - Significant but temporary breaches occur under extreme shocks to exports and exchange rate before oil production starts. - One-time 30 percent nominal depreciation in 2019 breaches PV external debt service-to-revenue ratio in stress test scenarios. - Extreme scenario (real GDP growth at 10-year historical average minus one standard deviation) would produce large debt breaches up to 212 percent by 2038, but considered extremely low probability. - Policy implications: - Strengthen fiscal policy institutions prior to start of oil production. - Manage short-term financing needs carefully; reliance on MDBs and development of domestic capital market encouraged. - Maintain domestic government debt securities at around 20 percent of GDP to support domestic bond market development. ### Risks (selected, as presented) - Overall risks: tilted to the downside in the short-term but to the upside over the medium to long-term. - Downside risks: - External: strengthening of US dollar; withdrawal of Correspondent Banking Relationships (CBRs). - Domestic: undercapitalized banks; contingent liabilities from PPPs and SOEs. - Weaker global growth affecting commodity prices; low energy prices prolonging “cost recovery” and reducing fiscal revenue; disorderly sugar sector restructuring; loss of grants and concessional financing as Guyana grows richer. - Upside risks: - Public investment; oil discoveries and production; successful public sector reforms. - Risk responses: - Allow exchange rate to act as an automatic stabilizer; tighten monetary policy if needed; strengthen capital and provisioning requirements; monitor CBR status and AML/CFT compliance. ### Social, labor, and inclusion indicators - Labor Force Survey (Q3 2017) highlights: - Population under 25 years: 47.1 percent. - Average age: 39.8 years. - Employment-to-population ratio: slightly less than 50 percent. - Unemployment rate (15+): 12 percent. - Youth unemployment: men 17.3 percent; women 28 percent. - Female labor force participation: increased from 34.6 percent (2012) to 43.6 percent (2017). - Earnings gaps: - Men earn on average 1.36 times the monthly earnings of women for salaried workers. - Men earn on average 1.94 times the monthly earnings of women for self-employed workers. - Implied hourly wages: men earn 1.12 times women among salaried workers; 1.59 times among self-employed workers. - Social mitigation for GuySuCo restructuring: re-employment plans, drainage and irrigation activities, severance payments, re-training programs, assistance for small businesses. ### External financing, projects, and multilateral relations (selected) - IDB net loan flow: 13.1 US$ million in 2017 (Net Loan Flow). - Investment loans (Sovereign Guaranteed Portfolio in Execution): Total approved 230,456,549; Amount Disbursed 82,576,569; Disb (%) 36%; Available 147,879,980. - Investment Grants: Total Approved 57,693,477; Current Disbursed 26,931,152; Life % Disb 47%; Available 30,762,325. - CDB relations (as of December 2017): - Total loans approved to Guyana: US$291.9 million; outstanding balances US$147.8 million; undisbursed US$25.11 million. - Guyana is CDB’s sixth largest borrower and largest recipient of CDB grants after Haiti. ### Staff appraisal — key policy recommendations (condensed) - Manage short-term financing prudently; rely on MDBs and develop domestic capital markets. - Avoid private external borrowing and prohibit central bank financing. - Save one-off gains from tax amnesty to preserve external buffers. - Undertake expenditure review and PIM reforms before scaling up investment with oil revenues. - Establish a transparent, rules-based fiscal framework and Sovereign Wealth Fund arrangements consistent with deposit/withdrawal rules and fiscal responsibility legislation. - Continue FSAP follow-up: raise capital requirements to at least 12 percent; reduce large exposure limits to 25 percent of capital; eliminate preferential provisioning for “well-secured” NPLs; operationalize resolution, ELA, and DIS frameworks. - Strengthen statistics: include oil sector in national accounts and BOP upon rebasing; compile IIP and improve timeliness and coverage of macro data. *International Monetary Fund — Staff Report for the 2018 Article IV Consultation (cr18220, excerpts).* ### 2017. The central government’s deficit remained stable at around 4.5 percent of GDP in 2017. ### cr18220 - 2017. The central government’s deficit remained stable at around 4.5 percent of GDP in 2017. ### Recent developments and macroeconomic outcomes - Real GDP growth: 2.1 percent in 2017 (down from 3.4 percent in 2016). - Non-mining GDP growth: rebounded to 4.1 percent in 2017. - Inflation: 1.5 percent at end-2017; core inflation close to zero. - Current account: deficit of 6.7 percent of GDP in 2017 (from a surplus of 0.4 percent of GDP in 2016). - Gross reserve cover: declined to 3.2 months of imports in 2017. - Real and nominal effective exchange rates: depreciated by about 6 and 5 percent, respectively, during January-December 2017. - Central government deficit: remained stable at around 4.5 percent of GDP in 2017, lower than the budgeted 5.6 percent. - Tax revenue to GDP ratio: increased by 1.2 percentage points in 2017 due to improvements in tax administration. - Non-tax revenue to GDP ratio: declined by 0.4 percentage point in 2017. - Public debt: 52.2 percent of GDP at end-2017. - Credit to the private sector: grew 2.1 percent in 2017. - Banking sector: profitable with adequate capital buffers; non-performing loans (NPLs) at 12.2 percent of total loans at end-2017 (down from 12.9 percent at end-2016). ### Outlook and projections (selected numbers) - Oil production expected to commence in 2020; recoverable resources conservatively estimated at around 3.2 billion barrels of oil. - Real GDP projection: 3.4 percent in 2018; 4.8 percent in 2019. - Current account deficit projections: 6.1 percent of GDP in 2018; 4.3 percent of GDP in 2019. - Central government deficit projections: 5.4 percent of GDP in 2018; 5.1 percent of GDP in 2019 (widening due to sugar sector restructuring and increased infrastructure-related capital expenditure). - Public debt projection: projected to rise in the short-term, then decline with the onset of oil production. - Table highlights (selected series, in percent of GDP unless otherwise indicated): - Central government revenue: 26.0 (2017); projected 26.7 (2018); 27.6 (2019). - Central government expenditure: 32.1 (2017); projected 33.6 (2018); 34.1 (2019). - Central government overall balance (after grants): -4.5 (2017); projected -5.4 (2018); -5.1 (2019). - Total public sector gross debt: 52.2 (end-2017); projected 57.0 (2018); 57.2 (2019). - External debt: 35.5 (end-2017); projected 36.0 (2018); 32.8 (2019). - Domestic debt: 16.7 (end-2017); projected 21.0 (2018); 24.4 (2019). - Money and credit: broad money -0.7 percent (2017); projected 10.7 percent (2018); 7.0 percent (2019). - Domestic credit of banking system: 1.5 percent (2017); projected 10.1 percent (2018); 10.0 percent (2019). - Private sector credit: 2.1 percent (2017); projected 2.8 percent (2018); 3.2 percent (2019). - Nominal GDP (G$ billion): 748.7 (2017); projected 780.0 (2018); 834.7 (2019). - Per capita GDP, US$: 4,578 (2017); projected 4,649 (2018); 4,939 (2019). ### Fiscal policy assessment and recommendations - Short-term fiscal path: Continued expansionary fiscal policy is expected to increase public debt before oil production begins. - Financing advice: Rely, to the extent possible, on concessional and non-concessional Multilateral Development Bank financing, and long-term domestic borrowing; avoid private external borrowing; central bank financing should not be used. - One-off gains: Saving the one-off gains from the tax amnesty would reduce financing needs and help preserve external buffers. - Expenditure quality: Undertake an expenditure review to enhance the quality and efficiency of government expenditure; review current expenditures to ensure maximum welfare and inclusion benefits before scaling up public investment with oil revenues. - Fiscal framework for oil wealth: Establish a rules-based fiscal framework consistent with resource fund deposit/withdrawal rules to determine annual allocation for stabilization, domestic capital expenditure, and intergenerational savings; consider fiscal responsibility legislation to reinforce consistency. ### Monetary, exchange rate, and external sector guidance - Monetary policy: Gradually revert towards a neutral stance as the economic recovery gains pace and inflationary pressures arise. - Exchange rate: Allow greater exchange rate flexibility to cushion external shocks and help safeguard foreign reserves. - External vulnerability: Guyana remains vulnerable to external shocks due to export concentration and short-term reliance on imported oil; building an adequate buffer stock of savings from oil revenues is important. ### Financial sector stability and reforms - FSAP implementation: Significant progress made on 2016 FSAP recommendations, but further work needed. - Priority financial sector actions: - Ensure internal consistency of supervisory function from routine supervision to intervention and resolution. - Eliminate reduced provisioning requirements for “well-secured” portions of NPLs. - Refine the definition of “related parties” to align with international standards. - Reduce reliance on overdraft lending. - Clarify upstream and downstream ownership of institutions. - Raise minimum capital adequacy requirement to 12 percent. - Reduce banks’ large exposure limits. - NPLs and provisioning: Addressing high non-performing loans and under-provisioning should remain a priority. ### Competitiveness, inclusion, and statistical priorities - Competitiveness and inclusive growth: - Lower the cost of doing business by addressing infrastructure bottlenecks, reducing energy costs, and cutting red tape. - Increase female labor force participation and bridge gaps with the Hinterland to boost growth and spread benefits more widely. - Reform public enterprises and reduce youth unemployment. - Statistics and national accounts: Include oil exploration and production in the national accounts when they are rebased and in the BOP statistics; strengthen external sector statistics and compile an international investment position. *International Monetary Fund — Staff Report for the 2018 Article IV Consultation (Guyana).* ### 1.2 percentage point increase in the tax revenue to GDP ratio, which was partly offset by a ### cr18220 - 1.2 percentage point increase in the tax revenue to GDP ratio, which was partly offset by a ### Fiscal developments and public debt - Tax revenue to GDP ratio increased by 1.2 percentage point, which was partly offset by a 0.4 percentage point decline in the ratio for non-tax revenue. - Public debt stood at 52.2 percent of GDP at end-2017. - The central government deficit is projected to widen to 5.4 and 5.1 percent of GDP in 2018 and 2019, respectively, due to the cost of restructuring the sugar sector and an increase in infrastructure-related capital expenditure. - Public debt is projected to peak at 57.2 percent of GDP in 2019. - A publicly guaranteed 5-year syndicated external bond, with a 4.75 percent interest and amounting to 3.7 percent of GDP, is being issued by the National Industrial and Commercial Investments Limited (NICIL) to finance the restructuring of the state-owned sugar enterprise (GuySuCo). - Total public and publicly-guaranteed debt will be pushed slightly above 60 percent of GDP in 2018–19 by the NICIL bond. - The public and publicly-guaranteed debt ratio is projected to decline to 41.4 percent by 2023. - The government has maintained an outstanding balance at the central bank of about 6 percent of GDP at end-March 2018 (from 3 percent at end-2016 and 3.5 percent at end-2017). Staff includes this overdraft in the debt figures in this report. ### Monetary and financial sector indicators - Credit to the private sector grew 2.1 percent in 2017. - Mortgage sector credit growth: 4.5 percent. - Household sector credit growth: 2.7 percent. - Business sector credit growth: 0.9 percent. - The 91-day Treasury Bill rate declined to 1.54 percent at end-2017, from 1.68 percent at end-2016, continuing to imply