## 1guyea2022001

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### Background
- Non-oil GDP contracted by -7.3 percent in 2020; overall GDP grew 43.5 percent in 2020 as oil GDP expanded.
- Oil production increased 57 percent in 2021 to 110,000 bpd.
- With Liza-2 (February 2022), Payara (end-2023) and Yellowtail (2025), oil production projected to reach 720,000 bpd by 2026.
- Exxon announced discovery of three additional offshore fields in April 2022; commercially recoverable petroleum reserves might reach over 11 billion barrels.
- Presentation of macro ratios is generally reported in relation to non-oil GDP to avoid distortions due to the oil sector.
- Human development: HDI lower than the median for the region and for countries in the same income group; Guyana graduated from low-income status in 2020.

### Recent developments
- Political delays: no-confidence vote in December 2018, delayed transition after March 2020 elections, new administration assumed office in August 2020; 2020 budget approved only in September 2020, increasing reliance on direct central bank financing as external funding slowed.
- 2021 economic performance:
  - Non-oil GDP recovered in 2021, supported by mining, construction, and services.
  - Summer floods in 2021 affected agriculture and hinterland activity.
  - Inflation rose from 5.7 percent at end-2021 to 6.6 percent by May 2022; inflation declined in May 2022 with a more moderate contribution of food inflation.
  - COVID vaccines administered to around two-thirds of the population; three-phase reopening began in 2021.
- War in Ukraine impact:
  - Rising global food and commodity prices (including fuel) contributed to inflationary pressures.
  - War not expected to affect food security materially given limited import exposure to Ukraine and Russia and recovering domestic agriculture.
  - Higher global oil prices strengthened fiscal and external accounts and encouraged some oil producers to increase production.
- External sector and reserves:
  - 2020: oil exports and improved non-oil current account led to some reserve accumulation.
  - 2021: higher investment-related oil-sector imports and lower non-oil commodity exports widened current account deficit.
  - Financial account improved due to higher FDI in oil sector and new SDR allocation; FX reserves coverage improved to 1.9 months of imports (2.9 months of non-oil imports).
  - Real and nominal effective exchange rates depreciated slightly in 2021 and remained stable in 2022 up to report date.
- Fiscal and monetary:
  - Expenditure reallocated toward cash grants, household transfers, and public investment projects; VAT on basic food items and household necessities set to zero.
  - Overall deficit (after grants) as percent of non-oil GDP deteriorated sharply in 2020 and less so in 2021.
  - Public debt stood at 42.9 percent of GDP at end-2021.
  - Fiscal cost-of-living measures included:
    - adjustment to freight cost component in CIF value reducing import revenue by around G$6 billion (0.2 percent of GDP, 0.5 percent of non-oil GDP);
    - lowering excise tax rate on gasoline and diesel from 50 percent to 0 percent;
    - allocating about 0.2 percent of GDP (0.4 percent of non-oil GDP) for other measures.
  - Broad money grew by 12.2 percent in 2021; credit to private sector rose by 7.1 percent in 2021.
  - Weighted average commercial banks’ prime lending rate declined from 9.3 percent at start-2021 to 8.9 percent by year-end.
- Financial sector:
  - Capital adequacy ratio (CAR) 29.1 percent at end-2021 (regulatory minimum 8 percent).
  - Nonperforming loans to total loans improved to 7.8 percent from 10.8 percent at end-2020.
  - Profitability (ROA and ROE) and liquidity ratios weakened due to increased provisioning, significant write-offs from AQR, and narrowing lending spreads.
  - House prices declined by about 0.2 percent in 2021.
  - Bank of Guyana revised AQR guidelines and implemented some pillars of Basel II and III.

### Outlook and risks
- Medium-term growth:
  - Non-oil GDP expected to average 5 percent per year over the medium term.
  - Non-oil GDP growth expected to rebound strongly in 2022 due to recovery of sugar and rice production and oil spillovers.
  - Inflation expected to reach around 3.5 percent in the medium term; inflation expected to rise to 9.4 percent at year-end 2022 and decline thereafter.
  - Oil GDP expected to grow over 100 percent in 2022 with Liza-2; about 30 percent on average per year during 2023–26.
- Public investment and fiscal stance:
  - Public investment spending expected to increase to close infrastructure gaps and support non-oil growth.
  - Only around 10 percent of budgeted public capital investment was executed in first 4.5 months of 2022; year-end execution unlikely to exceed 70 percent.
  - Authorities committed to a zero overall balance in the medium term; macro-fiscal framework in report based on expected public investment implementation consistent with this anchor.
  - With large infrastructure tenders allotted to international firms importing capital goods and workers, inflation expected to be contained in the medium term.
- External and reserves:
  - Reserves coverage will steadily improve; substantial buffers will accumulate in the Natural Resource Fund (NRF), expected to reach almost US$20 billion in 2027.
  - Current account (including grants) will turn into a significant surplus in 2022 as Liza-2 commences and oil prices remain high.
  - Public debt peaked at 51 percent of GDP in 2020 and expected to decline to around 13 percent by 2027.
- Debt sustainability and reserve adequacy:
  - Risk of external debt distress remains moderate; debt dynamics improve significantly with incoming oil revenues.
  - Debt carrying capacity downgraded from ‘moderate’ to ‘weak’ due to relatively low international reserves-to-imports cover in 2022 driven by a sharp increase in oil-related imports.
  - Guyana retains space to absorb shocks given low current external debt, expected rapid reserve increases, and NRF accumulation; international reserves expected to remain above adequate levels in terms of short-term debt, broad money, and non-oil related imports but below adequate levels by the ARA EM Metric due to large increase in oil exports.
- Risks:
  - Downside: highly volatile oil prices; slowing global economy; escalation of war in Ukraine causing sanctions and disruptions; global recession reducing oil demand and prices; new COVID outbreaks; excessively rapid government spending causing real exchange rate appreciation and reserve losses; governance concerns.
  - Upside: further oil discoveries and production could significantly improve long-term prospects.
  - Note: Exxon’s April 2022 discovery of three additional offshore fields is not incorporated into projections.

### Key medium-term projections and indicators (selected figures)
- Real GDP (percent change): 23.9 (2021 Prel.), 57.8 (2022 Proj.), 25.2 (2023 Proj.), 21.2 (2024 Proj.), 28.2 (2025 Proj.), 25.5 (2026 Proj.), 3.3 (2027 Proj.).
- Real Non-Oil GDP (percent change): 4.6 (2021 Prel.), 7.2 (2022 Proj.), 5.0 (2023 Proj.), 5.1 (2024 Proj.), 5.2 (2025 Proj.), 5.2 (2026 Proj.), 5.2 (2027 Proj.).
- Real Oil GDP (percent change): 56.9 (2021 Prel.), 116.1 (2022 Proj.), 36.8 (2023 Proj.), 28.3 (2024 Proj.), 36.5 (2025 Proj.), 31.1 (2026 Proj.), 2.9 (2027 Proj.).
- Consumer prices (average): 3.3 (2021 Prel.), 7.6 (2022 Proj.), 7.6 (2023 Proj.), 5.0 (2024 Proj.), 3.8 (2025 Proj.), 3.5 (2026 Proj.), 3.5 (2027 Proj.).
- Consumer prices (end of period): 5.7 (2021 Prel.), 9.4 (2022 Proj.), 6.0 (2023 Proj.), 4.1 (2024 Proj.), 3.5 (2025 Proj.), 3.5 (2026 Proj.), 3.5 (2027 Proj.).
- Revenues and grants (percent of non-oil GDP): 24.3 (2021 Prel.), 34.3 (2022 Proj.), 36.3 (2023 Proj.), 37.4 (2024 Proj.), 37.9 (2025 Proj.), 37.9 (2026 Proj.), 37.6 (2027 Proj.).
  - o/w oil revenues (percent of non-oil GDP): 0.0 (2021 Prel.), 10.0 (2022 Proj.), 12.2 (2023 Proj.), 13.4 (2024 Proj.), 13.9 (2025 Proj.), 13.8 (2026 Proj.), 13.9 (2027 Proj.).
- Expenditure (percent of non-oil GDP): 35.3 (2021 Prel.), 36.8 (2022 Proj.), 37.5 (2023 Proj.), 37.9 (2024 Proj.), 37.9 (2025 Proj.), 37.9 (2026 Proj.), 37.6 (2027 Proj.).
  - Current: 25.8 (2021 Prel.), 24.7 (2022 Proj.), 25.2 (2023 Proj.), 25.4 (2024 Proj.), 25.4 (2025 Proj.), 25.4 (2026 Proj.), 25.1 (2027 Proj.).
  - Capital: 9.5 (2021 Prel.), 12.1 (2022 Proj.), 12.3 (2023 Proj.), 12.5 (2024 Proj.), 12.5 (2025 Proj.), 12.5 (2026 Proj.), 12.5 (2027 Proj.).
- Overall balance (after grants, percent of non-oil GDP): -10.5 (2021 Prel.), -1.7 (2022 Proj.), -1.2 (2023 Proj.), -0.5 (2024 Proj.), 0.0 (2025 Proj.), 0.0 (2026 Proj.), 0.0 (2027 Proj.).
- Public Debt (% of GDP): 42.9 (2021 Prel.), 22.8 (2022 Proj.), 20.9 (2023 Proj.), 18.8 (2024 Proj.), 16.2 (2025 Proj.), 13.7 (2026 Proj.), 13.5 (2027 Proj.).
- Current account balance (% of GDP): -25.5 (2021 Prel.), 43.8 (2022 Proj.), 30.8 (2023 Proj.), 28.7 (2024 Proj.), 17.4 (2025 Proj.), 26.3 (2026 Proj.), 26.7 (2027 Proj.).
- Gross official reserves (US$ millions): 810.8 (2021 Prel.), 870.7 (2022 Proj.), 1323.3 (2023 Proj.), 1856.6 (2024 Proj.), 2454.3 (2025 Proj.), 2832.2 (2026 Proj.), 3172.5 (2027 Proj.).
  - (in months of imports of goods and services): 1.9 (2021 Prel.), 1.3 (2022 Proj.), 2.9 (2023 Proj.), 2.9 (2024 Proj.), 5.1 (2025 Proj.), 6.8 (2026 Proj.), 7.2 (2027 Proj.).
  - (in months of non-oil imports of goods and services): 2.9 (2021 Prel.), 3.1 (2022 Proj.), 4.5 (2023 Proj.), 6.0 (2024 Proj.), 7.6 (2025 Proj.), 8.1 (2026 Proj.), 8.5 (2027 Proj.).
- End of year balance at the Natural Resource Fund (US$ millions): 607.5 (2021 Prel.), 1446.8 (2022 Proj.), 2304.7 (2023 Proj.), 3776.4 (2024 Proj.), 7850.5 (2025 Proj.), 14227.6 (2026 Proj.), 21141.6 (2027 Proj.).
- Crude oil production (millions of barrels): 42.4 (2021 Prel.), 93.4 (2022 Proj.), 124.5 (2023 Proj.), 155.5 (2024 Proj.), 207.0 (2025 Proj.), 264.6 (2026 Proj.), 264.6 (2027 Proj.).
- Oil price (US$ per barrel): 69.1 (2021 Prel.), 106.8 (2022 Proj.), 92.6 (2023 Proj.), 84.2 (2024 Proj.), 78.5 (2025 Proj.), 74.7 (2026 Proj.), 72.5 (2027 Proj.).

### Authorities’ views and policy priorities
- Authorities view medium-term growth prospects as better than ever but acknowledge downside international risks (oil price volatility, war in Ukraine, supply chain disruptions, global slowdown).
- Authorities confident measures will help contain inflationary pressures, especially on housing and utilities components of CPI.
- Authorities determined to ensure development strategy avoids macroeconomic imbalances (e.g., excessively high inflation, loss of competitiveness, reserve losses).

### Policy discussions — fiscal policy (intent and recommendations)
- Intent:
  - Effective use of oil wealth to enhance living standards and physical and human capital.
  - Need for a medium-term fiscal framework with a clear fiscal anchor and structural reforms for governance, inclusive growth, and climate challenges.
- Near-term fiscal stance recommendations:
  - Maintain prudent fiscal policy while temporarily easing burdens on vulnerable households.
  - Gradually unwind general subsidies provided through the tax system because they are poorly targeted.
  - Move to full pass-through of international prices to domestic prices; replace general tax subsidies with better-targeted government support.
  - Develop and strengthen a well-targeted social safety net.
  - Sustainably increase capital spending within a framework that avoids macroeconomic imbalances.
  - Draw down debt to central bank incurred while monetizing the deficit during 2015-mid 2021.
- NRF Act, fiscal anchor, and medium-term framework:
  - December 2021 amendments set clear ceilings on withdrawals from the NRF but do not provide an effective fiscal anchor; Guyana lacks a medium-term fiscal framework.
  - Staff recommended constraining the annual non-oil overall fiscal deficit (after grants) to not exceed the expected transfer from the oil savings fund.
  - Staff recommended a zero overall fiscal balance anchor supported by a medium-term expenditure framework:
    - Current expenditures should mostly grow in line with non-oil GDP.
    - Growth of capital expenditures guided by absorptive capacity.
  - To be effective, zero overall fiscal balance target needs:
    - Rigorous analysis and possible changes to NRF transfer rule.
    - Operational target for the non-oil balance.
    - Measures to mobilize non-oil revenues and contain wage bill and non-current spending.
  - Transfers from the NRF could follow:
    - A Permanent Income Hypothesis (PIH) rule based on annuity/perpetuity value of expected future oil revenues, or
    - A more conservative ‘bird in hand’ rule based on returns on already materialized oil revenues.
- Public investment management:
  - Capacity weaknesses in public investment management need addressing; 2017 PIMA report highlighted weaknesses in planning, budgeting, appraisal, selection, procurement, and implementation.
  - Staff urged implementation of PIMA recommendations and a public expenditure review.

### Monetary and exchange rate policy
- With expected continued tightening of U.S. monetary policy, Guyana needs to tighten monetary policy to maintain exchange rate stability and contain inflationary pressures from elevated international commodity prices, domestic recovery, and higher government spending.
- Instruments suggested to curb monetary aggregate growth:
  - Raising the reserve requirement rate.
  - Expanding sale of Treasury bills to contain excess liquidity.
- Exchange rate should continue to serve as the nominal anchor while domestic financial markets deepen.
- FX interventions should address disorderly conditions and smooth short-term fluctuations not related to fundamentals.
- Medium to long term: staff support greater exchange rate flexibility as Guyana becomes a major oil producer and financial markets deepen; revise monetary policy framework to allow exchange rate to absorb shocks.
- Authorities prefer step-by-step market deepening and view reserve requirement as sufficient tool to curb credit supply when needed.

### Financial sector policy and digitalization
- Progress on 2016 FSAP recommendations: accelerated Basel II/III implementation and asset quality reviews; banks wrote off substantial stock of NPLs.
- Challenges remain: move from paper-based to risk-based supervision.
- AML/CFT: ensure effective implementation; a fourth CFATF mutual evaluation expected by end-2023; 2021 NRA completed; BoG implementing NRA recommendations with CARTAC.
- Digital payments growth: Mobile Money Payment System adoption; develop mobile money with risk-based regulation to mitigate ML/TF risks; consider IMF technical assistance on mobile payments regulation and supervision.
- Financial inclusion: private credit bureau, CreditInfo, established in July 2013; Credit Reporting Act amended January 2016 mandating information sharing.
- Fintech and digitalization can increase financial sector contribution to growth and diversify the non-oil economy.

### Structural and governance reforms to support inclusive growth
- Priority reforms:
  - Lower unemployment, especially rural youth.
  - Reduce inter-industry skills mismatches via education and labor market policies.
  - Engage Guyanese diaspora; adjust labor market regulation; expand schools and vocational training.
  - Increase investment in healthcare, roads, electricity, and telecommunications.
  - International experience suggests reducing local content requirements can help address skills mismatches via early engagement of foreign qualified skilled workers.
- Anti-corruption and transparency:
  - Progress: publication of audit reports (including COVID-related), re-establishment of Integrity Commission, annual asset declarations, live streaming of procurement tenders.
  - Staff urged improved EITI information sharing, publication of extractive industries’ financial statements, electronic disclosures, and closer follow-up on EITI recommendations.
- Low Carbon Development Strategy (LCDS):
  - LCDS implementation in 2022 includes shift to renewable energy and investing in hydroelectric power.
  - Guyana commits to reduce emissions by 70 percent before 2030 mainly via maintaining vast forest coverage and monitoring oil emissions on a sectoral and additive basis.
  - LCDS aims to monetize forest carbon services and increase resilience to climate risks.

### Labor market, governance, capacity development, and data
- Labor market:
  - Authorities investing in human capital including technical and vocational education to address skills shortages and labor market mismatches.
  - Work begun to gather critical data to inform interventions.
- Governance and anti-corruption planned actions:
  - Accelerate electronic publication of procurement contracts; establish bidders register; continue publishing audit reports; strengthen inter-agency coordination; increase public awareness of anti-corruption functions.
- Capacity development and data:
  - Large capacity needs; staff urged requests for technical assistance from FAD (management of oil resources, FARI model) and MCM (financial market infrastructure, stress testing, AQRs).
  - Data provision broadly adequate for surveillance, with progress compiling IIP data beginning 2020; timeliness, reliability, and coverage can be further improved.
  - Authorities concurred on need to prioritize capacity development requests.

### External sector assessment (Annex I) — main points
- External position in 2021 broadly in line with fundamentals and desirable policies; REER depreciated slightly; reserve adequacy improved to 1.9 months of imports and 2.9 months of non-oil imports.
- Current account:
  - Historically averaged -9.6 percent of GDP per year; reached -25.5 percent of GDP in 2021.
  - Widening in 2021 due to large FDI-financed oil investment imports (35.9 percent of GDP in 2021), recovery in imports, and floods lowering non-oil exports—viewed as temporary.
  - Adjusted EBA-lite analysis (accounting for large temporary oil imports of 22.6 percent of GDP and statistical adjustment -4.2 percent) yields adjusted cyclically adjusted current account of -9.5 percent and a current account gap of -0.3 percent of GDP, implying a 0.8 percent REER overvaluation.
- Capital and financial accounts:
  - FDI major source since 2018: 28.8 percent of GDP in 2021; oil-related FDI inflows US$4,430.1 million (57.4 percent of GDP) in 2021, expected to decline in 2022-27 averaging 12.6 percent of GDP.
  - Net FDI inflow in 2021 will reverse to net outflow in 2022 as outflows increase due to oil operator cost recovery.
  - Oil revenue flows US$409.2 million in 2021 and expected to grow to US$8,191.7 million by 2027.
- Reserves:
  - 2021 reserves equaled 10.5 percent of GDP; end-2021 reserves metrics: 1.9 months of imports, 2.9 months of non-oil imports, 23.4 percent of broad money (M2), and 1,362.2 percent of short-term debt.
  - Reserves expected to be above most adequacy metrics by 2025; however, below ARA EM Metric due to large oil exports skewing the measure.
  - Projected NRF balance: US$607.5 million (2021) to US$21,141.6 million (2027).

### The Amended NRF Transfer Rule (Annex II) — mechanics and assessment
- Context:
  - Parliament approved local content rules and amendments to the 2019 NRF Act on December 29, 2021.
  - Local Content Bill requires local participation in at least 40 critical areas; oil companies/subcontractors have up to December 2022 to prepare five-year local plans.
- Key differences in 2021 Bill:
  - Vest powers in new Board of Directors; simpler transfer formula; replaces 22-member oversight committee with new 9-member committee; requires publication of petroleum revenue reports in Official Gazette under penalty.
- Transfer rule mechanics:
  - All petroleum revenues initially deposited in NRF; balance x_t follows x_t = x_{t−1} + Oil revenues accruing to the government in period t − Oil revenue transfers to the budget in period t.
  - Law allows government to extract entire balance (>US$600 million) in first year (2022).
  - Thereafter ceilings on withdrawals, progressively smaller proportions allowed:
    - x < US $500 mn: x mn transferred
    - US $500 mn < x < US $1000 mn: 500 + 0.75*(x-500) mn transferred
    - US $1000 mn < x < US $1500 mn: 875 + 0.5*(x-1000) mn transferred
    - US $1500 mn < x < US $2000 mn: 1125 + 0.25*(x-1500) mn transferred
    - US $2000 mn < x < US $2500 mn: 1250 + 0.05*(x-2000) mn transferred
    - US $2500 mn < x: 1275 + 0.03*(x-2500) mn transferred
- Assessment:
  - Bill increases transparency and clarity but main shortcoming: does not integrate transfers with budgetary financing needs within an effective fiscal anchor, contrasting with 2019 staff recommendation to constrain annual non-oil fiscal deficit to not exceed expected NRF transfer.

### Macroeconomic impact of scaling up public investment (Annex IV)
- DIGNAR model used to analyze scaling up public investment in a small open resource-abundant economy.
- Calibration:
  - Baseline public investment efficiency: 59 percent (2017 PIMA Assessment); LAC 70 percent; EMEs 73 percent.
  - Aggressive scenario assumes efficiency increases from 59 percent to 70 percent.
  - Depreciation rate of public capital: 7 percent.
- Scenarios:
  - Baseline: overall balanced budget by 2025; public investment 9.5 percent of non-oil GDP in 2021 → 12.5 percent in 2024 and stable thereafter.
  - Aggressive: overall balanced budget by 2030; public investment rising to almost 23 percent of non-oil GDP in 2026 → decline to 12.5 percent by 2030.
- Simulation results:
  - Aggressive scenario causes more crowding out of private investment: cumulative 10.8 percent lower private investment over ten years relative to baseline.
  - Higher real interest rates and rapid front-loaded investment raise inflation and real exchange rate appreciation in aggressive scenario.
  - After ten years: tradable sector output 2.5 percent lower and non-oil output 3.3 percent lower under aggressive vs baseline.
  - Interpretation: gradual baseline yields less crowding out and higher long-term non-oil output despite lower short-term public investment.