negative ex ante real rates. - Non-performing loans (NPLs) were 12.2 percent of total loans at end-2017, down from 12.9 percent at end-2016. - The business sector accounts for 72 percent of NPLs. - One domestic bank accounts for about half of NPLs, though it has extended only a fifth of loans. - Provisioning is low in comparison with other countries in the region; banks have tightened credit in response to higher NPLs. - Pressures on Correspondent Banking Relationships (CBRs) have stabilized, but banks reported higher charges for cross-border transactions, stricter requirements for customers’ information, and higher operational costs due to AML/CFT compliance. - Two of the three domestically-owned banks cannot conduct business with third-party foreign currency cheques but can execute wire transfers. ### Outlook and external sector - Economic growth is projected to be 3.4 percent in 2018, driven by continued strength in the construction and rice sectors, and a recovery in gold mining. - Commencement of oil production in 2020 is described as a turning point; further oil exploration is likely to increase long-term production and proven reserves. - Current account deficit is projected to narrow to 6.1 and 4.3 percent of GDP in 2018 and 2019, respectively. - The deficit will be financed largely by FDI inflows and donor-supported investment. - The balance of payments will swing sharply to positive in 2020; the current account will move to large surpluses, partially offset by deficits in the financial account as repatriation of “cost recovery” revenues by oil companies is recorded as divestment of FDI. ### Risks - Overall risks are tilted to the downside in the short-term but to the upside over the medium to long-term. - Downside risks listed: - External: strengthening of US dollar, withdrawal of CBRs. - Domestic: undercapitalized banks, contingent liabilities from PPPs and SOEs. - Weaker-than-expected global growth can weigh down on commodity export prices. - Low energy prices could hurt eventual exports and fiscal revenue over the medium- and long-term by prolonging the “cost recovery” period; in the first years of production, changes in oil prices have a one-for-one impact on fiscal revenue. - Disorderly restructuring of the sugar sector would have major economic and social costs. - Further CBR losses remain a risk. - As Guyana grows richer, access to grants and concessional financing could be lost; such financing is projected to taper off with the start of oil production. - Upside risks listed: - Public investment. - Oil discoveries and production. - Successful implementation of envisaged reforms within the public sector. ### Policy discussions — fiscal policy - Debt sustainability concerns are attenuated by future oil revenues, but financing of short-term deficits should be carefully managed. - Authorities have refrained from private external borrowing in anticipation of future oil income; the NICIL bond is the one instance of such borrowing. - Staff encouraged reliance as much as possible on Multilateral Development Banks, including non-concessional financing. - Domestic financing options remain limited; domestic debt consists of short-term Treasury bills. - Staff stressed settling overdraft balances at the central bank in the short-term through the issuance of Treasury Bills; authorities agreed to do so. - Staff encouraged authorities to follow-up on plans and TA recommendations provided by MCM in 2017 to develop the domestic bond market (Annex II). - If longer-term bonds cannot be issued in the near term, there is scope for additional financing through Treasury Bills. Private external debt should continue to be avoided if possible, and central bank financing should not be used at all. - While consolidation is not needed for the sake of debt sustainability, moderation of the deficit would reduce financing needs and preserve external buffers. - An undershooting of the planned deficits of ½-1 percent of GDP is likely due to one-off revenues from a tax amnesty; staff encouraged authorities to save that overperformance. - Staff cautioned that scaling up public investment without addressing shortcomings identified in the 2017 PIMA could undermine its effectiveness. - Staff recommended an expenditure review to assess efficiency and effectiveness of public spending, and provide opportunities for safety net reform and more effective action on inclusive growth. - Authorities intend to conduct the third Public Expenditure and Financial Accountability (PEFA) assessment in 2018. ### Policy discussions — public enterprises, energy, and social considerations - Staff supports authorities’ efforts to reform public enterprises; restructuring of GuySuCo included workforce reduction and establishment of a Special Purposes Unit at NICIL to divest assets. - Privatization is envisaged for 3 out of 6 sugar estates. - Restructuring involves significant upfront costs but should strengthen fiscal position in the medium-term by eliminating further government bailouts to GuySuCo. - Staff emphasized importance of providing a safety net to protect those affected due to economic and social implications, geographic concentration of displaced workers, and difficulties for sugar workers transitioning to other occupations. - Electricity sector issues: - Technical losses in electricity transmission are about 10 percent. - Commercial losses are about 30 percent. - GPL reported a loss of US$ 3 million in 2017 and has requested government financial support to upgrade generation and grid reliability. - Any significant investment in GPL would likely require additional borrowing or a Public Private Partnership (PPP) arrangement. ### Policy discussions — managing oil revenues and fiscal framework - Plans for establishing a natural resource fund are well-advanced; legislation is expected to be presented to the Cabinet and to Parliament later this year. - Fiscal policy objectives after oil revenue comes on stream should balance development spending and preserving macroeconomic stability. - An appropriate macro-fiscal policy framework should: - Determine allocation of annual oil revenue for stabilization and domestic capital expenditure, and intergenerational savings. - Be integrated into the budget framework with no parallel spending authority. - Ensure consistency between fund deposit/withdrawal rules and a fiscal rule, reinforced by overarching fiscal responsibility legislation. - Annex III provides country experiences in managing natural resource windfalls. ### Fiscal structural reforms and tax administration (Box 1) - Staff supports continued efforts to enhance quality and efficiency of government expenditure and tax administration in response to the 2017 PIMA and TADAT. - The 2017 VAT reform broadened the base while reducing the rate, yielding a gain in the VAT revenue to GDP ratio. - Recent tax administration efforts include establishment of a Large Taxpayers Unit and creation of new outposts to improve tax collection. - Staff cautioned that the expectation of future amnesties can weaken compliance. Reform strategies for modernizing revenue administration include: - Developing a three to five-year strategic plan as a roadmap to guide operational delivery. - Establishing a dedicated reform unit to coordinate implementation of reforms, and improve management control through performance targets. - Improving information technology, particularly in the use of third party data, business process simplification, and data analytics to build an evidence-driven compliance strategy. - Addressing inadequacies in the integrity of the taxpayer register and accounts. - Institutionalizing a compliance risk management program to enable risk profiling and assessment. - Reorganizing the GRA’s structure to place all core specialized functional areas of Customs under the full purview of the Head of Customs. - Reorganizing field offices along segmentation principles. - Establishing the GRA as the single revenue collection agency for the petroleum sector, and creating a specialized petroleum revenue team within the Large Taxpayers Unit. Enhancing Public Financial Management: - Strengthen a medium-term fiscal framework, eventually integrating revenue forecasts from extractive industries. - Develop project-specific cash flow models for the petroleum project and the two large gold mines. - Improve the annual budget process and enhance presentation of the budget to increase credibility. - Public Investment Management (PIM) reforms: - Put in place a transparent rules-based fiscal framework by 2020. - Identify key strategic public investment projects to guide medium-term budgeting. - Complete and publish the policy framework on PPPs. - Improve monitoring of SOEs to coordinate their public investments and monitor fiscal risks. - Prepare and disseminate detailed guidance on project preparation and appraisal; allocate sufficient resources to pre-investment planning; increase budget agencies’ capacity to undertake appraisals. - Enhance access to public procurement information and update regulatory framework to international standards, including requirement for procurement planning. - Issue detailed guidelines on project management, enforce ex-post reviews for major projects, and build a database for monitoring project implementation. - Monitor public assets by conducting regular surveys, keeping record of value, condition, and location of non-financial assets. *International Monetary Fund — cr18220 (excerpts).* ### 19. Notwithstanding the positive prospects of energy revenues on the horizon, the ### 19. Notwithstanding the positive prospects of energy revenues on the horizon, the ### Fiscal stance, revenue, and public finances - Authorities committed to maintaining fiscal discipline while addressing immediate social and infrastructure needs and the costs of GuySuCo’s restructuring. - Central government deficit expected to remain in line with previous years during 2018-19, before gradually falling over the medium-term. - Recent revenue developments: - On-going tax amnesty and improvements in tax collections through recovery of arrears, court judgement awards, and fines are already having a positive impact on government revenues. - Authorities noted moral hazard from expectations of future tax amnesties is well contained since the last amnesty was in the 1980s, and further amnesties are not expected. - Fiscal framework and financing strategy: - Adoption of an oil and gas fiscal framework, establishment of a SWF, and considerations for a medium-term debt strategy to clarify sources of domestic and external financing and cost-risk trade-offs. - Agreed in principle on an appropriate funding mix involving limited private external borrowing and reliance on Multilateral Development Banks to the extent possible. - Intent to issue medium- to long-term bonds to assist in capital market development, delayed by capacity constraints. - Plan to settle government balances in the Bank of Guyana (BoG) in the short-term; an inter-agency MoF-BoG working committee established. - Establishment of a Treasury Single Account expected to help consolidate government funds and narrow the balance; issuance of Treasury Bills to help close that balance in the near term. - Social mitigation for GuySuCo restructuring: - Programs for displaced workers: re-employment in revitalized sugar estates, drainage and irrigation activities, severance payments to many former employees, pay-outs in progress for others, re-training programs, and assistance for starting small businesses. ### Monetary policy and external stability - Monetary stance and outlook: - Monetary policy should gradually revert towards a neutral stance. An accommodative stance was appropriate due to the economic slowdown, weak credit growth, and low inflation; tightening needed as recovery strengthens and inflationary pressures arise. - International prices and pass-through to domestic inflation and effects of changes in the interest rate differential vis-à-vis the United States should be closely monitored. - External position and exchange rate: - Staff assessed Guyana’s external position as moderately weaker than levels consistent with fundamentals. - EBA-based estimates: current account balance in 2017 around 1.9 percent