### Debt sustainability, debt carrying capacity, and stress tests
- Debt carrying capacity:
  - CI score: 2.66; falls below 2.69–3.05 range for “medium”; rated “Weak”.
  - Downgrade mainly due to lower import coverage of FX reserves from revised higher oil-related imports.
  - Staff expect import coverage to improve; NRF accumulation is a mitigating factor.
- External PPG debt baseline:
  - PV of external PPG debt: 6.5 percent of GDP in 2022 → 3.4 percent in 2032.
  - Risk of external debt distress: moderate in baseline; stress tests show vulnerability under combined shocks.
  - Combined shock could raise PV debt-to-GDP to 49 percent in first year and decline to 35 percent by 2030 and 31 percent by 2032.
- Public sector debt baseline:
  - PV of public debt-to-GDP: 19.2 percent in 2022 → 10.6 percent in 2032.
  - Stress tests show severe breaches under extreme shocks (e.g., commodity price shock could push PV public debt-to-GDP to 42 percent in 2024 and 160 percent by 2032).
- Conclusion:
  - Baseline: debt dynamics improve considerably; mitigating factors include low current external debt and NRF accumulation (almost 216 percent of non-oil GDP by 2027).
  - Stress tests underscore need for strong fiscal framework, diversification, and buffers.

### Selected social and economic indicators and tables (highlights)
- Population, 2021 (thousands): 789
- Life expectancy at birth (years), 2019: 70
- Under-five mortality rate (per 1,000 live births), 2020: 28
- Population living below the poverty line (%), 2000-06: 35
- Nominal GDP (G$ billion): 1,609.1 (2021), 3,094.0 (2022), 3,503.5 (2023), 3,961.3 (2024), 4,780.1 (2025), 5,776.2 (2026), 5,925.9 (2027)
- Per capita GDP, US$: 9,777.6 (2021), 18,744.6 (2022), 21,162.3 (2023), 23,855.8 (2024), 28,700.7 (2025), 34,578.0 (2026), 35,367.6 (2027)
- Balance of Payments highlights (US$ millions):
  - Current Account (incl. official transfers): -2,757 (2019), -897 (2020), -1,972 (2021), 6,503 (2022), 5,173 (2023), 5,446 (2024), 3,999 (2025), 7,274 (2026), 7,595 (2027).
  - Exports (f.o.b.): 1,567 (2019), 2,590 (2020), 4,356 (2021), 11,628 (2022), 13,268 (2023), 14,920 (2024), 18,181 (2025), 23,212 (2026), 23,722 (2027).
  - Imports (c.i.f.): 4,026 (2019), 2,254 (2020), 4,361 (2021), 2,801 (2022), 4,327 (2023), 2,944 (2024), 4,380 (2025), 3,179 (2026), 3,107 (2027).
  - Oil exports: - (2019), 1,064 (2020), 2,975 (2021), 9,978 (2022), 11,532 (2023), 13,097 (2024), 16,259 (2025), 21,193 (2026), 21,617 (2027).
- Monetary Survey (selected, end of period):
  - Base Money (G$ bn): 202.3 (2019), 292.2 (2020), 295.2 (2021), 465.6 (2022), 681.1 (2023), 942.5 (2024), 1,246.6 (2025), 1,593.6 (2026), 1,991.3 (2027).
  - Broad Money (G$ bn): 562.1 (2019), 643.6 (2020), 722.3 (2021), 805.1 (2022), 903.7 (2023), 992.8 (2024), 1,081.7 (2025), 1,178.4 (2026), 1,284.0 (2027).
  - Private sector credit (G$ bn): 302.9 (2019), 310.3 (2020), 332.3 (2021), 357.0 (2022), 381.0 (2023), 404.4 (2024), 429.7 (2025), 456.5 (2026), 485.0 (2027).
  - Bank of Guyana net foreign assets (US$ mn): 453.3 (2019), 559.1 (2020), 453.4 (2021), 513.2 (2022), 965.8 (2023), 1,499.2 (2024), 2,096.9 (2025), 2,474.8 (2026), 2,815.1 (2027).

### Climate strategy and LCDS 2030
- LCDS 2030 objective: monetize climate services of vast forest cover and accelerate low-carbon growth; target to reduce emissions by 70 percent before 2030 mainly via maintaining forest coverage and monitoring oil emissions on a sectoral and additive basis.
- Flaring tax: US$45 per ton of carbon.
- Market-based mechanisms for forest climate services available starting in 2022; participation in international carbon finance platforms (e.g., LEAF Coalition) and transition from Guyana-Norway partnership envisioned.
- Policy implications:
  - Strengthen monitoring of oil-sector emissions on sectoral and additive basis.
  - Advance energy transition to renewables (hydropower, solar).
  - Consider complementary fiscal instruments beyond the flaring tax to internalize carbon externalities.

*Source: IMF staff report excerpt on Guyana fiscal, monetary, financial sector, structural, and governance policies (content unit: 1guyea2022001).*

### 1. Comparative Regional Developments _________________________________________________________ 20

### 1. Comparative Regional Developments

### Background
- Guyana’s economic growth was negatively impacted by the COVID-19 pandemic; non-oil GDP contracted by -7.3 percent in 2020, with particularly sharp declines in construction and services. Oil GDP expanded in 2020, leading to overall GDP growth of 43.5 percent in 2020.
- Oil production increased 57 percent in 2021 to 110,000 bpd. With the coming on stream of three additional fields—Liza-2 (February 2022), Payara (end-2023) and Yellowtail (2025)—oil production is projected to reach 720,000 bpd by 2026.
- Exxon announced the discovery of three additional offshore fields in the Stabroek Block in April 2022. Guyana’s commercially recoverable petroleum reserves might reach over 11 billion barrels.
- Human development needs remain large; the country’s human development index is lower than the median for the region and for countries in the same income group. With the start of oil production, Guyana graduated from low-income status in 2020.
- Presentation of macro ratios is generally reported in relation to non-oil GDP to avoid distortions due to the oil sector.

### Recent Developments
- Political events delayed reforms and the government’s pandemic response: a no-confidence vote in December 2018, delayed transition after March 2020 elections, and a new administration assuming office in August 2020. The 2020 budget was approved only in September 2020, affecting confidence and increasing reliance on direct financing from the central bank as external funding slowed.
- Economic performance in 2021:
  - Non-oil GDP recovered in 2021, supported by mining, construction, and services.
  - Summer floods in 2021 affected agriculture and hinterland activity.
  - Inflation rose from 5.7 percent at end-2021 to 6.6 percent by May 2022, though inflation declined in May 2022 with a more moderate contribution of food inflation.
  - Guyana has administered COVID vaccines to around two-thirds of the population and began a three-phase reopening in 2021.
- Impact of the war in Ukraine:
  - Rising global food and commodity prices (including fuel) contributed to inflationary pressures.
  - The war is not expected to affect food security materially given limited import exposure to Ukraine and Russia and recovering domestic agricultural production.
  - Higher global oil prices strengthened fiscal and external accounts and encouraged some oil producers to increase production where possible.
- External sector and reserves:
  - In 2020 oil exports and an improvement in the non-oil current account (from collapsed imports) led to some reserve accumulation.
  - In 2021 higher investment-related imports in the oil sector and lower non-oil commodity exports widened the current account deficit.
  - The financial account improved due to higher FDI in the oil sector and a new SDR allocation; FX reserves coverage improved to 1.9 months of imports (2.9 months of non-oil imports).
  - The real and nominal effective exchange rates depreciated slightly in 2021 and remained stable in 2022 up to the report date.
- Fiscal and monetary developments:
  - The authorities reallocated expenditures toward cash grants, transfers to households, and ‘shovel ready’ public investment projects focused on road networks and affordable housing; VAT on basic food items and household necessities set to zero.
  - The overall deficit (after grants) as percent of non-oil GDP deteriorated sharply in 2020 and less so in 2021. Public debt stood at 42.9 percent of GDP at end-2021.
  - Fiscal measures to ease cost-of-living pressures included: (i) extending adjustment to freight cost component in CIF value reducing revenue from imports costing around G$6 billion (0.2 percent of GDP, 0.5 percent of non-oil GDP); (ii) lowering excise tax rate on gasoline and diesel from 50 percent to 0 percent; (iii) allocating about 0.2 percent of GDP (0.4 percent of non-oil GDP) for other measures.
  - Broad money grew by 12.2 percent in 2021 and credit to the private sector rose by 7.1 percent in 2021, recovering to pre-pandemic levels. The weighted average of commercial banks’ prime lending rate declined from 9.3 percent at the start of 2021 to 8.9 percent by year-end.
- Financial sector:
  - Domestic banks’ capital adequacy ratio (CAR) was 29.1 percent at end-2021 (regulatory minimum 8 percent).
  - Nonperforming loans to total loans improved to 7.8 percent from 10.8 percent at end-2020.
  - Profitability (returns on assets and equity) and liquidity ratios weakened, attributed to increased provisioning, significant write-offs from recent asset quality reviews (AQR), and narrowing lending spreads.
  - House prices declined by about 0.2 percent in 2021.
  - Bank of Guyana advanced reforms: revising AQR guidelines (revised credit classification and provisioning for loss category) and implementing some pillars of Basel II and III.

### Outlook and Risks
- Medium-term outlook:
  - Non-oil GDP growth is expected to rebound strongly in 2022 due to recovery of sugar and rice production from floods and positive spillovers from the oil sector.
  - Over the medium term, non-oil GDP growth is expected to average 5 percent per year.
  - Inflation is expected to reach around 3.5 percent in the medium term owing to more stable projected international food and fuel prices; inflation expected to rise to 9.4 percent at year-end 2022 and decline thereafter.
  - Oil GDP is expected to grow over 100 percent in 2022 with Liza-2 coming on stream, and to grow by about 30 percent on average per year during 2023–26.
- Public investment and fiscal stance:
  - Public investment spending is expected to increase in the medium term to close infrastructure gaps and support non-oil growth.
  - Only around 10 percent of budgeted public capital investment was executed in the first four and a half months of 2022; year-end execution rate is unlikely to exceed 70 percent.
  - Authorities committed to a zero overall balance in the medium term; the macro-fiscal framework presented in the report is based on expected public investment implementation consistent with this fiscal anchor.
  - With expected tenders for large infrastructure projects allotted to international firms importing capital goods and workers, inflation is expected to be contained in the medium term.
- External and reserve outlook:
  - Reserves coverage will steadily improve and substantial buffers will accumulate in the Natural Resource Fund (NRF), expected to reach almost US$20 billion in 2027.
  - The current account balance (including grants) will turn into a significant surplus in 2022 as Liza-2 commences and oil prices remain high.
  - Public debt peaked at 51 percent of GDP in 2020 and is expected to decline to around 13 percent by 2027.
- Debt sustainability and reserve adequacy:
  - Debt-sustainability analysis indicates the risk of external debt distress remains moderate, with debt dynamics improving significantly with incoming oil revenues.
  - Guyana’s debt carrying capacity was downgraded from ‘moderate’ to ‘weak’ due to a relatively low international reserves-to-imports cover in 2022 driven by a sharp increase in oil-related imports.
  - Guyana still has space to absorb shocks given low current external debt, expected rapid increase in international reserves, and NRF accumulation; international reserves are expected to remain above adequate levels in terms of short-term debt, broad money, and non-oil related imports but below adequate levels by the ARA EM Metric due to large increase in oil exports.
- Risks:
  - Downside risks: highly volatile oil prices; slowing global economy; escalation of the war in Ukraine causing sanctions and disruptions; global recession reducing oil demand and prices; new COVID outbreaks; excessively rapid government spending causing real exchange rate appreciation and reserve losses; governance concerns.
  - Upside risks: further oil discoveries and production could significantly improve long-term prospects.
  - Note: Exxon’s April 2022 discovery of three additional offshore fields is not incorporated into projections.

### Key Medium-Term Projections and Indicators (selected figures)
- Real GDP (percent change): 23.9 (2021 Prel.), 57.8 (2022 Proj.), 25.2 (2023 Proj.), 21.2 (2024 Proj.), 28.2 (2025 Proj.), 25.5 (2026 Proj.), 3.3 (2027 Proj.).
- Real Non-Oil GDP (percent change): 4.6 (2021 Prel.), 7.2 (2022 Proj.), 5.0 (2023 Proj.), 5.1 (2024 Proj.), 5.2 (2025 Proj.), 5.2 (2026 Proj.), 5.2 (2027 Proj.).
- Real Oil GDP (percent change): 56.9 (2021 Prel.), 116.1 (2022 Proj.), 36.8 (2023 Proj.), 28.3 (2024 Proj.), 36.5 (2025 Proj.), 31.1 (2026 Proj.), 2.9 (2027 Proj.).
- Consumer prices (average): 3.3 (2021 Prel.), 7.6 (2022 Proj.), 7.6 (2023 Proj.), 5.0 (2024 Proj.), 3.8 (2025 Proj.), 3.5 (2026 Proj.), 3.5 (2027 Proj.).
- Consumer prices (end of period): 5.7 (2021 Prel.), 9.4 (2022 Proj.), 6.0 (2023 Proj.), 4.1 (2024 Proj.), 3.5 (2025 Proj.), 3.5 (2026 Proj.), 3.5 (2027 Proj.).
- Revenues and grants (percent of non-oil GDP): 24.3 (2021 Prel.), 34.3 (2022 Proj.), 36.3 (2023 Proj.), 37.4 (2024 Proj.), 37.9 (2025 Proj.), 37.9 (2026 Proj.), 37.6 (2027 Proj.).
  - o/w oil revenues (percent of non-oil GDP): 0.0 (2021 Prel.), 10.0 (2022 Proj.), 12.2 (2023 Proj.), 13.4 (2024 Proj.), 13.9 (2025 Proj.), 13.8 (2026 Proj.), 13.9 (2027 Proj.).
- Expenditure (percent of non-oil GDP): 35.3 (2021 Prel.), 36.8 (2022 Proj.), 37.5 (2023 Proj.), 37.9 (2024 Proj.), 37.9 (2025 Proj.), 37.9 (2026 Proj.), 37.6 (2027 Proj.).
  - Current: 25.8 (2021 Prel.), 24.7 (2022 Proj.), 25.2 (2023 Proj.), 25.4 (2024 Proj.), 25.4 (2025 Proj.), 25.4 (2026 Proj.), 25.1 (2027 Proj.).
  - Capital: 9.5 (2021 Prel.), 12.1 (2022 Proj.), 12.3 (2023 Proj.), 12.5 (2024 Proj.), 12.5 (2025 Proj.), 12.5 (2026 Proj.), 12.5 (2027 Proj.).
- Overall balance (after grants, percent of non-oil GDP): -10.5 (2021 Prel.), -1.7 (2022 Proj.), -1.2 (2023 Proj.), -0.5 (2024 Proj.), 0.0 (2025 Proj.), 0.0 (2026 Proj.), 0.0 (2027 Proj.).
- Financing (percent of non-oil GDP): 10.5 (2021 Prel.), 1.7 (2022 Proj.), 1.2 (2023 Proj.), 0.5 (2024 Proj.), 0.0 (2025 Proj.), 0.0 (2026 Proj.), 0.0 (2027 Proj.).
  - Net foreign financing: 1.1 (2021 Prel.), 2.6 (2022 Proj.), 5.5 (2023 Proj.), 3.2 (2024 Proj.), 3.1 (2025 Proj.), 0.1 (2026 Proj.), -0.2 (2027 Proj.).
  - Net domestic financing: 9.5 (2021 Prel.), -0.9 (2022 Proj.), -4.3 (2023 Proj.), -2.7 (2024 Proj.), -3.1 (2025 Proj.), -0.1 (2026 Proj.), 0.2 (2027 Proj.).
- Broad money (% change): 12.2 (2021 Prel.), 11.5 (2022 Proj.), 12.3 (2023 Proj.), 9.9 (2024 Proj.), 9.0 (2025 Proj.), 8.9 (2026 Proj.), 9.0 (2027 Proj.).
- Public Debt (% of GDP): 42.9 (2021 Prel.), 22.8 (2022 Proj.), 20.9 (2023 Proj.), 18.8 (2024 Proj.), 16.2 (2025 Proj.), 13.7 (2026 Proj.), 13.5 (2027 Proj.).
- Current account balance (% of GDP): -25.5 (2021 Prel.), 43.8 (2022 Proj.), 30.8 (2023 Proj.), 28.7 (2024 Proj.), 17.4 (2025 Proj.), 26.3 (2026 Proj.), 26.7 (2027 Proj.).
- Gross official reserves (US$ millions): 810.8 (2021 Prel.), 870.7 (2022 Proj.), 1323.3 (2023 Proj.), 1856.6 (2024 Proj.), 2454.3 (2025 Proj.), 2832.2 (2026 Proj.), 3172.5 (2027 Proj.).
  - (in months of imports of goods and services): 1.9 (2021 Prel.), 1.3 (2022 Proj.), 2.9 (2023 Proj.), 2.9 (2024 Proj.), 5.1 (2025 Proj.), 6.8 (2026 Proj.), 7.2 (2027 Proj.).
  - (in months of non-oil imports of goods and services): 2.9 (2021 Prel.), 3.1 (2022 Proj.), 4.5 (2023 Proj.), 6.0 (2024 Proj.), 7.6 (2025 Proj.), 8.1 (2026 Proj.), 8.5 (2027 Proj.).
- End of year balance at the Natural Resource Fund (US$ millions): 607.5 (2021 Prel.), 1446.8 (2022 Proj.), 2304.7 (2023 Proj.), 3776.4 (2024 Proj.), 7850.5 (2025 Proj.), 14227.6 (2026 Proj.), 21141.6 (2027 Proj.).
- Crude oil production (millions of barrels): 42.4 (2021 Prel.), 93.4 (2022 Proj.), 124.5 (2023 Proj.), 155.5 (2024 Proj.), 207.0 (2025 Proj.), 264.6 (2026 Proj.), 264.6 (2027 Proj.).
- Oil price (US$ per barrel): 69.1 (2021 Prel.), 106.8 (2022 Proj.), 92.6 (2023 Proj.), 84.2 (2024 Proj.), 78.5 (2025 Proj.), 74.7 (2026 Proj.), 72.5 (2027 Proj.).

### Authorities’ Views and Policy Priorities
- Authorities agreed medium-term growth prospects are better than ever but acknowledged downside risks from international developments (volatility of oil prices, lingering war in Ukraine, supply chain disruptions, slowdown in the global economy).
- Authorities are confident that measures will help contain inflationary pressures, especially on housing and utilities components of CPI.
- Authorities are determined to ensure the development strategy will not bring macroeconomic imbalances (e.g., excessively high inflation, significant loss of competitiveness and reserves).

### Policy Discussions — Fiscal Policy (summary of intent)
- Effective use of oil wealth should enhance living standards and the economy’s physical and human capital.
- To achieve development goals rapidly yet prudently, authorities need a medium-term fiscal framework with a clear fiscal anchor and structural reforms to ensure good governance, support inclusive growth, and address climate change challenges.

*Source: Guyanese authorities and IMF staff calculations and projections.*

### 18.       Fiscal policy in 2022 has been appropriately supporting growth, while considerably

### Fiscal policy in 2022 has been appropriately supporting growth, while considerably reducing the fiscal deficit.

### Fiscal developments in 2022
- The 2022 budget reduced current expenditures by about 1 percent of non-oil GDP compared to 2021.
- Pandemic-related health expenditures are maintained; transfers to households implemented earlier in the pandemic are not permanent.
- Additional measures implemented to mitigate the impact of rising commodity prices on households.
- Capital spending has been ramped up to support the non-oil economy; an execution rate of around 70 percent of the 2022 capital budget is expected (representing an increase of about 2½ percent of non-oil GDP).
- Oil revenue (transferred to the budget in line with the amended NRF Act) is projected to increase sharply.
- The overall fiscal deficit is expected to decline to 1¾ percent of non-oil GDP in 2022 from 10½ percent of non-oil GDP in 2021.
- The fiscal balance is still expected to record a small deficit, while the public debt ratio is expected to decline given the large increase in nominal GDP.

### Policy recommendations — near term fiscal stance
- Maintain prudent fiscal policy while temporarily easing burdens on vulnerable households given limited safety nets.
- Gradually unwind general subsidies provided through the tax system because tax measures are poorly targeted.
- Move to full pass-through of international prices to domestic prices since the shock does not appear temporary; replace general tax subsidies with better-targeted government support.
- Simultaneously develop and strengthen a well-targeted social safety net system.
- Sustainably and feasibly increase capital spending to support the transformation of the Guyanese economy, within a framework that avoids macroeconomic imbalances.
- Draw down the debt to the central bank incurred while monetizing the deficit during 2015-mid 2021.

### NRF Act, fiscal anchor, and medium-term framework
- The NRF Act was amended in December 2021 to set clear ceilings on withdrawals from the Fund for budgetary spending.
- However, the amendments do not provide an effective fiscal anchor; Guyana lacks a medium-term fiscal framework.
- Staff recommended constraining the annual non-oil overall fiscal deficit (after grants) to not exceed the expected transfer from the oil savings fund to anchor short-term fiscal policy and avoid macroeconomic imbalances (including real exchange rate appreciation from rising non-tradeable prices).
- Staff recommended a zero overall fiscal balance anchor supported by a medium-term expenditure framework:
  - Current expenditures should mostly grow in line with non-oil GDP.
  - Growth of capital expenditures should be guided by absorptive capacity constraints.
- The medium-term framework in the report is consistent with achieving a zero overall fiscal balance target by 2025.
- To be an effective fiscal anchor, a zero overall fiscal balance target needs:
  - Rigorous analysis and possible changes to the NRF transfers rule.
  - An operational target for the non-oil balance.
  - Measures to mobilize non-oil revenues and contain the wage bill and non-current spending so consolidation is not driven mostly by potentially volatile oil revenues.
- Transfers from the NRF could follow:
  - A standard permanent income hypothesis (PIH) rule based on the annuity/perpetuity value of expected future oil revenues, or
  - A more conservative ‘bird in hand’ rule based on returns on already materialized oil revenues.

### Public investment management and absorptive capacity
- Capacity weaknesses in public investment management need addressing alongside closing infrastructure gaps.
- The 2017 PIMA report highlighted weaknesses in planning, budgeting, appraisal, selection, procurement, and implementation of capital projects.
- Staff urged implementation of the PIMA recommendations and undertaking a public expenditure review to assess efficiency and effectiveness of public spending.

### Fiscal strategy evolution and governance of oil resources
- As a new oil producer, Guyana should implement a simple fiscal framework in the short term (next couple of years), such as a zero overall fiscal balance (after grants).
- As information and capacity improve, transition to a more comprehensive fiscal strategy with a fiscal anchor translated into an operational target for the non-oil primary fiscal balance.
- The transition should consider infrastructure and human capital needs, intergenerational equity, fiscal sustainability, and absorptive and institutional capacity constraints.
- Staff emphasized continuing reform of public enterprises, including governance, transparency, and cost control at Guyana Power and Light Inc. (GPL) and GuySuCo.