of GDP lower than its norm of a 4.8 percent deficit, implying a moderate real exchange rate overvaluation. - Current account gap expected to narrow over the short-term given expansion of commodity exports and a favorable terms-of-trade shock in 2019; narrowing would imply an exchange rate broadly in line with fundamentals. - International reserves remained above traditional metrics and meet the Fund’s composite adequacy metric. - Staff recommended more exchange rate flexibility to facilitate adjustment to external shocks and safeguard foreign reserves. - Foreign exchange market structure: - The foreign exchange interbank market remains limited; banks rely on a few exporting customers to meet FX demand, leading to hoarding of FX. - Prudential limits on the net open FX position could create incentives for more interbank FX market transactions. - Authorities’ views: - Recent slowdown and low inflation provided space for supportive monetary policy; higher international rates have not yet fully impacted domestic rates. - BoG focused on output and inflation objectives; committed to a market-determined flexible exchange rate regime. - FX market in a strong surplus position of U.S. dollars after some tightness in early 2017; oligopolistic market frictions keep rates somewhat weaker than fundamentals justify. ### Strengthening financial sector resilience - Legislative and regulatory progress: - Significant progress in implementing the 2016 FSAP regulatory framework recommendations. - In April 2018, four bills submitted to Parliament: amendments to the Bank of Guyana’s Act for ELA; amendments to Part VIII of the Financial Institutions Act for orderly resolution; National Payment System law; Deposit Insurance Act. - Deposit insurance scheme (DIS) to be introduced after an effective resolution regime and the ELA framework are formalized. - BoG institutional and supervisory actions: - Established a Financial Stability Unit (FSU) to monitor systemic risks and support the Financial Stability Committee. - Continued close monitoring and frequent reporting requests on commercial banks’ asset quality and remedial actions to reduce NPLs. - Reviewing Crisis Management Plan (CMP) and Supervision Guideline (SG) to fill information gaps on banks’ conditions and group structures, tighten related party lending definition, and refine loan classification and provisioning. - CARTAC provided TA on Basel II/III in February 2018; BoG drafted the road map for Basel II implementation focusing on: Pillar 1 (minimal capital requirement), Pillar 2 (supervisory review), Pillar 3 (public disclosure). - Draft Financial Consumer Protection legislation is being prepared. - Authorities have addressed significant deficiencies in the AML/CFT framework and are encouraged to continue aligning with the FATF standard and ensuring effective implementation. - Balance sheet and sectoral interlinkages: - Households are the principal domestic creditor with banks serving as the center of linkages to other domestic sectors. - In stock terms, households provided about 26 percent of GDP to the banking sector (commercial banks and central bank) in 2016. - Government external funding financed 33.8 percent of GDP, largely from concessional loans; its domestic financing from the BoG and commercial banks were 2.9 percent and 6.9 percent of GDP, respectively. - Authorities’ views and supervisory focus: - Committed to further progress on FSAP recommendations; enhancing BoG supervisory powers and establishing ELA framework prioritized. - Continue to monitor asset quality: NPLs have declined but remain relatively high and concentrated among a few large borrowers with solvent businesses; follow-up examinations and frequent reporting are conducted. - AML/CFT framework significantly strengthened; CBR withdrawals remain a concern but situation stabilized; ongoing discussions with international banks regarding new CBRs are cautiously optimistic. ### Enhancing competitiveness and supporting inclusive growth - Productivity-enhancing reforms and sectoral priorities: - Traditional sectors: sugar sector reforms expected to increase productivity but reduce size; authorities should facilitate retraining and diversification into other crops and activities. Rice sector prospects favorable with rising yields supported by rice research program. - Diversification: efforts to increase backward linkages of the oil industry to the domestic economy. Risk of real exchange appreciation eroding competitiveness in non-energy sectors; mitigation via business climate and infrastructure improvements important. - Energy sector: high energy costs are longstanding obstacle. Plans to use natural gas for power generation could provide cleaner, more affordable alternative to current energy matrix while pursuing renewable energy initiatives. Large commercial users find solar panels cost-effective. - Inclusion: reducing disparities between the coast and the Hinterland remains a priority through improved transportation (including road to Brazil), health, education, electricity, and telecommunication services; moving from flood-prone coastal region to interior would improve climate resilience. - Labor market and demographics: - Recent labor force survey fills important data gaps. - Youth unemployment rate is 21.6 percent compared to an average unemployment rate of 12 percent. - Female labor force participation increased from 34.6 percent in 2012 to 43.6 percent in 2017, but remains much lower than male participation. - Authorities discussing family-friendly labor policies, possible extension of maternity leave, and early childhood intervention programs. - Business climate and governance: - Staff emphasized unlocking private sector-led growth; costs of doing business remain high and Guyana lags peers in dealing with construction permits, resolving insolvency, getting electricity, and trading across borders. - Guyana rated at 56.3 out of 100 in World Bank Doing Business Distance to Frontier, with a small improvement in 2017. - Public investment program can help relieve infrastructure-related bottlenecks and high energy costs. - Authorities established memoranda of understanding with line ministries to reduce duplicate or cumbersome procedures. - Corruption Perception Index improved from 29 to 38 (out of 100) in 2015–17. - Becoming a candidate member of the Extractive Industries Transparency Initiative (EITI) and committing to EITI 2016 standard noted as a welcome step. - Authorities’ views on inclusive and green growth: - Preparing the Green State Development Strategy (GSDS) prioritizing: building a green economy; diversifying economic base; transitioning to renewable energy; resilient infrastructure; sustainable natural resource management; human development; governance and transparency; knowledge-driven growth industries. - Innovations in rice production and access to new markets expected to expand exports. - Bridging coastal–Hinterland divide underway; improving infrastructure and access to healthcare, education, and other social services remains a major cost driver for government expenditure. ### Data, surveillance, and statistical capacity - Data provision broadly adequate for surveillance but needs strengthening. - Problems with quality and timeliness of macroeconomic indicators due to pervasive staffing issues and coverage. - Needed improvements: timely high-frequency data, revision of national accounts and BOP statistics to include oil sector, dissemination of IIP, submission of FSI data, compilation of house price indexes. - Staff welcomed BOP compilation using BPM6. Authorities finalizing an all-urban CPI, a household budget survey, and a living conditions survey. - Capacity constraints remain an obstacle to addressing statistical weaknesses. ### Staff appraisal — outlook, risks, and policy recommendations - Macroeconomic outlook and growth drivers: - Guyana’s macroeconomic outlook remains favorable. Growth slowed in 2017 but became more broad-based and is expected to accelerate in the run-up to the start of oil production in 2020. - Extractive industries and public investment expected to be key growth drivers over the medium-term. - Financing and fiscal policy recommendations: - Short-term financing needs should be carefully managed; authorities’ restraint towards borrowing in anticipation of future oil revenue is commendable. - Rely on Multilateral Development Banks, including non-concessional operations; develop domestic capital markets for stable financing and to meet needs of domestic long-term institutional investors. - Avoid private external borrowing; central bank financing should not be used at all. - Staff welcomed authorities’ intention to close overdraft balances at the central bank in the near-term. - Saving one-off gains from the tax amnesty would reduce financing needs and help preserve external buffers. - Public expenditure and investment management: - Continue improving quality and efficiency of government expenditure. - Address shortcomings identified by the PIMA before scaling-up public investment with oil revenues; review current expenditures to ensure maximum welfare and inclusion benefits. - Oil revenue management and fiscal framework: - Rules-based fiscal framework for managing oil wealth should be transparent and consistent with resource fund deposit/withdrawal rules; should determine annual allocation for stabilization, domestic capital expenditure, and intergenerational savings. - Consistency between fund rules and a fiscal rule could be reinforced by fiscal responsibility legislation. - Monetary and exchange rate policy: - Monetary policy should gradually revert towards a neutral stance as recovery gains pace and inflationary pressures arise. - Exchange rate should play a more active role in cushioning external shocks; building an adequate buffer stock of savings from oil revenues over the long-term would help cope with external shocks. - Financial sector priorities and remaining FSAP work: - Significant progress on 2016 FSAP recommendations, but further work needed: ensure internal consistency from routine supervision to intervention and resolution; eliminate reduced provisioning for “well-secured” portions of NPLs; refine definition of “related parties” to international standards; reduce reliance on overdraft lending; clarify upstream and downstream ownership of institutions; raise minimum capital adequacy requirement to 12 percent; reduce banks’ large exposure limits. - Competitiveness and inclusion: - Enhancing competitiveness and supporting inclusive growth remain high priority: lower cost of doing business by addressing infrastructure bottlenecks, reducing energy costs, and cutting red tape. - Increasing female labor force participation and bridging Hinterland gaps can boost growth and spread benefits more widely. *IMF staff report excerpt: cr18220 - 19. Notwithstanding the positive prospects of energy revenues on the horizon, the* ### 46. Oil exploration and production should be included in the national accounts when they are ### 46. Oil exploration and production should be included in the national accounts when they are rebased, and also in the BOP statistics. ### Key findings - Oil exploration and production should be included in the national accounts when they are rebased. - Oil exploration and production should also be included in the BOP statistics. - Strengthening external sector statistics and compiling an international investment position should be a priority. ### Policy recommendations - Include oil exploration and production in national accounts at the time of rebasing. - Incorporate oil exploration and production into balance of payments (BOP) statistics. - Prioritize strengthening external sector statistics. - Prioritize compiling an international investment position. *Source: cr18220 - 46. Oil exploration and production should be included in the national accounts when they are rebased, and also in the BOP statistics.