### Authorities’ views on fiscal policy
- Authorities are strongly committed to fiscal prudence while meeting critical developmental needs.
- Authorities agreed on constraining the annual non-oil overall fiscal deficit (after grants) to not exceed the expected transfer from the NRF and noted the new framework strengthens fiscal prudence.
- Authorities committed to periodic reviews of the oil transfer rule under the amended NRF Act to help ensure long-term sustainability and intergenerational equity.

### Monetary and exchange rate policy
- With expected continued tightening of U.S. monetary policy, Guyana needs to tighten monetary policy to maintain exchange rate stability and contain inflationary pressures from elevated international commodity prices, domestic recovery, and higher government spending.
- Staff suggested deploying instruments to curb monetary aggregate growth, including:
  - Raising the reserve requirement rate.
  - Expanding the sale of Treasury bills to contain excess liquidity.
- The exchange rate should continue to serve as the nominal anchor while efforts deepen domestic financial markets.
- Foreign exchange interventions should address disorderly market conditions and smooth short-term fluctuations not related to fundamentals.
- Over the medium to long term, staff support greater exchange rate flexibility as Guyana becomes a major oil producer and as financial markets deepen.
- Staff recommended revising the monetary policy framework, including allowing the exchange rate to absorb shocks and increase flexibility to maintain competitiveness.
- Creating infrastructure for effective interbank, domestic debt, and FX markets will strengthen monetary policy transmission and central bank credibility.
- Authorities view exchange rate stability as currently serving Guyana’s needs and prefer a step-by-step approach to deepen markets; they consider the reserve requirement a sufficient tool to curb credit supply when needed.

### Financial sector policy and digitalization
- Progress on 2016 FSAP recommendations has been made, including accelerating Basel II/III implementation and commercial banks’ asset quality reviews; banks wrote off a substantial stock of NPLs.
- Challenges remain in moving from paper-based functioning to broad-based risk-based supervision.
- Guyana should ensure effective implementation of its AML/CFT framework; a fourth CFATF mutual evaluation is expected by end-2023.
- The 2021 National Risk Assessment (NRA) has been completed; the Bank of Guyana is implementing NRA recommendations with CARTAC.
- Digital payments are growing following COVID-19 and wider adoption of the Mobile Money Payment System offered by GT&T.
- Development of mobile money and digital payments should be balanced with a risk-based regulatory approach to mitigate ML/TF risks.
- Staff suggested considering IMF technical assistance on regulation and supervision of mobile payments.
- Staff welcomed authorities’ financial inclusion strategies:
  - A private credit bureau, CreditInfo, was established in July 2013.
  - The Credit Reporting Act was amended in January 2016 to mandate information sharing with the credit bureau by credit institutions and public utilities.
- Fintech and digitalization could help increase the financial sector’s contribution to growth and diversify the non-oil economy.
- Authorities are committed to continuing financial reforms and aligning legal frameworks with international standards; they prioritize strengthening AML/CFT effectiveness and accelerating digitalization.

### Structural and governance reforms to support inclusive growth
- Priority structural reforms:
  - Lower unemployment, especially for rural youth.
  - Reduce inter-industry skills mismatches via education and labor market policies to expand and diversify the non-oil economy.
- Staff recommended a multi-pronged approach:
  - Engage the Guyanese diaspora.
  - Change labor market regulation.
  - Improve the education system by expanding schools at all levels, aligning curricula with labor market needs, and enhancing vocational training.
- Increased investment needed in healthcare, roads, electricity, and telecommunications.
- International experience suggests reducing local content requirements can help address skills mismatches by early engagement of foreign qualified skilled workers.
- Strengthen anti-corruption framework and transparency of oil receipts governance:
  - Progress includes publication of audit reports of public expenditures (including COVID-related), implementation of some 2019 Article IV recommendations, re-establishment of the Integrity Commission, annual asset declarations for many public officials, and live streaming of public procurement tenders.
  - On EITI, staff urged improved information sharing and publication of extractive industries’ financial statements, movement toward electronic disclosures, and closer follow-up on EITI recommendations to address remaining gaps.
- Staff welcomed the Low Carbon Development Strategy (LCDS) and climate resilience measures:
  - Guyana faces flood and drought risks exacerbated by climate change; the Climate Resilience and Adaptation Strategy was developed with Guyana-Norway Partnership resources.
  - LCDS implementation in 2022 includes shifting to renewable energy sources and investing in hydroelectric power to diversify the energy matrix and lower electricity costs.
  - Mitigation includes entering the international carbon credits market to monetize and maintain vast forest coverage.
  - Guyana commits to reduce emissions by 70 percent before 2030 mainly via maintaining vast forest coverage and monitoring oil emissions on a sectoral and additive basis.

*Source: IMF staff report excerpt on Guyana fiscal, monetary, financial sector, structural, and governance policies (content unit: 1guyea2022001).*

### 36.      The authorities are working actively to improve efficiency and reduce mismatches in

### The authorities are working actively to improve efficiency and reduce mismatches in

### Labor market and human capital
- Authorities recognize the importance of an efficient and responsive labor market given scale and pace of structural changes in the economy.
- Key actions:
  - Investing heavily in human capital development, including technical and vocational education, to ensure an adequate supply-side response to emergent demands in the market for skilled labor.
  - Beginning work, with expert support, to gather critical data to inform strategic interventions aimed at addressing labor market mismatches.

### Governance, transparency, and anti-corruption
- Status and commitments:
  - Considerable fiscal transparency and a robust anti-corruption framework exist; authorities are committed to further strengthening governance, particularly on EITI.
  - Authorities recognize that adequate follow up on EITI recommendations is critical and will require prioritization as capacity is built.
- Planned actions:
  - Accelerate electronic publication of key information on procurement contracts.
  - Establish a bidders register.
  - Continue publishing audit reports of public expenditures including COVID-19 funds.
  - Further strengthen mechanisms and processes for required follow up as applicable.
  - Improve coordination and information sharing among public agencies involved in anti-corruption.
  - Increase public awareness about the functions of the anti-corruption framework, including increasing the efficiency of the Integrity Commission and the National Procurement and Tender Administration Board.

### Low Carbon Development Strategy (LCDS 2030)
- Objectives and priorities:
  - Monetize climate services provided by Guyana’s vast forest cover and accelerate economic growth along a low carbon path.
  - Invest in transition to clean and renewable energy.
  - Strengthen resilience to floods and improve water management.
- Consultations:
  - LCDS 2030 has benefited from wide consultations.

### Capacity development and data
- Capacity needs:
  - Capacity development needs are large and need careful prioritization.
  - Staff urged requests for technical assistance from FAD on framework for management and use of oil resources, including the FARI model.
  - Staff urged requests for MCM support on development of financial market infrastructure, stress testing of bank balance sheets, and AQRs for financial stability.
  - Fund capacity development is also available for governance-related issues, including strengthening transparency of public procurement process and public investment management frameworks.
- Data provision:
  - Data provided to the Fund is broadly adequate for surveillance purposes.
  - Authorities have made considerable progress, notably compiling International Investment Position data beginning in 2020.
  - Timeliness, reliability, and coverage can be further improved.
- Authorities’ view:
  - The authorities concurred with staff on the need to prioritize capacity development requests.

### Staff appraisal: macroeconomic developments and outlook
- Recent developments:
  - Following a protracted political transition and a pandemic induced recession in 2020, the economy recovered in 2021, supported by fiscal policy and the oil boom.
  - New administration took office in August 2020, delaying 2020 budget approval and pandemic measures and increasing reliance on direct financing from the central bank.
  - In 2021, the economy recovered from the contraction of the non-oil sector in 2020, despite floods, supported by fiscal policy.
- Public debt and external position:
  - Public debt declined almost 10 percent of GDP, reaching 42.9 percent of GDP at end-2021.
  - Guyana maintained a moderate risk of external debt distress, with debt dynamics improving significantly with incoming oil revenues.
  - The external position strengthened and is assessed to be broadly in line with the level implied by fundamentals and desirable policies.
- Prospects:
  - Guyana’s medium-term prospects are very favorable, with increasing oil production having the potential to transform the economy.
  - Oil production is expected to increase significantly with the coming on stream of two large oilfields during 2023–26.
  - Guyana’s commercially recoverable petroleum reserves is the third largest in Latin America and Caribbean, and one of the highest levels of oil reserves per capita in the world.
  - Potential benefits: build substantial fiscal and external buffers to absorb shocks while addressing infrastructure gaps and human development needs.
  - Risks: increased dependence on oil revenues exposes the economy to volatility in global oil prices; a slowing global economy and repercussions from the war in Ukraine could adversely affect non-oil exports.
  - Upside: higher global oil prices and additional gas and oil discoveries could significantly improve long-term prospects.

### Policy recommendations: fiscal, monetary, and institutional
- Fiscal policy:
  - Fiscal and monetary policies should be cautious.
  - In 2022, the government implemented tax measures to limit passthrough to consumers of rising food and energy prices from the war in Ukraine.
  - Staff recommend gradual unwinding of these untargeted measures and strengthening and better targeting the social safety net system to better mitigate the impact of the inflationary shock.
  - Recommend a feasible and moderate increase in public investment while further strengthening the medium-term fiscal framework.
  - Urge caution in the pace of ramping up public investment and simultaneous strengthening of capacity to manage public investment, based on 2017 recommendations on public investment management.
  - Recommend setting annual budgets within a fiscal framework that, over the medium term, constrains the annual non-oil overall fiscal deficit (after grants) to not exceed the expected transfer from the NRF, to anchor fiscal policy in a sustainable way.
  - Recommend further analysis and any needed adjustment to the oil transfer rule to ensure long-term sustainability and intergenerational equity in management of oil resources and to move towards a more robust fiscal framework if needed.
- Monetary and exchange rate policy:
  - To maintain exchange rate stability and given expected continued tightening of U.S. monetary policy, monetary policy in Guyana should continue to be tightened.
  - Staff agree with authorities that exchange rate stability serves Guyana’s current needs best; use of the exchange rate as the nominal anchor is currently appropriate.
  - Recommend increased efforts to deepen domestic financial markets.
  - Over the medium to long term, as Guyana becomes a major oil producer, staff support aims to deepen financial markets and recommend revising the monetary policy framework to ensure it is well suited for the economy’s needs, including allowing the exchange rate to absorb shocks and increase its flexibility to maintain competitiveness.

### Financial stability and AML/CFT
- Financial stability:
  - Staff commend authorities’ efforts to maintain financial stability.
  - Macro-financial risks are well monitored with a broad spectrum of indicators, including credit developments and the systemic risk matrix.
  - Banks are well capitalized.
  - Staff welcome BoG’s successful asset quality reviews, progress in conducting stress testing exercises, and authorities’ strategies to promote financial inclusion.
  - Staff strongly support commitment to complete implementation of the 2016 FSAP recommendations and move towards broad based risk-based supervision.
- AML/CFT:
  - Guyana has recently strengthened the AML/CFT framework and was removed from the CFATF list of strategic jurisdictions with strategic deficiencies in November 2016.
  - Staff recommend ensuring sustained efforts for effective implementation.
  - Guyana should implement recommendations and action plans identified in the recent NRA and sustain efforts to strengthen AML/CFT legal framework through effective implementation.
  - Full compliance with international standards would bolster Guyana’s fight against money laundering and terrorism financing.