* ### 47. It is proposed that the next Article IV consultation takes place on the standard 12-month ### It is proposed that the next Article IV consultation takes place on the standard 12-month cycle. ### Comparative regional developments and growth dynamics - Real GDP growth (y/y percent change): charts compare Guyana, Tourism-dependent Caribbean, Commodity-exporting Caribbean for years including 2002, 2005, 2008, 2011, 2014, 2017; summary observations: - Growth was lower in 2017, driven by a slowdown in mining and sugar sectors. - Guyana continues to perform in line or better than some regional peers. - Inflation (period average, y/y percent change): inflation remained subdued in 2017. - Public Sector Balance (percent of GDP): the fiscal deficit deteriorated in 2017. - External Debt (percent of GDP) and Domestic Debt (percent of GDP): external borrowing remained flat in 2017; domestic debt slightly increased from a low base. - Current Account Balance (percent of GDP): weaker-than-expected export growth and higher oil prices worsened the current account balance. ### Real sector indicators - Sectoral real GDP (annual percent change) and sectoral contributions: - Economic expansion continued but at a slower pace in 2017. - Rice production recovered; weakness in mining and sugar sectors reduced real GDP growth. - Economic activity in 2017 slowed but became more broad-based. - Consumer prices: - 12-month inflation remained subdued; consumer prices (monthly percent change) series shown with components Other, Food, Energy and transportation. - Nominal and commodity production indices: - Commodity production index (2007=100) shown for Gold, Rice, Bauxite; charts indicate movements through 2017. ### External sector developments and projections - Current account and trade: - Current account balance (in US$ millions): -291.5 (2014), -163.0 (2015), 13.2 (2016), -237.2 (2017), -220.2 (2018), -168.5 (2019), projected 501.1 (2020), 1,190.5 (2021), 1,564.7 (2022), 2,962.1 (2023). - Current account (excl. official transfers) similarly shown and projected. - Merchandise trade (net) series and exports/imports details indicate weaker exports and higher oil prices negatively affected the current account balance. - Exports (f.o.b.) detailed by commodity (in US$ millions): - Bauxite: 124.7 (2014), 104.3 (2015), 92.1 (2016), 102.3 (2017), 119.3 (2018), 125.0 (2019), 130.9 (2020), 137.0 (2021), 143.5 (2022), 150.8 (2023). - Sugar: 88.0 (2014), 78.4 (2015), 73.4 (2016), 48.5 (2017), 23.6 (2018), 29.0 (2019), 33.4 (2020), 35.1 (2021), 36.5 (2022), 36.8 (2023). - Rice: 249.5 (2014), 220.8 (2015), 178.8 (2016), 201.0 (2017), 220.0 (2018), 221.1 (2019), 229.9 (2020), 239.1 (2021), 248.7 (2022), 258.6 (2023). - Gold: 469.8 (2014), 501.1 (2015), 830.7 (2016), 817.5 (2017), 933.5 (2018), 1,072.2 (2019), 1,174.8 (2020), 1,279.9 (2021), 1,359.8 (2022), 1,439.4 (2023). - Oil: projected exports begin in 2019 with 1,127.6 and increase to 2,220.1 (2020), 2,854.7 (2021), 4,913.9 (2022), 0 (2018 was blank). - Imports (c.i.f.) (US$ millions): 1,737.9 (2014), 1,491.6 (2015), 1,465.1 (2016), 1,632.1 (2017), 1,777.1 (2018), 1,879.8 (2019), projections to 3,446.5 (2023). - Fuel and lubricants imports: 573.4 (2014), 367.4 (2015), 344.7 (2016), 394.5 (2017), 481.3 (2018), 471.5 (2019), projections thereafter. - Financing flows: - Grants and FDI positively affected current and financial accounts in recent years. - Official borrowing partially replaced PetroCaribe financing; composition of loan disbursements charted. - Reserves and import cover: - Gross international reserves (US$ millions): 665.6 (2014), 598.5 (2015), 596.7 (2016), 584.6 (2017), 612.1 (2018), 631.6 (2019), projected 833.2 (2020), 1,136.4 (2021), 1,557.6 (2022), 2,270.0 (2023). - Months of imports of goods and services: 3.7 (2014), 3.7 (2015), 3.7 (2016), 3.2 (2017), 3.2 (2018), 3.1 (2019), projected increases to 6.6 (2023). ### Fiscal sector developments and projections - Central government revenue and expenditure (percent of GDP and G$ billions): - Revenue (percent of GDP): 22.9 (2014), 24.6 (2015), 24.5 (2016), 26.0 (2017), 26.7 (2018), 27.6 (2019), projections to 28.2 (2023). - Expenditure (percent of GDP): 29.1 (2014), 27.0 (2015), 30.0 (2016), 32.1 (2017), 33.6 (2018), 34.1 (2019), projections to 28.7 (2023). - The 2017 NFPS deficit increased due to higher expenditure despite increases in revenue from improvements in tax administration. - Current expenditure continues to increase, reducing fiscal savings. - Central government detailed accounts (G$ billions): - Central government revenue: 146.7 (2014), 162.7 (2015), 177.3 (2016), 194.7 (2017), 208.0 (2018), 230.7 (2019), projections to 460.8 (2023). - Tax revenue: 135.9 (2014) to 171.1 (2017) to 259.5 (2023 projected). - Non-tax revenue: 8.8 (2014), 18.8 (2015), 25.6 (2016), 23.5 (2017), with oil revenue component projected to rise from 0.0 historically to 35.9 (2020), 71.3 (2021), 92.7 (2022), 161.1 (2023). - Capital expenditure: 51.0 (2014), 30.7 (2015), 46.6 (2016), 58.7 (2017), projected to 197.1 (2023). - Financing and debt: - Net domestic financing financed much of the 2017 deficit. - Total public sector gross debt (percent of GDP): 51.9 (2014), 50.1 (2015), 50.7 (2016), 52.2 (2017), 57.0 (2018), 57.2 (2019), projected 54.4 (2020), 51.7 (2021), 51.6 (2022), 41.4 (2023). - External and domestic debt components provided in tables; external debt increased slightly in 2017. ### Financial soundness indicators - Banking system metrics (2007–2017 series): - Capital to risk-adjusted assets and to total assets: reported CAR is above regulatory requirement; system well capitalized. - Provision for loan loss to total loans and NPLs to total loans: credit concentration decreased in 2017 and asset quality slightly improved. - Return on equity and return on assets: banks' profitability remained flat despite weaker economic activity. - Liquid assets to total assets and customer deposit to total loans: banks remain liquid. - Top 20 Borrowers to Total Loans: credit concentration decreased in 2017. - Conclusion: The banking system is well capitalized and liquid; asset quality slightly improved; bank profitability remained stable in 2017. ### Monetary developments - Money and credit: - Broad money (annual percentage): 3.3 (2014), 3.7 (2015), 5.4 (2016), -0.7 (2017), 10.7 (2018), 7.0 (2019), projected 21.3 (2020), 18.0 (2021), 11.6 (2022), 22.8 (2023). - Base money growth decreased; base money levels (G$ billions end-period) and components charted. - Private sector credit (percent): credit growth stabilized, particularly to businesses; household and mortgage lending increased. - Interest rates: interest and Treasury bill rates marginally declined; average lending rates around 10.9 (historical series). - Policy stance: Monetary conditions are broadly supportive of growth. ### Selected social and economic indicators (highlights) - Population, 2018 (thousands): 782 - Life expectancy at birth (years), 2015: 66.5 - Under-five mortality rate (per 1,000 live births), 2016: 32.4 - Gini index, 1998: 44.6 - Population living below the poverty line (%), 2000-06: 35 - HDI rank, 2015: 127 - Real GDP (annual percent change): 3.9 (2014), 3.1 (2015), 3.4 (2016), 2.1 (2017), 3.4 (2018), 4.8 (2019), projection 29.8 (2020) and thereafter. - Per capita GDP, US$: 4,030 (2014), 4,168 (2015), 4,531 (2016), 4,578 (2017), 4,649 (2018), 4,939 (2019), projections to 9,169 (2023). ### Balance of payments, external financing requirements, and vulnerability indicators - Financing requirement (US$ millions): 372 (2014), 196 (2015), 54 (2016), 310 (2017), 340 (2018), 330 (2019), -169 (2020), -749 (2021), -1,011 (2022), -2,120 (2023). - Available financing components include official transfers, NFPS loans, other public sector net, and private sector (net). - Financial vulnerability indicators: - Public sector debt-to-GDP: 51.9 (2014), 50.1 (2015), 50.7 (2016), 52.2 (2017), 57.0 (2018), 57.2 (2019), projected 54.4 (2020), 51.7 (2021), 51.6 (2022), 41.4 (2023). - Current account balance-to-GDP: -9.5 (2014), -5.1 (2015), 0.4 (2016), -6.7 (2017), -6.1 (2018), -4.3 (2019), projected 10.7 (2020), 21.9 (2021), 26.1 (2022), 40.7 (2023). - Gross official reserves (US$ millions) and months of imports presented above. ### Medium-term macroeconomic framework (selected projections) - Real GDP: 3.9 (2014), 3.1 (2015), 3.4 (2016), 2.1 (2017), 3.4 (2018), 4.8 (2019), 29.8 (2020), 22.1 (2021), 11.8 (2022), 27.9 (2023). - Non-oil real GDP: remains in single-digit growth projections after oil production. - Consumer prices (average and end of period) remain moderate: consumer prices (average) 0.7 (2014), -0.9 (2015), 0.8 (2016), 2.0 (2017), 1.3 (2018), 2.9 (2019), projected 3.1–3.5 in 2020–2022. - Fiscal path: - Overall balance (after grants) as percent of GDP: -5.5 (2014), -1.4 (2015), -4.4 (2016), -4.5 (2017), -5.4 (2018), -5.1 (2019), projected -4.8 (2020), -4.7 (2021), -4.3 (2022), -0.2 (2023). - Net external financing and net domestic financing trajectories provided in projections. - Public sector gross debt evolution and memorandum items included. ### Risks and policy responses (Risk Assessment Matrix) - Global risks: - Tighter global financial conditions, including strengthening of the U.S. dollar and/or higher rates — Likelihood: H; Impact: M. - Policy response: 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 — Likelihood: M; Impact: M. - Policy response: Allow the exchange rate to play a more active automatic stabilizer role; Accelerate structural reforms to support growth. - Lower energy prices — Likelihood: L; Impact: M. - Policy response: Short-run benefit via reduced oil import bill; could adversely affect oil-sector investments, calling for fiscal consolidation. - Country-specific risks: - Significant deterioration in the quality of domestic banks’ credit portfolio — Likelihood: M; Impact: H. - Policy response: Strengthen capital and provisioning requirements and risk-based supervision; introduce emergency liquidity assistance and crisis resolution frameworks. - Larger-than-expected slowdown in key sectors and losses/contingencies at public enterprises and PPPs — Likelihood: M; Impact: M. - Policy response: Allow automatic stabilizers to work in the short-term; fiscal consolidation/restructuring of problem enterprises; adopt a medium-term expenditure framework. - Reduced financial services by correspondent banks ("de-risking") — Likelihood: L; Impact: M. - Policy response: Monitor status of CBRs; address drivers behind CBR pressure, including AML/CFT compliance and impediments to information sharing; effectively communicate efforts. *Source: IMF staff report excerpts and associated tables and figures contained in the provided content unit.* ### Annex I. Progress on 2017 Article IV Policy Recommendations ### Annex I. Progress on 2017 Article IV Policy Recommendations ### Fiscal policy - IMF 2017 recommendation: "A moderate fiscal consolidation during 2017-2019 to preserve buffers, through a reduction in the growth in current expenditure, particularly subsidies to SOEs, broaden the revenue base and strengthen tax administration. Refrain from nonconcessional borrowing." - Authorities’ response: "Broadly consistent" - Key outcomes and indicators: - "The central government deficit (after grants) was 4.5 percent of GDP in 2017 compared to the budgeted 5.6 percent." - "The authorities improved tax administration and took measures to restructure the sugar SOE and reduce its reliance on government support." - "External borrowing remained largely on concessional terms." ### Monetary and exchange rate policies - IMF 2017 recommendation: "Maintain an accommodative monetary policy stance, but gradually move towards a neutral stance in 2017. Allow greater exchange rate flexibility to play a larger role in facilitating external adjustment." - Authorities’ response: "Broadly consistent" - Key outcomes and indicators: - "The monetary stance remained accommodative, due to the economic slowdown, and low inflation." - "Following up a small but significant movement in the exchange rate in early 2017, it has remained broadly stable. The authorities have refrained from intervention." ### Financial sector policy - IMF 2017 recommendation: "Strengthen supervisory and regulatory framework in line with the 2016 FSAP recommendations. Operationalize the crisis management framework. Continue to strengthen the AML/CFT framework." - Authorities’ response: "Broadly consistent" - Key actions and progress: - Drafted "amendments to the Financial Institutions Act (FIA) to enhance the supervisory power of the BoG, including inspection, enforcement, and resolution." - Drafted "amendments to the draft Pension Act to bring it in line with international standards." - Prepared "stress testing guidelines for a bottom-up approach." - Drafted "legislation for a deposit insurance scheme (DIS)." - "After addressing AML/CFT deficiencies and exiting the FATF grey list, the government completed the National Risk Assessment as mandated by the Financial Action Task Force (FATF)." ### Structural reforms - IMF 2017 recommendation: "Continue with further improvements to the business climate, diversification efforts, and structural reforms of key economic sector." - Authorities’ response: "Broadly consistent" - Key developments: - "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." *Source: IMF staff compilation from Annex I of cr18220 — Progress on 2017 Article IV Policy Recommendations* ### 1. More frequent follow-up examinations ### 1. More frequent follow-up examinations ### Banking sector supervision: recommendations and authorities’ responses - Eliminate reduced provisioning requirements for “well-secured” portions of NPLs and ensure that loan classification and provisioning reflect borrowers’ true financial conditions. ¶45 - Time: I - Authorities’ response: SG No. 5 is currently being reviewed. - 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 - Time: I - Authorities’ response: On completion of ownership structure update, a questionnaire will be sent to relevant institutions before end-June 2018. - Require banks to develop contingency funding plans to manage liquidity risks due to deposit concentration. ¶35, ¶37, ¶56 - Time: I - Authorities’ response: 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 - Time: I - Authorities’ response: The World Bank provided draft procedures which are expected to be approved by the BoG Board soon. - Reinforce the role of the Financial Stability Committee as a forum for rigorous systemic assessments, including activation of crisis protocols. ¶52, ¶55 - Time: I - Authorities’ response: A Financial Stability Unit was established in July 2017 to support the Financial Stability Committee, 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 - Time: NT - Authorities’ response: 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. The amendment to Part VIII of the FIA has been submitted to the Parliament. - Increase the minimum capital adequacy requirement, including charges for market and operational risk, to at least 12 percent. ¶50 - Time: NT - Authorities’ response: 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. This is expected to be completed by June 30, 2019. - Phase out the zero-risk weighting of CARICOM government securities, and align the weights with individual countries’ risks. ¶45 - Time: NT - Encourage banks to cease the practice of overdraft lending. ¶47 - Time: NT - Authorities’ response: Intent to implement has already been communicated to the commercial banks. - Streamline and operationalize the draft Crisis Management Plan. ¶52 - Time: NT - Authorities’ response: The draft Crisis Management Plan will be revisited subsequent to the finalization of amendments to the FIA Part VIII, and implementation of ELA and Deposit Insurance. ### Legislative and institutional reforms for resolution, ELA, and deposit insurance - Provide resolution powers to the BoG and, to the extent possible, limit courts’ ability to reverse the BoG’s decisions. ¶54 - Time: NT - Authorities’ response: Draft amendments to the Part VIII of the FIA have been prepared, shared with the financial industry, and consultations with stakeholders were held on February 13, 2018. The amendment was submitted to Parliament in April 2018. - Organize a small group at the BoG to develop resolution plans for vulnerable financial institutions. ¶57 - Time: NT - Amend FIA (Part VIII) to enable effective resolution of failing or about-to-fail banks. ¶53-54 - Time: NT - Set up a resolution group for regionally active entities and request group recovery and resolution plans. ¶57 - Time: NT - Review the draft DIS, eliminate its participation in open bank assistance, and ensure that all preconditions for its introduction are satisfied. ¶59 - Time: NT - Authorities’ response: Draft law has been prepared, shared with the financial industry, and consultations with stakeholders were held on February 13, 2018. The draft law was submitted to the Parliament in April 2018. - Amend the BOG Act 1998 to facilitate the ELA framework - Time: NT - Authorities’ response: The amendment to the BoG Act 1998 was submitted to the Parliament in April 2018. ### Financial sector development and regulatory priorities - Expedite preparation of required regulations to support the recently adopted insurance law. ¶48 - Time: I - Authorities’ response: Regulations reviewed by Attorney General Chambers and submitted to Minister of Finance for publication in Gazette. - 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 - Time: I - Authorities’ response: The National Payments Systems laws has been drafted and submitted to the Parliament in April 2018. - Strengthen the AML/CFT framework in line with international standards. ¶65 - Time: I - Authorities’ response: Completed. The legislation has been amended. - Extend maturities of government securities to facilitate capital market development and use in sterilizing structural liquidity. ¶39 - Time: NT - Authorities’ response: IMF TA was provided in July 2017. The implementation of TA recommendations are being examined. ### Key statistics and specific numeric targets/actions (as stated) - Reduce large exposure limit from 40 percent to 25 percent of capital. ¶45-46 - Increase minimum capital adequacy requirement to at least 12 percent. ¶50 - Completion target for CARTAC Basel II/III – Pillar I implementation review: June 30, 2019. *Source: cr18220 - 1. More frequent follow-up examinations (PDF chapter/section).* ### Guyana — Labor Force Survey: main findings (Annex VI) - Survey coverage and timing: - The Guyana Bureau of Statistics (BOS) has published its first ever Labor Force Survey (LFS), covering the third quarter of 2017. - The LFS was conducted between July and September 2017, and was supported by the Inter-American Development Bank. - Demographics: - Average age: 39.8 years old. - Share of population under 25 years old: 47.1 percent. - Ethnicity (working age population): East Indian descent comprise 42.8 percent; African descent comprise 28.2 percent. - Labor force participation and employment-to-population ratios: - Overall employment-to-population ratio: slightly less than 50 percent. - Male employment-to-population ratio: declined from 66.3 percent to 62.1 percent compared to the 2012 Census. - Female employment-to-population ratio: increased from 28 percent to 36.9 percent compared to the 2012 Census. - Unemployment: - Unemployment rate for persons aged 15 and above: 12 percent. - Women’s unemployment rate: 15.3 percent. - Men’s unemployment rate: 9.9 percent. - Youth unemployment rates: higher than average; youth unemployment rate for men: 17.3 percent; youth unemployment rate for women: 28 percent. - Educational attainment of the working-age population: - Primary education only: 48.3 percent. - No schooling: 9.9 percent. - Upper secondary education: about a quarter of the working age population. - Bachelor’s degree or above: 2.8 percent. - Note: Brain drain of educated workers is an important factor contributing to low educational attainment. ### 6. Earnings gaps exist between employment types and gender, and across occupations. ### 6. Earnings gaps exist between employment types and gender, and across occupations. ### Earnings by employment type and gender - Salaried workers earn more than self-employed workers for both men and women. - Men earn on average 1.36 times the monthly earnings of women for salaried workers. - Men earn on average 1.94 times the monthly earnings of women for self-employed workers. - Part of the gender earnings gap can be attributed to longer working hours for men. - The gender gaps in hourly wages are lower than in monthly earnings because men on average work longer hours than women; however, the gender gap in hourly wages still does not account for heterogeneity among workers including differences in education attainment level, occupation, and age. - Figures referenced: Figure 6 (monthly earnings ratios), Figure 7 (implied hourly wage ratios). ### Implied hourly wages (methodology) - Implied hourly wages are calculated based on the following formula: (Implied hourly wages) = (monthly earnings)/(weekly usual hours worked*52 weeks/12 months). - Using this approach: - In terms of implied hourly wages, men on average earn 1.12 times as much as women among salaried workers. - In terms of implied hourly wages, men on average earn 1.59 times as much as women among self-employed workers. - The calculation adjusts monthly earnings by reported usual weekly hours to derive hourly comparisons. ### Earnings by occupation - Monthly earnings differ greatly across occupations. - Workers in financial and insurance services, and mining and manufacturing sectors earn more than workers in other occupations. - Figure referenced: Figure 8 (occupation-level earnings). ### Notes and limitations highlighted in the source - The gender gap measured by monthly and implied hourly earnings does not control for heterogeneity among workers, including differences in education attainment level, occupation, and age. - The analysis relies on implied hourly wages computed from reported weekly usual hours and monthly earnings. *GUYANA STAFF REPORT FOR THE 2018 ARTICLE IV CONSULTATION—INFORMATIONAL ANNEX (May 31, 2018).* ### 13.7 percent above the projections and tripled the amount disbursed in 2016. Equally, ### cr18220 - 13.7 percent above the projections and tripled the amount disbursed in 2016. Equally, ### Overview of 2017 outcomes - Disbursements were "13.7 percent above the projections and tripled the amount disbursed in 2016. Equally, Investment Grants disbursements were healthy with an increase from US$7.3 million in 2016 to US$11.3 million in 2017." - "Net cash flows were positive in 2017 for the first time in three years after two successive years of negative flows. This positive outcome stems from increased disbursements under the investment loan portfolio, considering the 20 percent increase in the level of principal repayments in 2017." ### Investment Loans (Sovereign Guaranteed Portfolio in Execution) - TOTAL approved: 230,456,549; Amount Disbursed: 82,576,569; Disb (%) 36%; Available: 147,879,980 - Selected project entries (Approval Date — Approved Amount — Amount Disbursed — Disb (%) — Available): - Road Improvement and Rehabilitation Program — 28-Oct-09 — 24,800,000 — 24,800,000 — 100% — - - Expansion and Integration of Basic Nutrition Program — 11-Sep-09 — 1,876,549 — 1,875,976 — 100% — 573 - Sustainable Housing Program — 11-Dec-09 — 3,100,000 — 1,299,022 — 42% — 1,800,978 - East Bank Demerara Four Lane Extension — 17-Nov-10 — 20,000,000 — 19,991,022 — 100% — 8,590 - Sustainable Operation of the Electricity Sector and Improved Quality of Service — 7-Sep-11 — 5,000,000 — 5,000,000 — 100% — - - Road Network Upgrade and Expansion Program — 21-Jun-12 — 66,200,000 — 10,410,000 — 16% — 55,790,000 - Power Utility Upgrade Program — 25-Jun-14 — 15,141,750 — 0 — 0% — 15,141,750 - Water Supply and Sanitation Infrastructure Improvement Program — 3-Jul-14 — 9,338,250 — 0 — 0% — 9,338,250 - Citizen Security Strengthening Programme — 3-Dec-14 — 15,000,000 — 4,620,013 — 31% — 10,379,987 - Support to Improve Maternal and Child Health — 26-Oct-16 — 8,000,000 — 258,656 — 3% — 7,741,344 - Sustainable Agricultural Development Program — 16-Nov-16 — 15,000,000 — 1,001,205 — 7% — 13,998,795 - Enhancing the National Quality Infrastructure for Economic Diversification and Trade — 30-Nov-16 — 9,000,000 — 300,000 — 3% — 8,700,000 - Support for the Criminal Justice System — 14-Dec-16 — 8,000,000 — 445,803 — 6% — 7,554,197 ### Investment Grants (IGR) — Summary and Selected Projects - Total Approved: 57,693,477; Current Disbursed: 26,931,152; Life % Disb: 47%; Available: 30,762,325 - Selected project entries (Approval Date — Approved Amount — Current