### Anti-corruption and fiscal transparency progress
- Recent progress:
  - Several pillars of the anti-corruption framework have been strengthened, including the Integrity and Public Procurement Commissions and the National Procurement and Tender Administration Board.
  - Audit reports of public expenditures, including for COVID, are published and their recommendations are followed up on.
  - Asset declarations of a large number of public officials are submitted annually.
  - Public procurement tenders are streamed live.
  - Authorities made progress implementing recommendations of the 2019 and 2021 EITI reports, notably on reconciliation with the fiscal regime.
  - Some progress on information sharing and publication of extractive industries’ financial statements.
  - Authorities are strengthening capacity to address remaining gaps, including moving towards electronic disclosure and adequate follow-up.

*Source: IMF staff report text provided in the content unit.*

### 52.      It is proposed that the next Article IV consultation takes place on the standard 12-

### 1guyea2022001 - 52.      It is proposed that the next Article IV consultation takes place on the standard 12-

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

### Comparative Regional Developments (Figure 1)
- Guyana continues to perform in line or better than some regional peers.
- Real GDP Growth (y/y percent change): Guyana outperformed Tourism-dependent Caribbean and Commodity-exporting Caribbean across 2006–2021 (chart series shown).
- Inflation, Period Average (y/y percent change): Guyana inflation remained subdued though most recently slightly higher than in other tourism destinations.
- Public Sector Balance (Percent of GDP): Guyana (Non-financial Public Sector) shown against regional groups across 2006–2021.
- External Debt (Percent of GDP): External borrowing remained low for Guyana relative to peers.
- Domestic Debt (Percent of GDP): Domestic debt is on the rise but lower than in comparable groups.
- Current Account Balance (Percent of GDP): The current account balance has stabilized.

### Real Sector Indicators (Figure 2)
Findings:
- Economic activity slowly picked up in 2021 after political crisis, floods, and pandemic lockdowns; non-oil economic recovery was strong in 2021.
- Inflation trend: 12-month inflation rising.
- The floods affected sugar and rice production in 2021.
- Growth drivers: construction and services helped GDP growth rebound.
Selected chart-noted series (annual percent change or index, as presented):
- Sectoral Real GDP (annual percent change): Agriculture, Non-mining, Non-oil, Other sector series plotted.
- Consumer Prices (monthly percent change): 12-month inflation (RHS) shown.
- Commodity Production (index: 2007=100): Gold, Rice, Bauxite, Nominal GDP, Sugar.
- Sectoral Contribution to Real Growth (percent): Agriculture, Mining and Quarrying, Services, Construction and Manufacturing.

### External Sector Developments (Figure 3)
Findings:
- External position has stabilized from the covid crisis.
- Large oil-related imports increased the current account deficit in values and volumes.
- Total exports increased; non-oil commodity exports have declined.
- Remittances have increased (Remittances series in US$ millions).
- FDI declined during the covid crisis, recovery in 2021 due to oil-related FDI.
- Official loan disbursements have increased; composition of loan disbursements shows PetroCaribe (saved and spent portions) and Other loans.
Selected chart-noted series and indicators:
- Current account (Percent of GDP) and Terms of Trade (y-o-y percent change).
- Imports of goods (capital goods, fuel imports) as percent of GDP.
- Exports of goods (Gold, Bauxite, Sugar, Rice) in percent of GDP.
- Remittances (In US$ millions).
- FDI, net and Grants (In US$ millions).
- Composition of Loan Disbursements (In US$ millions).

### Fiscal Sector Developments (Figure 4)
Findings:
- Fiscal deficit deteriorated slightly in 2021 due to declining revenues despite unwinding of covid-related measures.
- Revenues declined owing to continued fall in tax revenues.
- Current expenditures are declining including transfers; fiscal balance is deteriorating slightly.
- Net domestic financing has recently declined somewhat, with an increased domestic debt.
Selected chart-noted series:
- Revenue and expenditure (Percent of GDP): Revenue, Current expenditure, Capital expenditure.
- Tax and Non-tax revenue (Percent of GDP).
- Current Expenditure components: Transfers, Other goods and services, Wages and salaries (Percent of GDP).
- Fiscal Current Balance (Percent of GDP) excluding and including grants.
- Net domestic financing and components (Percent of GDP).
- Government Debt: External debt and Domestic debt (Percent of GDP).

### Financial Soundness Indicators (Figure 5; Table 7)
Findings:
- Banking system is well capitalized; capital adequacy ratio above regulatory requirement.
- Liquid asset ratio remained stable; banks remain liquid.
- Credit concentration slightly decreased; asset quality improved.
- Banks' profitability deteriorated slightly in 2021 as operating expenses increased.
Selected indicators (2011–2021 series as provided):
- Liquid assets to total assets; Customer deposit to total loans.
- Capital to risk-adjusted assets; Capital to total assets; Minimum capital adequacy.
- Top 20 Borrowers to Total Loans.
- Provision for loan loss to total loans; NPLs to total loans.
- Return on equity; Return on assets; Oper. exp. to total income.

From Table 7 (selected series, 2016–2021):
- Capital to risk-adjusted assets: 25.41, 27.14, 28.72, 28.01, 29.12, 29.06.
- Nonperforming loans to total loans: 12.91, 12.19, 11.93, 11.11, 10.83, 7.82.
- Return on assets: 0.55, 0.57, 0.59, 0.73, 0.59, 0.50.
- Liquid assets to total assets: 30.44, 29.36, 30.21, 31.68, 41.05, 33.84.

### Monetary Developments (Figure 6; Table 4)
Findings:
- Monetary conditions are supportive of growth.
- Base money has stabilized.
- Interest rates marginally declined.
- Credit growth reached pre-pandemic levels, particularly business lending.
Selected series and levels:
- Money (annual percentage change): Broad money and Monetary series plotted (2011–2021).
- Interest and Treasury Bill Rates (percent): Lending interest rate (RHS), Treasury bill interest, Small savings rate.
- Private Sector Credit (percent): Credit to deposit, Credit growth, Deposit growth, Credit to GDP ratio.
- Private Sector Credit by Sectors: Business, Mortgage, Households.

From Table 4 (Bank of Guyana and Monetary Survey, end of period, in billions of Guyanese dollars):
- Base Money: 202.3 (2019), 292.2 (2020), 295.2 (2021), 465.6 (2022), 681.1 (2023), 942.5 (2024), 1,246.6 (2025), 1,593.6 (2026), 1,991.3 (2027).
- Broad Money: 562.1 (2019), 643.6 (2020), 722.3 (2021), 805.1 (2022), 903.7 (2023), 992.8 (2024), 1,081.7 (2025), 1,178.4 (2026), 1,284.0 (2027).
- Private sector credit: 302.9 (2019), 310.3 (2020), 332.3 (2021), 357.0 (2022), 381.0 (2023), 404.4 (2024), 429.7 (2025), 456.5 (2026), 485.0 (2027).
- Bank of Guyana's net foreign assets, in millions of U.S. dollars: 453.3 (2019), 559.1 (2020), 453.4 (2021), 513.2 (2022), 965.8 (2023), 1,499.2 (2024), 2,096.9 (2025), 2,474.8 (2026), 2,815.1 (2027).

### Selected Social and Economic Indicators (Table 1)
- Population, 2021 (thousands): 789
- Life expectancy at birth (years), 2019: 70
- Under-five mortality rate (per 1,000 live births), 2020: 28
- Population living below the poverty line (%), 2000-06: 35
- Real GDP (Proj. 2021–2027, annual percent change): 23.9 (2021), 57.8 (2022), 25.2 (2023), 21.2 (2024), 28.2 (2025), 25.5 (2026), 3.3 (2027)
- Real Non-Oil GDP: 4.6 (2021), 7.2 (2022), 5.0 (2023), 5.1 (2024), 5.2 (2025), 5.2 (2026), 5.2 (2027)
- Real Oil GDP: 56.9 (2021), 116.1 (2022), 36.8 (2023), 28.3 (2024), 36.5 (2025), 31.1 (2026), 2.9 (2027)
- Consumer prices (average): 3.3 (2021), 7.6 (2022), 7.6 (2023), 5.0 (2024), 3.8 (2025), 3.5 (2026), 3.5 (2027)
- Central Government Revenue (Percent of GDP): 24.3 (2021), 34.3 (2022), 36.3 (2023), 37.4 (2024), 37.9 (2025), 37.9 (2026), 37.6 (2027)
- Expenditure (Percent of GDP): 35.3 (2021), 36.8 (2022), 37.5 (2023), 37.9 (2024), 37.9 (2025), 37.9 (2026), 37.6 (2027)
- Overall balance (after grants) (Percent of GDP): -10.5 (2021), -1.7 (2022), -1.2 (2023), -0.5 (2024), 0.0 (2025), 0.0 (2026), 0.0 (2027)
- Total public sector gross debt (Percent of GDP) 1/: 42.9 (2021), 22.8 (2022), 20.9 (2023), 18.8 (2024), 16.2 (2025), 13.7 (2026), 13.5 (2027)
- Current account balance (in US$ millions and Percent of GDP, Table 1): -1,971.7 (US$ mn) and -25.5 percent of GDP (2021) shifting to 6,502.6 (US$ mn) and 43.8 percent of GDP (2022) per projections.
- Gross official reserves (US$ millions): 810.8 (2021), 870.7 (2022), 1,323.3 (2023), 1,856.6 (2024), 2,454.3 (2025), 2,832.2 (2026), 3,172.5 (2027)
- Crude oil production (million barrels): 42.4 (2021), 93.4 (2022), 124.5 (2023), 155.5 (2024), 207.0 (2025), 264.6 (2026), 264.6 (2027)
- Oil price (barrel) projections (US$): 69.1 (2021), 106.8 (2022), 92.6 (2023), 84.2 (2024), 78.5 (2025), 74.7 (2026), 72.5 (2027)
- Nominal GDP (G$ billion): 1,609.1 (2021), 3,094.0 (2022), 3,503.5 (2023), 3,961.3 (2024), 4,780.1 (2025), 5,776.2 (2026), 5,925.9 (2027)
- Per capita GDP, US$: 9,777.6 (2021), 18,744.6 (2022), 21,162.3 (2023), 23,855.8 (2024), 28,700.7 (2025), 34,578.0 (2026), 35,367.6 (2027)

Note: Table footnotes included in source:
- 1/ Since 2015-16, public debt to GDP ratios have been adjusted to reflect unsettled government balances at the central bank.
- 2/ The changes in public sector (net) are from a small base, making the series volatile.
- 3/ The external current account for 2018 onwards includes high value imports of oil goods and services.
- 4/ From 2022 through 2027 reserves include transfers of oil revenues consistent with staff's fiscal policy advice on the use of oil revenues.
- 5/ Gross reserves in months of projected imports of goods and services. From 2017, these are affected by high value imports of oil goods and services.

### Balance of Payments Highlights (Table 2)
Selected levels and projections (in millions of U.S. dollars):
- Current Account (incl. official transfers): -2,757 (2019), -897 (2020), -1,972 (2021), 6,503 (2022), 5,173 (2023), 5,446 (2024), 3,999 (2025), 7,274 (2026), 7,595 (2027).
- Exports (f.o.b.): 1,567 (2019), 2,590 (2020), 4,356 (2021), 11,628 (2022), 13,268 (2023), 14,920 (2024), 18,181 (2025), 23,212 (2026), 23,722 (2027).
- Imports (c.i.f.): 4,026 (2019), 2,254 (2020), 4,361 (2021), 2,801 (2022), 4,327 (2023), 2,944 (2024), 4,380 (2025), 3,179 (2026), 3,107 (2027).
- Oil exports: - (2019), 1,064 (2020), 2,975 (2021), 9,978 (2022), 11,532 (2023), 13,097 (2024), 16,259 (2025), 21,193 (2026), 21,617 (2027).
- Primary Income (net): -47 (2019), -108 (2020), -390 (2021), -1,106 (2022), -1,275 (2023), -5,065 (2024), -7,588 (2025), -11,248 (2026), -12,279 (2027).
- Financial Account (Net): 2,857 (2019), 879 (2020), 1,896 (2021), -6,552 (2022), -5,222 (2023), -5,485 (2024), -4,040 (2025), -7,328 (2026), -7,652 (2027).
- Gross international reserves (memorandum): 575.9 (2019), 680.6 (2020), 810.8 (2021), 870.7 (2022), 1,323.3 (2023), 1,856.6 (2024), 2,454.3 (2025), 2,832.2 (2026), 3,172.5 (2027).
- Oil price assumption (US$/b): 61.4 (2019), 41.3 (2020), 69.1 (2021), 106.8 (2022), 92.6 (2023), 84.2 (2024), 78.5 (2025), 74.7 (2026), 72.5 (2027).
- GDP (US$ million): 5,174 (2019), 5,471 (2020), 7,717 (2021), 14,839 (2022), 16,804 (2023), 18,999 (2024), 22,926 (2025), 27,704 (2026), 28,421 (2027).

Footnotes from Table 2:
- 1/ Table has been revised to BPM6 presentation.
- 2/ Includes capital flows of PetroCaribe financing.
- 3/ The external current account for 2018 onwards includes high value imports of oil goods and services.
- 4/ Gross reserves are in months of projected imports of goods and services. For 2017 onward, these are affected by high value imports of oil goods and services.

### Public Sector Operations (Tables 3a–3c)
Key fiscal ratios (central government, percent of GDP):
- Central Government Revenue: 22.3 (2019), 20.0 (2020), 16.6 (2021), 14.0 (2022), 14.4 (2023), 14.3 (2024), 12.9 (2025), 11.6 (2026), 12.1 (2027).
- Tax revenue: 20.9 (2019), 19.1 (2020), 15.8 (2021), 9.3 (2022), 9.0 (2023), 8.7 (2024), 7.8 (2025), 7.0 (2026), 7.3 (2027).
- Central Government Expenditure: 26.2 (2019), 28.5 (2020), 24.1 (2021), 15.0 (2022), 14.8 (2023), 14.5 (2024), 13.0 (2025), 11.6 (2026), 12.2 (2027).
- Overall Balance (after grants): -2.8 (2019), -7.9 (2020), -7.2 (2021), -0.7 (2022), -0.5 (2023), -0.2 (2024), 0.0 (2025), 0.0 (2026), 0.0 (2027).
- Financing (Percent of GDP): 2.8 (2019), 7.9 (2020), 7.2 (2021), 0.7 (2022), 0.5 (2023), 0.2 (2024), 0.0 (2025), 0.0 (2026), 0.0 (2027).
Memorandum items:
- Total public debt: 43.6 (2019), 51.1 (2020), 42.9 (2021), 22.8 (2022), 20.9 (2023), 18.8 (2024), 16.2 (2025), 13.7 (2026), 13.5 (2027).

### Monetary Survey and Bank of Guyana Summary (Table 4, selected)
- Currency in Circulation (end of period, G$ bn): 128.1 (2019), 162.2 (2020), 183.6 (2021), 337.2 (2022), 540.1 (2023), 789.1 (2024), 1,080.5 (2025), 1,413.9 (2026), 1,796.8 (2027).
- Net Foreign Assets (Bank of Guyana): 94.5 (2019), 116.6 (2020), 94.5 (2021), 107.0 (2022), 201.4 (2023), 312.6 (2024), 437.2 (2025), 516.0 (2026), 586.9 (2027).
- Broad Money growth (annual percent change): 14.4 (2019), 14.5 (2020), 12.2 (2021), 11.5 (2022), 12.3 (2023), 9.9 (2024), 9.0 (2025), 8.9 (2026), 9.0 (2027).

### Indicators of External and Financial Vulnerability (Table 5)
Selected indicators (Percent unless otherwise indicated):
- Public sector debt-to-GDP 1/: 43.6 (2019), 51.1 (2020), 42.9 (2021), 22.8 (2022), 20.9 (2023), 18.8 (2024), 16.2 (2025), 13.7 (2026), 13.5 (2027).
- NPV of public sector debt-to-GDP: 32.3 (2019), 39.3 (2020), 36.7 (2021), 19.2 (2022), 16.8 (2023), 14.8 (2024), 12.5 (2025), 10.6 (2026), 10.5 (2027).
- CPI-inflation (end of period): 2.1 (2019), 0.9 (2020), 5.7 (2021), 9.4 (2022), 6.0 (2023), 4.1 (2024), 3.5 (2025), 3.5 (2026), 3.5 (2027).
- Current account balance-to-GDP: -53.3 (2019), -16.4 (2020), -25.5 (2021), 43.8 (2022), 30.8 (2023), 28.7 (2024), 17.4 (2025), 26.3 (2026), 26.7 (2027).
- Gross official reserves (US$ million): 575.9 (2019), 680.6 (2020), 810.8 (2021), 870.7 (2022), 1,323.3 (2023), 1,856.6 (2024), 2,454.3 (2025), 2,832.2 (2026), 3,172.5 (2027).
- Gross official reserves in months of imports 2/: 1.6 (2019), 1.1 (2020), 1.9 (2021), 1.3 (2022), 2.9 (2023), 2.9 (2024), 5.1 (2025), 6.8 (2026), 7.2 (2027).

Footnotes from Table 5:
- 1/ Since 2015-16, the public debt to GDP ratios have been adjusted to reflect unsettled government balances at the central bank.
- 2/ Gross reserves are in months of projected imports of goods and services. For 2017 onward, these are affected by high value imports of oil goods and services.

### Medium-Term Macroeconomic Framework (Table 6)
Selected projected annual percent changes and fiscal aggregates:
- Real GDP: 5.4 (2019), 3.5 (2020), 3.9 (2021), 57.8 (2022), 25.2 (2023), 21.2 (2024), 28.2 (2025), 25.5 (2026), 3.3 (2027).
- Non-oil real GDP: 4.3 (2019), -7.3 (2020), 4.6 (2021), 7.2 (2022), 5.0 (2023), 5.1 (2024), 5.2 (2025), 5.2 (2026), 5.2 (2027).
- GDP deflator: 3.0 (2019), -26.3 (2020), 13.9 (2021), 21.9 (2022), -9.6 (2023), -6.7 (2024), -5.9 (2025), -3.7 (2026), -0.7 (2027).
- Consumer prices (average): 2.1 (2019), 1.2 (2020), 3.3 (2021), 7.6 (2022), 7.6 (2023), 5.0 (2024), 3.8 (2025), 3.5 (2026), 3.5 (2027).
- Central Government Revenue (Percent of GDP): 22.3 (2019), 20.0 (2020), 16.6 (2021), 14.0 (2022), 14.4 (2023), 14.3 (2024), 12.9 (2025), 11.6 (2026), 12.1 (2027).
- Expenditure (Percent of GDP): 26.2 (2019), 28.5 (2020), 24.1 (2021), 15.0 (2022), 14.8 (2023), 14.5 (2024), 13.0 (2025), 11.6 (2026), 12.2 (2027).
- Overall balance (after grants) (Percent of GDP): -2.8 (2019), -7.9 (2020), -7.2 (2021), -0.7 (2022), -0.5 (2023), -0.2 (2024), 0.0 (2025), 0.0 (2026), 0.0 (2027).
- Total public sector gross debt (Percent of GDP): 43.6 (2019), 51.1 (2020), 42.9 (2021), 22.8 (2022), 20.9 (2023), 18.8 (2024), 16.2 (2025), 13.7 (2026), 13.5 (2027).

Memorandum items:
- Nominal GDP (G$ billion): 1,079 (2019), 1,141 (2020), 1,609 (2021), 3,094 (2022), 3,504 (2023), 3,961 (2024), 4,780 (2025), 5,776 (2026), 5,926 (2027).
- Per capita GDP, US$: 6,594.4 (2019), 6,952.7 (2020), 9,777.6 (2021), 18,744.6 (2022), 21,162.3 (2023), 23,855.8 (2024), 28,700.7 (2025), 34,578.0 (2026), 35,367.6 (2027).

### Risk Assessment (Table 8)
- The Risk Assessment Matrix (RAM) shows events that could materially alter the baseline path; staff assesses likelihood categories as: “low” (<10 percent), “medium” (10–30 percent), and “high” (30–50 percent).
- The RAM reflects staff views on the source of risks and overall level of concern as of the time of discussions with the authorities.
- Three shocks in the GRAM were deemed low risk and/or low impact for Guyana or incorporated in other risks and therefore not included: (i) de-anchoring of inflation expectations in the U.S. and/or advanced European economies; (ii) widespread social discontent and political instability; and (iii) global information infrastructure failure.

*Sources: Guyanese authorities; Bank of Guyana; Ministry of Finance; UNDP Human Development Report; World Bank; and IMF staff calculations and projections.*

### Annex I. External Sector Assessment

### Annex I. External Sector Assessment

### Overall assessment
- The external position of Guyana in 2021 was broadly in line with the level implied by fundamentals and desirable policies and strengthened compared to 2020.
- The real exchange rate against currencies of trading partners depreciated slightly.
- Reserve adequacy improved to 1.9 months of imports and 2.9 months of non-oil imports.
- As oil production increases and oil prices remain high, the external position is expected to continue improving and substantial external buffers will be accumulated in the NRF.
- Risks: signs of appreciation pressures which will be exacerbated if inflation continues accelerating and if oil receipts are brought onshore.

### Current account
Findings
- Guyana’s current account has been in deficit over the last 20 years, averaging -9.6 percent of GDP per year, and reaching -25.5 percent of GDP in 2021.
- The widening of the current account deficit in 2021 is attributed to large FDI-financed imports for oil investment, the recovery in imports along with the recovery in the economy, and summer floods which lowered non-oil commodities exports—developments that staff view as temporary.
- National savings as a share of GDP declined in 2021 and has been negative since 2018.
- Private investment as a share of GDP, which declined during the pandemic, remained stable relative to 2020.
- With oil production in Liza-2, Payara and Yellowtail expected to reach capacity in 2022-26 and recovery in non-oil commodity exports, the current account is expected to turn to a significant surplus in 2022-27, averaging 29.0 percent of GDP.

Model-based assessment and adjustments
- EBA-lite model using unadjusted current account: cyclically adjusted (multilaterally consistent) current account norm was -9.2 percent of GDP compared with a cyclically adjusted actual level of -27.9 percent of GDP, yielding a current account gap of -18.7 percent and a policy gap of 1.0 percent, implying a substantial real exchange rate overvaluation of 48.0 percent.
- Large FDI-financed goods imports in the oil sector were 35.9 percent of GDP in 2021; many of these imports are large and temporary (equipment for oil extraction).
- Using adjustments for large, temporary oil-related imports (difference equal to 22.6 percent of GDP) and a statistical adjustment (-4.2 percent of GDP) produces an adjusted cyclically adjusted current account of -9.5 percent of GDP.
- After adjustment: current account gap of -0.3 percent of GDP and a 0.8 percent overvaluation of the real effective exchange rate.
- Staff assessment: external position in 2021 was broadly in line with fundamentals and desirable policies.
- Projection: as oil exports increase and oil-related imports decline, the current account is projected to strengthen over the medium term.