Disbursed — Life % Disb — Available): - Water Supply and Sanitation Infrastructure Improvement Program — 3-Jul-14 — 14,838,250 — 6,934,209 — 47% — 7,904,041 - Power Utility Upgrade Program — 25-Jun-14 — 26,931,250 — 9,308,004 — 35% — 17,623,246 - Micro and Small Enterprise (MSE) Development and Building Alternative Livelihood — 27-Feb-13 — 5,000,000 — 4,284,210 — 86% — 715,790 - Sustainable Energy Program for Guyana — 12-Jul-13 — 5,000,000 — 570,685 — 11% — 4,429,315 - Institutional Strengthening in support of Guyana LCDS — 1-Feb-12 — 5,923,977 — 5,834,044 — 98% — 89,933 ### Net Flow of IDB Convertible Currencies (US$ million) - Loan Disbursements: 2012: 51.4; 2013: 58.5; 2014: 26.2; 2015: 14.7; 2016: 8.6; 2017: 25.1 - of which PBL disbursements: 2012: 9.9; 2013: 16.9; 2014: 0; 2015: 17.2; 2016: 0; 2017: 0 - Repayments (principle): 2012: 2.5; 2013: 4.5; 2014: 5.3; 2015: 8.1; 2016: 10; 2017: 12 - Net Loan Flow: 2012: 48.9; 2013: 54; 2014: 20.9; 2015: 6.6; 2016: -1.4; 2017: 13.1 - Subscriptions and contributions: 2012: 0.5; 2013: 0; 2014: 0; 2015: 0; 2016: -0.5; 2017: 0 - Interests and charges: 2012: 5.3; 2013: 6.4; 2014: 7.4; 2015: 8.4; 2016: 9.4; 2017: 9.6 - Net Cash Flow: 2012: 43.1; 2013: 47.6; 2014: 13.5; 2015: -1.8; 2016: -10.3; 2017: 3.6 ### Loans in Execution as of December 31, 2017 (US$ Million) - Total Loans: 16; Total Approved: 239,846,836; % Disb. 44%; Available: 154,871,390 - Selected project entries (Approval Date — Approved Amount — % Disb. — Available): - Expansion and Integration of Basic Nutrition Program — 9/11/2009 — 1,876,549 — 100% — 573 - Expansion and Integration of Basic Nutrition Program — 12/11/2009 — 3,100,000 — 42% — 1,800,978 - Road Network Upgrade and Expansion Program — 6/21/2012 — 66,200,000 — 5% — 62,790,000 - Citizen Security Strengthening Programme — 12/3/2014 — 15,000,000 — 31% — 10,379,987 - Support to Improve Maternal and Child Health — 10/26/2016 — 8,000,000 — 3% — 7,741,344 - Sustainable Agricultural Development Program — 11/16/2016 — 15,000,000 — 7% — 13,998,795 - Power Utility Upgrade Program — 6/25/2014 — 22,500,000 — 31% — 15,600,662 - Water Supply and Sanitation Infrastructure Improvement Program — 7/3/2014 — 7,500,000 — 76% — 1,824,855 - Road Improvement and Rehabilitation Program — 10/28/2009 — 24,800,000 — 100% — - - East Bank Demerara Four Lane Extension — 11/17/2010 — 20,000,000 — 100% — - - Sustainable Operation of the Electricity Sector and Improved Quality of Service — 9/7/2011 — 5,000,000 — 100% — - - Power Utility Upgrade Program — 6/25/2014 — 15,141,750 — 0% — 15,141,750 - Water Supply and Sanitation Infrastructure Improvement Program — 7/3/2014 — 9,338,250 — 0% — 9,338,250 - Georgetown Sanitation Improvement Program — 10/27/2010 — 9,390,287 — 100% — - ### Investment Grants in Execution as of December 31, 2017 - Total Investment Grants: 5; Total Approved: 57,693,477; % Disb. 59%; Available: 23,599,993 - Selected entries (Approval Date — Approved Amount — % Disb. — Available): - Power Utility Upgrade Program — 6/25/2014 — 26,931,250 — 35% — 12,678,594 - Water Supply and Sanitation Infrastructure Improvement Program — 7/3/2014 — 14,838,250 — 47% — 5,686,361 - Sustainable Energy Program for Guyana — 7/12/2013 — 5,000,000 — 11% — 4,429,315 - Institutional Strengthening in support of Guyana LCDS — 2/1/2012 — 3,073,904 — 97% — 89,933 - Micro and Small Enterprise (MSE) Development and Building Alternative Livelihood — 2/27/2013 — 5,000,000 — 86% — 715,790 ### TC & Grants Active Portfolio (As at March 31, 2018) - Total: 17,946,048; % Disb 52%; Available: 8,574,783 - Selected project entries (Approval Date — Approved Amount — % Disb — Available): - Forest Carbon Partnership Facility Project in Guyana — 12/4/2013 — 3,800,000 — 13% — 3,289,782 - Promoting a Cluster Approach for Agricultural Diversification in Guyana — 11/21/2016 — 150,000 — 0% — 150,000 - Sustainable Livelihoods and Community Economic growth — 11/9/2012 — 1,161,000 — 100% — - - Institutional Strengthening to Guyana Social Safety Net — 12/1/2017 — 600,000 — 0% — 600,000 - Leveraging Natural Capital in Guyana's Rupununi — 5/2/2012 — 1,102,869 — 100% — - - Promoting a Cluster Approach for Agricultural Diversification in Guyana — 11/10/2016 — 782,544 — 12% — 686,821 - Market Development for climate Resilient Food Products in Guyana — 12/14/2017 — 950,000 — 0% — 950,000 - Pool account for audits and training in financial management & procurement — 8/5/2009 — 22,195 — 32% — 15,021 - Support for Management for Development Results — 9/26/2013 — 1,143,000 — 100% — 437 - Guyana - Brazil Land Transport Link and Deep-Water Port — 11/19/2013 — 1,500,000 — 29% — 1,041,820 - Support for the implementation of the Citizen Security Strategy — 12/18/2013 — 1,670,996 — 100% — - - Institutional Strengthening of the Audit Office of Guyana Phase 4 — 12/16/2004 — 488,053 — 100% — - - Public Procurement Modernization and Financial Management Strengthening — 12/16/2004 — 740,000 — 45% — 406,173 - Design and Execution of a Household Survey of Living Conditions — 11/24/2015 — 750,000 — 83% — 0 - Design and Execution of a Labour Force Survey — 11/24/2015 — 400,000 — 100% — - - Enhancing Statistical Capacities of Guyana — 12/16/2015 — 442,092 — 31% — 305,492 - Fiscal Management Modernization in Guyana — 12/7/2016 — 745,000 — 16% — 625,962 - Support for a National Aviation Master Plan for Guyana — 12/9/2016 — 500,000 — 0% — 500,000 - Agribusiness Knowledge Exchange Program — 10/23/2017 — 14,352 — 77% — 3,275 ### Investment Grants Active Portfolio (As at March 31, 2018) — Alternate summary - Total Approved: 51,769,500; % Disb. 56%; Available: 22,794,270 - Entries: - Power Utility Upgrade Program — 06-25-2014 — 26,931,250 — 39% — 12,678,594 - Water Supply and Sanitation Infrastructure Improvement Program — 07-3-2014 — 14,838,250 — 47% — 5,686,360 - Sustainable Energy Program for Guyana — 07-12-2013 — 5,000,000 — 11% — 4,429,315 - Micro and Small Enterprise (MSE) Development and Building Alternative Livelihood — 02-27-2013 — 5,000,000 — 100% — 0 ### Relations with the Caribbean Development Bank (CDB) (As of December 2017) - CDB accounts for "over 20 percent of the country’s multilateral debt stock." - Total loans approved for Guyana from CDB’s inception (January 26, 1970) to December 31, 2017: US$291.9 million; representing 6.2 percent of CDB’s total approved lending; Guyana is CDB’s sixth largest borrower out of 19 borrowing member countries. - Cumulative grant approvals from CDB to Guyana as of December 31, 2017: US$53.2 million (Guyana is the largest recipient of grant funding from CDB after Haiti). - Outstanding balances as of December 31, 2017: US$147.8 million. - Undisbursed balances as of December 31, 2017: $25.11 million. - The US$11.7 million Skills Development and Employability Project (approved December 2016) remains pending. - Summary Statement of Loan Approvals and Undisbursed Balances, December 31, 2016 (In US$ million): - Community Roads Improvement Program — Approval Date 22-Jul-2010 — Approved 16.29 — Undisbursed 0.16 - Fourth Road Project — Approval Date 12-Dec-2012 — Approved 34.20 — Undisbursed 2.61 - Sea and River Defense Resilience Project — Approval Date 12-Dec-2013 — Approved 25.00 — Undisbursed 22.50 - Total Approved 59.20 — Total Undisbursed 25.11 - Loan Transactions (In millions of U.S. Dollars): - Net flows: 2011: 0.31; 2012: 2.18; 2013: (3.32); 2014: (0.16); 2015: (2.90); 2016: (0.14); 2017: 0.63 - Gross disbursements: 2011: 8.06; 2012: 10.37; 2013: 5.13; 2014: 9.53; 2015: 6.90; 2016: 7.78; 2017: 11.00 - Amortization: 2011: 4.50; 2012: 4.93; 2013: 5.06; 2014: 6.24; 2015: 6.35; 2016: 6.64; 2017: 7.06 - Interest and charges: 2011: 3.26; 2012: 3.27; 2013: 3.38; 2014: 3.45; 2015: 3.45; 2016: 3.27; 2017: 3.32 - At the end of 2016, CDB’s Board approved a new CSP for 2017-2021 with a notional resource envelope of US$194 million, including Guyana’s grant allocation of about $65 million from the United Kingdom Caribbean Infrastructure Partnership Fund (UK–CIF). - "The resource envelope reflects the emphasis of the Government of the Co-operative Republic of Guyana (GOGY) that each intervention being financed with external resources must include a grant element of at least 35 percent." - Technical work is expected to inform UK-CIF projects, "These are expected to be approved in late 2018." (text as supplied) - "Guyana’s allocation is GBP 53.2million. This equated to $64.6 million as at November 2, 2016, shortly before Country Strategy Paper was submitted for approval." ### Statistical Issues (As of May 20, 2018) - Assessment summary: "Data provided to the Fund is broadly adequate for surveillance purposes, although timeliness, reliability, and coverage can be improved." - Data availability notes: - "Selected data are only available during missions and upon request." - "Monetary and external statistics, exchange rates and interest rates are reported to the Fund and available also from the website of the Bank of Guyana (BoG) but with certain lags." - "The Ministry of Finance (MOF) provides macroeconomic and fiscal statistics in annual and semiannual publications on its website in a PDF format." - Oil and national accounts: - "Oil exploration and drilling is partially included in the balance of payment statistics, but not in the national accounts." - Recommendation: "Future technical assistance should focus on helping Guyana incorporate reliably the contribution of the oil sector in national statistics and balance of payment statistics." - National accounts work: - "The 2017 technical assistance mission from CARTAC produced a Data Quality Assessment Framework for the national accounts system." - "The mission also assisted the Bureau of Statistics to develop a five-year work plan for the development of the national accounts." - Planned actions: "undertaking a new benchmarking exercise for the annual gross domestic product (GDP) estimates for the year 2018" (text as supplied) and "The authorities intend to rebase GDP, which will help them incorporate the effects of future oil production." - "The authorities commenced disseminating quarterly GDP in 2017." - Future work focus: "compiling expenditure-side GDP, an Industrial Production Index and a Producer Price Index." - "The Bureau of Statistics (BoS) could increase the coverage of surveys, particularly with respect to the services sector." - "It also published the first Labor Force Survey since" (text ends as supplied) *International Monetary Fund — cr18220 (excerpts as provided)* ### 2014. The BoS aims to launch All-Urban CPI, Households Budget Survey, and Living Conditions ### 2014. The BoS aims to launch All-Urban CPI, Households Budget Survey, and Living Conditions Survey later in 2018. ### Statistics programs and planned surveys - The BoS aims to launch All-Urban CPI, Households Budget Survey, and Living Conditions Survey later in 2018. - Participant in the General Data Dissemination System (GDDS) since 2011. - Implementation of a National Data Summary Page, a component of e-GDDS, would improve data transparency and accessibility. - In 2017 the BoG submitted to STA for dissemination the quarterly balance of payments in BPM6 format, starting with data for 2015. - No data are being reported for publication in the Government Finance Statistics Yearbook. ### Government finance statistics and fiscal technical assistance - Fiscal statistics are disseminated through several Ministry of Finance (MOF) publications, including the Mid-Year Report on the annual budget, the Budget Speech and other budget-related documents. - Technical assistance delivered by CARTAC in 2017 focused on strengthening tax administration. - Technical assistance delivered by IMF in 2017 and 2018 focused on: - Reforming and modernizing Guyana’s revenue administration, - Public investment management, - Fiscal analysis, modelling and forecasting future petroleum revenue. - Authorities plan to upgrade their fiscal statistics to reflect the impact of future petroleum revenue and to incorporate it in their future budget projections. ### Monetary and financial stability statistics - The BoG has made significant progress in improving the quality of monetary statistics, especially about the institutional coverage. - Monetary statistics currently include: - The BoG, - Other depositary corporations (commercial banks, the New Building Society, and trust companies), - Other financial corporations (finance companies, life insurance companies, non-life insurance companies, pension funds, and asset management companies). - The BoG’s monetary statistics provide data for publication in the IFS Supplement, based on standardized report forms. - The BoG publishes on a regular basis prudential indicators for commercial banks, depository and non-depository nonbanks in its quarterly report and on its website. - CARTAC has helped develop macro-prudential/systemic risk indicators and financial stability indicators for the insurance sector. ### External sector statistics (ESS) - In 2017 a follow-up mission from CARTAC assisted the BoG in strengthening the compilation and dissemination of external sector statistics. - Improvements and progress: - Some improvements in the quality of balance of payments data. - Implemented a pilot enterprise survey. - Compiled a partial international investment position (IIP). - Prepared quarterly balance of payments data following BPM6 format. - The 2017 mission provided hands-on guidance to major enterprises to complete and submit the survey forms; the BoG staff continues to follow up with the companies. - Data gaps for the IIP include: - Direct investment and other financial assets and liabilities of the nonfinancial private sector and public corporations. - A pilot enterprise survey was conducted, but the response rate is low. ### Table of Common Indicators Required for Surveillance (As of May 2018) - Exchange Rates: Date of Latest Observation 03/18; Date Received 04/18; Frequency of Data D; Frequency of Reporting D; Frequency of Publication D - International Reserve Assets and Reserve Liabilities of the Monetary Authorities: Date of Latest Observation 03/18; Date Received 03/18; Frequency of Data M; Frequency of Reporting M; Frequency of Publication M - Reserve/Base Money: Date of Latest Observation 03/18; Date Received 05/18; Frequency of Data M; Frequency of Reporting M; Frequency of Publication M - Broad Money: Date of Latest Observation 03/18; Date Received 05/18; Frequency of Data M; Frequency of Reporting M; Frequency of Publication M - Central Bank Balance Sheet: Date of Latest Observation 03/18; Date Received 05/18; Frequency of Data M; Frequency of Reporting M; Frequency of Publication M - Consolidated Balance Sheet of the Banking System: Date of Latest Observation 03/18; Date Received 05/18; Frequency of Data M; Frequency of Reporting M; Frequency of Publication M - Interest Rates: Date of Latest Observation 03/18; Date Received 05/18; Frequency of Data M; Frequency of Reporting M; Frequency of Publication M - Consumer Price Index: Date of Latest Observation 03/18; Date Received 04/18; Frequency of Data M; Frequency of Reporting Monthly; Frequency of Publication Monthly - Revenue, Expenditure, Balance and Composition of Financing – General Government: Date of Latest Observation 2017; Date Received 05/18; Frequency of Data Half yearly; Frequency of Reporting Half yearly; Frequency of Publication Half yearly - Revenue, Expenditure, Balance and Composition of Financing – Central Government: Date of Latest Observation 2017; Date Received 05/18; Frequency of Data Half yearly; Frequency of Reporting Half yearly; Frequency of Publication Half yearly - Stocks of Central Government and Central Government-Guaranteed Debt: Date of Latest Observation 2017; Date Received 05/18; Frequency of Data A; Frequency of Reporting A; Frequency of Publication A - External Current Account Balance: Date of Latest Observation 2017; Date Received 04/18; Frequency of Data A; Frequency of Reporting A; Frequency of Publication A - GDP: Date of Latest Observation 2017; Date Received 04/18; Frequency of Data A; Frequency of Reporting A; Frequency of Publication A - Gross External Debt: Date of Latest Observation 2017; Date Received 05/18; Frequency of Data A; Frequency of Reporting A; Frequency of Publication A - International Investment Position: N/A; Date Received N/A; Frequency of Data N/A; Frequency of Reporting N/A; Frequency of Publication N/A ### Debt Sustainability Analysis — Key findings and background - Guyana’s risk of external debt distress remains moderate, but debt dynamics will improve markedly with the start of oil production in 2020. - The PV of external debt-to-GDP is projected to decline to 8 percent over the medium-term while debt service will decrease to 2 percent of revenue. - Stress tests show susceptibility of public debt to adverse shocks before oil revenues place debt on a downward trajectory; external public debt is sensitive to extreme shocks to exports and to the exchange rate, causing temporary significant breaches in external debt thresholds. - Medium- and long-term outlook is very favorable given projected oil revenues, which will underpin fiscal surpluses and a reduction in external indebtedness. - Total gross public debt declined from 61.2 percent of GDP in 2007 to 50.7 percent of GDP in 2017. - IMF, World Bank (IDA), and IADB provided debt relief amounting to US$640 million in 2006–07 under MDRI. - Negotiations with other non-Paris Club creditors are protracted; debt from these creditors amounts to around 12 percent of total external debt or 4 percent of GDP. - Most external debt is owed to multilateral institutions (58.5 percent); the IADB accounted for 40.8 percent of total external debt at end-2017. - China’s Export-Import Bank accounted for 14.6 percent of total external debt at end-2017. - PetroCaribe-related debt was partly repaid through in-kind rice exports; the PetroCaribe agreement was suspended in 2015 and no further borrowing was made since then. ### Oil discoveries, production plans, and fiscal implications - Exxon Mobil offshore oil discovery in 2015 conservatively estimated between 800 and 1,400 million barrels. - Additional major oil discoveries in 2017 in the Stabroek block (Liza, Liza Deep, Payara, Snoek and Turbot) estimated to bring total gross recoverable resources to 3.2 billion oil-equivalent barrels. - Additional discoveries: Ranger and Pacora; 4 exploration wells in 2018 and 20 additional prospects in the Stabroek block; 7 other offshore blocks awarded but not drilled. - Associated gas production is planned for the domestic market. - Commercial production planned to commence in mid-2020, conservatively estimated output of 100,000 barrels/day (bpd) from Liza Phase I. - Liza Phase II expected to commence production in 2022 with capacity of 220,000 barrels per day. - Liza Phase I and II comprise close to 45 percent of total oil reserves in the country (14.1 percent and 30.7 percent respectively). - Combined production of Liza Phase I and II estimated around 300,000 bpd by 2025. - Under the revenue-sharing agreement: - 75 percent of oil production is initially allocated to “cost recovery” to ExxonMobil and its partners. - 25 percent is considered “profit oil” and is shared 50-50 with the government. - The agreement sets a royalty of 2 percent on gross earnings, which brings the initial government share to 14.5 percent of total oil revenues. - Breakeven price for Liza Phase 2 is relatively low at around $35 per barrel. - The trajectory of oil prices is based on the April 2018 WEO projection: - Rising from US$52 dollars per barrel in 2017 to around US$54 dollars by 2023, - Converging to a long-run value of US$55 dollars per barrel thereafter. ### Baseline scenario assumptions and projections - Baseline assumes oil production in Liza Phase I and Phase II will commence in 2020 and 2022, respectively. - Oil production projected to increase from 100,000 barrels per day in mid-2020 to 300,000 barrels per day in 2025-2026, and to average around 111,000 barrels per day in 2034-38. - To account for risk of delays in Liza Phase II, its production ramp-up period is extended over three years, from 2022 to 2025. - Value-added of the oil sector to gross production assumed to be 50 percent of total output. - Staff estimates GDP to grow at 29.1 percent (Y/Y) in 2020. - Government’s share initially 14.5 percent of gross revenues, increases after cost recovery, peaking at 70 percent of gross revenues, before tapering off. - DSA assumes a fiscal regime incorporating a permanent-income type approach; substantial accumulation of foreign assets in a Sovereign Wealth Fund with fiscal surpluses in excess of 20 percent of GDP per year in the late 2020s. - External debt is gradually paid off as it matures; oil revenues assumed to lead to exchange rate appreciation and accumulation of reserves by the central bank. ### Macroeconomic outlook and fiscal projections - Revenues from oil production and rising public investment expected to increase growth to 13.3 percent, on average, during 2018–23, while non-oil growth will remain at around 4.5 percent. - Oil sector’s contribution to GDP projected to peak at around 42 percent in 2025. - Oil will contribute 3.5 and 6 percent of GDP to revenue in 2020 and 2021, respectively. - Central government overall deficit projected to narrow from 5.4 percent of GDP in 2018 to a projected 0.2 percent of GDP by 2023, before turning to an overall surplus. - Inflation projected to increase slightly, averaging 3.1 percent in the medium term. - Current account will move to large surpluses after 2020; gross international reserves will increase, with reserve cover rising to 8 months of imports by 2023. - Fiscal deficit projected at around 4.7 percent of GDP, on average, over the medium term, driven largely by capital spending on infrastructure projects. - Government’s oil revenue averages 5.5 percent of GDP in 2020-22 and 21 percent of GDP in the long run. - Total public and publicly-guaranteed debt increases to 61 percent of GDP by end-2018, stabilizes at 56.3 percent of GDP at the start of oil production in 2020, and gradually tapers to 21.9 percent of GDP by 2038. - Assumption that outstanding domestic government debt securities will be maintained at 20 percent of GDP to develop and maintain a liquid domestic bond market. ### Publicly-guaranteed debt and restructuring - Analysis considers a publicly-guaranteed debt to finance restructuring of the state-owned Guyana Sugar Corporation (GuySuCo). - GuySuCo incurred heavy subsidies amounting to 1-2 percent of GDP per year over the last three years. - Government undertook restructuring including workforce reduction and establishment of a Special Purposes Unit at NICIL to divest assets. - NICIL is raising G$30 billion (3.7 percent of GDP) through a five-year syndicated external bond, secured by its assets and guaranteed by the government. *Source: STAFF REPORT FOR THE 2018 ARTICLE IV CONSULTATION—DEBT SUSTAINABILITY ANALYSIS (May 31, 2018).* ### 4.75 percent, making Guyana one of the lowest credit risks in the Caribbean. ### cr18220 - 4.75 percent, making Guyana one of the lowest credit risks in the Caribbean. ### NICIL borrowing and bond structure - Borrowing: G$30 billion by NICIL incorporated as a Private Limited Company under the Companies Act of 1991 and 100 percent owned by the Government of Guyana. - Purpose: To cover part of workers’ severance payments and the revitalization of three out of six of GuySuCo’s sugar estates prior to their privatization. - Security and repayment: - The bond is secured by the company’s assets. - Revenue from GuySuCo and associated businesses, and proceeds from the privatization of GuySuCo’s estates will be used to repay this bond. - The principal repayment is spread evenly over five years. - Treatment in analysis: To be conservative and to ensure that the public guarantee is fully reflected in the debt statistics, the analysis takes into account the G$30 billion borrowing by NICIL, although it is secured by the company’s assets. - Market context note: Guyana’s spread seems broadly in line with investment-grade countries in the region (example cited: Trinidad and Tobago’s US$ sovereign bond maturing January 16, 2024 traded at a yield-to-maturity of 4.36 percent as of May 10, 2018). ### Assessment of baseline scenario: Gross external debt - Baseline sustainability: - All debt burden indicators remain below their thresholds in the baseline. - The advent of oil reduces the need for new external borrowing and surpluses could be used to service existing debts. - Key statistics and trajectories: - The PV of the external debt-to-GDP ratio peaks at 27 percent of GDP in 2018 due to the public guarantee on NICIL’s G$30 billion bond, but gradually declines to 2 percent in the long term (compared to 20 percent in the previous DSA). - Ratios: external debt-to-revenue is close to its threshold; external debt-to-exports and external debt service-to-exports are well below their respective thresholds. - Short-term pressures: These ratios increase over the short term due to slight increases in principal payments but will gradually decline from 2020 onwards with support from oil revenues. - Stress-test breaches (standardized stress tests): - Significant but temporary breaches occur under extreme shocks to exports and the exchange rate before the start of oil production. - (i) The PV ratios of external debt-to-GDP and external debt-to-exports breach their sustainability thresholds in 2020-22 and 2020-21 respectively, in a scenario that assumes export value growth at historical average minus one standard deviation. - (ii) The PV of external debt service-to-revenue ratio breaches the sustainability threshold in 2019 in a scenario that assumes a one-time 30 percent nominal exchange rate depreciation relative to the baseline during that year. - Interpretation of stress tests: - Breaches in external public debt-to-GDP and external debt-to-exports are distorted by the high standard deviation of export growth in historical data, attributable to: - High share of commodity exports (85 percent of total exports). - High volatility of commodity prices. - A few idiosyncratic shocks (e.g., suspension of rice exports to Venezuela; collapse of the sugar sector). - The temporary breaches in 2020-22 underscore the importance of prudence before the start of oil production. - The one-time 30 percent nominal exchange rate devaluation in 2019 is not reflective of Guyana’s current economic cycle and past exchange rate path (the steepest exchange rate depreciation since 1990 was 11 percent, in 1998). - Start of oil production in 2020 will substantially increase international reserves and may create significant appreciation pressures on the Guyanese dollar. ### Assessment of baseline scenario: Gross public debt - Baseline trajectory: - Total gross public-sector debt risk starts to decrease from 2020 with oil revenues. - Debt-to-GDP ratio rises to 61 percent in 2018 due to the government guarantee on NICIL’s bond (3.7 percent of GDP), then gradually declines to 56.3 percent in 2020 and 21.9 percent of GDP by 2038, on the back of rising fiscal surpluses from oil revenues. - The PV of the public-sector debt-to-GDP ratio is projected to increase to 48 percent in 2018-19 and gradually decline thereafter, stabilizing at around 20 percent of GDP in the long term. - Long-term level assumption: maintenance of domestic debt at 20 percent of GDP for capital market development and liquidity purposes. - Stress-test vulnerabilities: - In an extreme scenario that assumes real GDP growth at 10-year historical average minus one standard deviation, the PV of debt-to-GDP ratio would breach the threshold from 2020 onwards, rising to 212 percent by 2038. - One reason: the scenario effectively eliminates the high real GDP growth in 2020 (as if oil production in Liza Phase I did not start). - Historical standard deviation may be distorted by underestimation of GDP, imports, and FDI in years prior to oil production because national accounts and balance of payments did not reflect foreign companies’ investments during the preparatory phase. - Thus this scenario mainly removes the level effect on GDP of going from no oil production to being an oil producer and is considered to have extremely low probability. - Another breach occurs in 2028 under a shock that assumes a fixed primary balance; this shock would involve running a 4 percent primary deficit at the peak of oil revenues and is judged highly unlikely. ### Conclusion and policy implications - Overall assessment: - Guyana’s debt dynamics improve considerably under the baseline, but are vulnerable to stress tests; the risk of debt distress remains moderate. - In the baseline, debt indicators remain below their respective thresholds over the projection period. - The PV of external debt-to-GDP ratio declines to around 2 percent in the long run as the need for external borrowing is eliminated by the accumulation of external assets. - The PV of total debt-to-GDP ratio remains below the debt sustainability threshold in the baseline and is on a downward trajectory, but is susceptible to large shocks to real GDP growth. - Financing and institutional priorities: - Financing the large deficits projected in the short-term may require an increasing reliance on non-concessional debt, including domestic borrowing. These financing risks are not fully captured in this LIC DSA and warrant close monitoring. - It is important to strengthen fiscal policy institutions prior to the start of oil production for prudent and effective management of the anticipated large inflows. *Source: cr18220 - 4.75 percent, making Guyana one of the lowest credit risks in the Caribbean.* ### Box 1 in the Staff Report provides details on fiscal structural reforms. ### Box 1 in the Staff Report provides details on fiscal structural reforms. ### Indicators and stress-test outcomes (Figures 1–2) - The most extreme stress test is the test that yields the highest ratio on or before 2028; for Figures b–e it corresponds to an Exports shock, and for Figure f to a One-time depreciation shock. - Debt accumulation and debt-service indicators charted for 2018–2038 include: - Grant-equivalent financing (% of GDP) and Grant element of new borrowing (% right scale) shown alongside Rate of Debt Accumulation. - Debt service-to-revenue ratio and debt service-to-exports ratio presented under baseline, historical scenario, and most extreme shock. ### External Debt Sustainability — baseline indicators (Table 1) - External debt (nominal): 35.7, 33.2, 35.5, 40.0, 35.8, 31.5, 28.0, 26.5, 20.6, 11.7, 4.2 - Of which: public and publicly guaranteed (PPG): 35.7, 33.2, 35.5, 40.0, 35.8, 31.5, 28.0, 26.5, 20.6, 11.7, 4.2 - Change in external debt: -3.8, -2.6, 2.3, 4.5, -4.1, -4.3, -3.5, -1.5, -5.9, -1.1, -0.6 - Identified net debt-creating flows: -0.2, -5.2, 0.2, -1.2, -3.4, -12.1, -10.8, -8.1, -14.7, -25.7, -5.4 - Non-interest current account deficit (series): 4.6, -0.9, 6.0, 8.0, 4.1, 5.4, 3.7, -11.3, -22.4, -26.6, -41.1, -30.1, -6.0, -25.6 - Exports (series): 40.5, 45.7, 45.2, 47.7, 49.2, 68.0, 80.9, 86.0, 100.6, 103.6, 52.0 - Imports (series): 60.0, 55.0, 60.8, 62.6, 62.3, 61.6, 60.5, 60.0, 56.9, 44.4, 40.9 - Net FDI (negative = inflow) (series): -3.8, -1.7, -6.0, -7.3, 2.7, -6.0, -5.9, 7.5, 17.0, 21.0, 32.1, 4.1, 0.6, 9.0 - Endogenous debt dynamics contribution from nominal interest rate: 0.5, 0.5, 0.6, 0.6, 0.6, 0.6, 0.6, 0.5, 0.5, 0.3, 0.1 - PV of external debt (selected projection series): ......23.0, 27.5, 23.7, 21.1, 18.9, 18.1, 14.1, 8.0, 1.8 - PV of external debt in percent of exports (selected): ......50.8, 57.5, 48.3, 31.0, 23.4, 21.0, 14.0, 7.7, 3.5 - PV of PPG external debt (in percent of government revenues): ......87.3, 98.9, 80.6, 72.9, 63.6, 60.8, 47.3, 15.2, 5.0 - Debt service-to-exports ratio (in percent): 7.6, 3.8, 3.6, 4.4, 11.7, 2.5, 1.9, 1.7, 1.2, 1.0, 1.0 - PPG debt service-to-revenue ratio (in percent): 11.5, 6.6, 6.1, 7.6, 19.5, 6.0, 5.3, 4.8, 3.9, 1.9, 1.5 - Total gross financing need (Billions of U.S. dollars): 0.1, 0.0, 0.1, 0.1, 0.1, -0.1, -0.2, -0.3, -0.6, -2.5, -0.6 - Non-interest current account deficit that stabilizes debt ratio (selected): 8.3, 1.7, 3.7, 0.9, 7.8, -7.0, -18.9, -25.2, -35.2, -29.0, -5.4 ### Key macroeconomic assumptions (Table 1 & Table 3) - Real GDP growth (series across tables): 3.1, 3.4, 2.1, 3.8, 1.2, 3.4, 4.8, 29.8, 22.1, 11.8, 27.9, 16.6, 0.0, 0.5, 0.3 - GDP deflator in US dollar terms (change in percent) (selected series): 0.8, 6.0, -0.5, 3.6, 3.8, -1.3, 1.7, -7.2, -4.5, -1.5, -5.0, -3.0, 2.8, 3.4, 3.1 - Effective interest rate (percent) (series): 1.4, 1.5, 1.9, 1.3, 0.3, 1.8, 1.7, 2.0, 2.1, 2.1, 2.1, 2.0, 1.8, 2.0 - Growth of exports of G&S (US dollar terms, in percent) (selected): -4.0, 23.6, 0.5, 7.3, 15.1, 7.9, 9.8, 66.6, 38.8, 17.0, 42.2, 30.4, 0.0, -2.6, -0.9 - Growth of imports of G&S (US dollar terms, in percent) (selected): -11.4, 0.6, 12.3, 5.9, 15.0, 5.1, 6.0, 19.0, 14.7, 9.2, 15.1, 11.5, 13.4, 3.0, 1.2 - Grant element of new public sector borrowing (in percent) (selected): 13.9, 27.9, 26.5, 26.4, 30.0, 30.0, 25.8, 3.0, 1.0, 3.5 - Government revenues (excluding grants, in percent of GDP) (series): 26.8, 26.4, 26.3, 27.8, 29.5, 28.9, 29.7, 29.7, 29.8, 52.5, 35.8, 41.9 ### Public sector debt sustainability (Table 3) - Public sector debt (percent of GDP, series): 50.1, 50.7, 52.2, 61.0, 60.3, 56.3, 52.8, 52.1, 41.4, 34.8, 31.6, 29.7, 27.9, 26.4, 21.9 - Of which: foreign-currency denominated (series duplicates external share): 35.7, 33.2, 35.5, 40.0, 35.8, 31.5, 28.0, 26.5, 20.6, 17.1, 15.2, 14.0, 12.8, 11.7, 4.2 - Change in public sector debt (selected): -1.8, 0.6, 1.5, 8.8, -0.7, -4.0, -3.5, -0.7, -10.7, -6.6, -3.2, -1.9, -1.8, -1.5, -0.3 - Primary deficit (selected series): -0.6, 2.1, 4.3, 5.3, 4.2, 3.7, 2.6, -1.2, -1.1, -1.1, -1.0, -0.9, -0.9, 2.2, -0.8, -0.7 - Revenue and grants (series): 27.8, 27.5, 27.9, 29.3, 30.8, 29.8, 30.2, 30.1, 30.2, 28.9, 28.5, 28.5, 35.7, 30.5, 25.3, 35.8 - Primary (noninterest) expenditure (series): 27.2, 29.5, 32.2, 34.5, 35.0, 33.5, 32.8, 28.9, 29.1, 27.7, 27.6, 34.7, 52.1, 51.6, 35.1 - Automatic debt dynamics contribution from interest rate/growth differential (selected): -1.2, -2.2, -1.0, -1.6, -3.1, -12.2, -8.9, -4.8, -9.9, -5.4, -1.8, -0.3, -0.2, 0.2, -0.1 - PV of public sector debt (selected): ......39.7, 48.5, 48.2, 45.9, 43.6, 43.6, 34.9, 29.5, 26.8, 25.3, 23.8, 22.6, 19.4 - Gross financing need (percent of GDP, series): 14.6, 17.2, 23.1, 23.7, 29.7, 25.9, 25.8, 23.1, 21.5, 18.4, 17.0, 16.3, 15.7, 15.4, 17.1 - PV of public sector debt-to-revenue and grants ratio (selected): ...142.2, 165.6, 156.5, 153.9, 144.4, 144.8, 115.9, 102.1, 93.9, 70.9, 45.0, 45.0, 43.1, 54.2 ### Sensitivity analyses and stress scenarios (Tables 2 & 4) - Table 2 reports sensitivity for PV of debt-to-GDP, PV of debt-to-exports, PV of debt-to-revenue, debt service-to-exports, and debt service-to-revenue for 2018–2038 under: - Alternative Scenarios (A1, A2) and Bound Tests (B1–B6). - Example baseline entries for PV of debt-to-GDP ratio: 27, 24, 21, 19, 18, 14, 8, 2 (by selected years). - Example bound-test outcome: B6 One-time 30 percent nominal depreciation relative to the baseline in 2019 produces notably higher ratios in several series. - Table 4 reports public debt sensitivity (PV of Debt-to-GDP Ratio, PV of Debt-to-Revenue Ratio, Debt Service-to-Revenue Ratio) for 2018–2038 under: - Alternative scenarios A1–A3 and Bound tests B1–B5. - Example baseline PV of Debt-to-GDP Ratio series: 48, 48, 46, 44, 43, 52, 31, 19 (by selected years). - Stress tests include scenarios such as Permanently lower GDP growth, One-time 30 percent real depreciation, and 10 percent of GDP increase in other debt-creating flows. ### Notable methodological notes and definitions - Revenues are defined inclusive of grants. - PV calculations assume PV of private sector debt is equivalent to its face value. - Effective interest rate defined as current-year interest payments divided by previous period debt stock. - Grant-equivalent financing includes grants provided directly to the government and through new borrowing (difference between the face value and the PV of new debt). - Bound-test B2 (exports shock) and other export-value shocks assume exports values remain permanently lower, while current account as a share of GDP returns to baseline (implicitly assuming offsetting import adjustments). - A2 “less favorable financing” assumes the interest rate on new borrowing is by 2 percentage points higher than in the baseline, while grace and maturity periods remain the same. *Sources: Country authorities; and staff estimates and projections.* --- _Source: https://www.imf.org/-/media/files/publications/cr/2018/cr18220.pdf_