Notes on adjustments
- The size of large, temporary oil-related imports was estimated using estimates of large oilfield development costs for Liza-1 and Liza-2 in the FARI model; difference equals 22.6 percent of GDP.
- A statistical adjustment (-4.2 percent of GDP) was made to accommodate the classification of transfers to/from bank accounts abroad.

### Real exchange rate (REER) and nominal effective exchange rate (NEER)
Facts
- The REER was stable in 2021, depreciating about 0.47 percent.
- The NEER depreciated by around 0.95 percent.
- Historically, effective exchange rates have been broadly stable; movements typically driven by developments of the US dollar vis-à-vis other currencies.
- The REER has remained stable since end-2021.

Assessment and risks
- EBA-lite REER model: REER norm was 97.5 compared with the actual level of 107.6, yielding a REER gap of 9.9 percent and a policy gap of -3.8 percent, implying a current account gap of -3.8 percent.
- The development of the oil sector has caused large short-term fluctuations in real GDP, distorting REER model results.
- Given recent REER stability and government plans to increase investment and implement supply-side policies to improve non-oil competitiveness, staff do not view the REER as misaligned.
- Downside risks: significant appreciation pressures if inflation accelerates and if significant oil receipts are brought onshore.
- The policy gap is driven by loose monetary policy and low private credit growth in 2021.
- Reported model elasticities and gaps:
  - CA-Actual: -25.5 (in percent of GDP)
  - Cyclical contributions (from model): (-)1.8
  - COVID-19 adjustor: 0.8
  - Additional temporary/statistical factors: (-)-18.4
  - Natural disasters and conflicts: (-)-0.2
  - Adjusted CA: -9.5
  - CA Norm (from model): -9.2
  - Adjusted CA Norm: -9.2
  - CA Gap: -0.3 / -3.8 (two model variants)
  - Relative policy gap: 1.0
  - Elasticity: -0.39
  - REER Gap (in percent): 0.8 / 9.9

### Capital and financial accounts: flows and policy measures
- Foreign direct investment (FDI) has been the major source of capital inflows since 2018 and was equal to 28.8 percent of GDP in 2021.
- Oil-related FDI inflows were US$4,430.1 million, or 57.4 percent of GDP, in 2021 and are expected to decline in 2022-27, averaging 12.6 percent of GDP.
- Net FDI inflow in 2021 will reverse to a net outflow in 2022 as outflows increase due to oil operator cost recovery.
- Non-oil related FDI: US$272.6 million in 2019; US$87.8 million in 2020; US$23.1 million in 2021. Expected to slowly recover in 2022-27.
- Public sector capital flows mainly comprise concessional loans, totaling US$125.2 million in 2021.
- Oil revenue flows were US$409.2 million in 2021 and are expected to grow to US$8,191.7 million by 2027.

Vulnerabilities and risks
- With growth in oil production, the financial account will be vulnerable to external shocks (shocks to oil production and oil prices will impact government oil revenue flows).
- Risk of slower-than-expected recovery in non-oil FDI.
- Given concessional public external borrowing and low reliance on other private financial flows, vulnerabilities remain contained.

### Reserves level and adequacy
Stock and metrics
- Guyana accumulated reserves in 2021; international reserves equaled 10.5 percent of GDP in 2021.
- As of end-2021, reserves are 1.9 months of imports, or 2.9 months of non-oil imports, 23.4 percent of broad money (M2), and 1,362.2 percent of short-term debt.
- These metrics provide buffers against capital flight and limited market access in the event of adverse shocks.

Projections and adequacy
- Guyana’s level of international reserves is expected to be above most reserve adequacy metrics by 2025 and in the medium term; oil revenues will provide substantial external buffers.
- Projected balance in the NRF: US$607.5 million in 2021 to US$21,141.6 million in 2027.
- Reserves in terms of short-term debt, broad money, and non-oil related imports are expected to remain well above adequate levels.
- Reserves in terms of imports will reach 2.9 months of imports in 2023 and continue to improve in the medium term.
- However, reserves will remain below adequate levels using the Assessing Reserve Adequacy (ARA) Emerging Markets (EM) Metric, as this measure is skewed by the large increase in oil exports.

Selected historical and projected ratios (Text Table 2 highlights key series)
- Gross reserves (stock) series and adequacy metrics include values such as:
  - 2010: Gross reserves 164.9; 3 Months Imports 141.6; 3 Months Non-Oil Imports 141.6; 20% of Broad Money 260.4; Short Term Debt 4627.9
  - 2018: Gross reserves 79.2; 3 Months Imports 41.1; 3 Months Non-Oil Imports 86.5; 20% of Broad Money 112.1; Short Term Debt 958.8
  - 2020: Gross reserves 78.7; 3 Months Imports 37.6; 3 Months Non-Oil Imports 109.0; 20% of Broad Money 110.2; Short Term Debt 1297.4
  - 2021 Prel.: Gross reserves 73.5; 3 Months Imports 64.2; 3 Months Non-Oil Imports 96.7; 20% of Broad Money 117.0; Short Term Debt 1362.2
  - 2022 Proj.: Gross reserves 46.5; 3 Months Imports 44.2; 3 Months Non-Oil Imports 101.9; 20% of Broad Money 112.7; Short Term Debt 1378.5
  - 2023 Proj.: Gross reserves 63.4; 3 Months Imports 96.2; 3 Months Non-Oil Imports 149.8; 20% of Broad Money 152.6; Short Term Debt 1900.9
  - 2024 Proj.: Gross reserves 80.8; 3 Months Imports 96.3; 3 Months Non-Oil Imports 200.6; 20% of Broad Money 194.9; Short Term Debt 2610.0
  - 2025 Proj.: Gross reserves 92.0; 3 Months Imports 168.4; 3 Months Non-Oil Imports 252.0; 20% of Broad Money 236.5; Short Term Debt 3494.2
  - 2026 Proj.: Gross reserves 87.9; 3 Months Imports 225.6; 3 Months Non-Oil Imports 269.7; 20% of Broad Money 250.6; Short Term Debt 3975.6
  - 2027 Proj.: Gross reserves 95.5; 3 Months Imports 240.4; 3 Months Non-Oil Imports 284.7; 20% of Broad Money 257.6; Short Term Debt 5869.5
- Adequate Range cited for some metrics: 100-150 (for ARA EM Metric), 100 (for 3 Months Imports), 100 (for 3 Months Non-oil Imports), 100 (for 20% of Broad Money), 100 (for Short Term Debt).

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### Annex II. The Amended NRF Transfer Rule

Context and legal changes
- International oil producers have discovered 11 billion barrels of commercially recoverable oil and gas.
- Guyana's Parliament approved local content rules for oil producers and amendments to the 2019 Natural Resource Fund Act on December 29, 2021.
- The Local Content Bill requires energy projects to use local businesses in specified areas and paves the way for local participation in at least 40 critical areas in the oil sector. Oil companies and their subcontractors have up to December 2022 to prepare a five-year plan outlining indigenous employment and procurement.
- The Natural Resources Fund Bill, No. 21 of 2021 introduced amendments to the 2019 Act and was passed despite an in-House protest from the Opposition.

Key differences and provisions in the 2021 Bill
- Removes extensive powers from the Minister of Finance and vests them in a new Board of Directors.
- Proposes a simpler, clearer formula to calculate how much can be withdrawn from the Fund for government expenditures, designed to be easily understood by the public to promote transparency.
- Replaces the 22-member Public Accountability and Oversight Committee with a new 9-member committee to establish practical and effective non-governmental oversight.
- Requires that all reports and receipts of all petroleum revenues be published in the Official Gazette; failure to comply results in a penalty of $5 million and ten-years prison time.
- The Minister of Finance could face up to ten years imprisonment if he fails to disclose the receipt of any petroleum revenues received by Government in the Official Gazette within three months of receipt.

Transfer rule mechanics
- All petroleum revenues accruing to the government initially get deposited in the Natural Resource Fund (NRF). The balance in the NRF in period t, x_t, follows the path:
  - x_t = x_{t−1} + Oil revenues accruing to the government in period t − Oil revenue transfers to the budget in period t
- The Natural Resource Fund Bill, signed into law on December 30, 2021, allows the government to extract the entire amount deposited in the NRF, over US$600 million, in the first year of operation of the Fund (2022) for budgetary spending.
- After the first withdrawal, the legislation sets a ceiling on withdrawals with a progressively smaller proportion of the balance allowed to be transferred to the budget:
  - x < US $500 mn: x mn transferred
  - US $500 mn < x < US $1000 mn: 500 + 0.75*(x-500) mn transferred
  - US $1000 mn < x < US $1500 mn: 875 + 0.5*(x-1000) mn transferred
  - US $1500 mn < x < US $2000 mn: 1125 + 0.25*(x-1500) mn transferred
  - US $2000 mn < x < US $2500 mn: 1250 + 0.05*(x-2000) mn transferred
  - US $2500 mn < x: 1275 + 0.03*(x-2500) mn transferred

Assessment and main shortcoming
- The Bill has several good features, including making transfers to the budget based on a clear, easily understandable formula and depositing all petroleum revenues initially in the NRF.
- However, the Bill does not incorporate a key principle: transfers of oil revenues to the budget should be closely integrated with budgetary financing needs within an appropriate and effective fiscal anchor.
- This omission contrasts with the 2019 Article IV Staff Report recommendation to adopt a fiscal framework that anchors fiscal policy by constraining the annual non-oil fiscal deficit to not exceed the expected transfer from the NRF, ensuring measured increases in fiscal spending and avoiding adverse public debt dynamics.

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### Annex III. Cross-country experiences and lessons in management of oil resources

Key policy lessons (three overarching lessons)
- The need to supplement a prudent oil revenue management framework with a strong and effective public financial management system, in particular a robust public investment management (PIM) framework.
- The need to have an effective fiscal anchor to contain fiscal deficits and public debt accumulation (lessons from Ghana and Kuwait).
- The transfer of oil revenues to the budget should be closely integrated with budgetary financing needs in the context of an appropriate and effective fiscal anchor.

A. Timor-Leste
- Petroleum is the mainstay of Timor-Leste’s economy: income from petroleum currently accounts for over 70 percent of GDP and over 95 percent of total revenues.
- Fiscal framework centered on a Petroleum Fund and a guideline focused on long-term fiscal sustainability.
- Strict application of a Permanent Income Hypothesis (PIH)-based benchmark has helped preserve the real value of government wealth from oil.
- Timor-Leste’s pressing development needs have led to higher public spending in recent years; balancing fiscal sustainability and development needs is critical.

B. Ghana
- Ghana started oil production at the end of 2010 after discovery in 2007.
- Norwegian assistance helped develop Ghana’s framework; the Petroleum Revenue Management Act (PRMA, Act 815) passed in 2011.
- Lessons: need for a strong PFM and PIM framework; need for an effective fiscal anchor to contain fiscal deficits and public debt; the transfer of oil revenues to the budget must be closely integrated with budgetary financing needs within an effective fiscal anchor.
- Ghana’s difficulties during the first ten years of oil production illustrate risks of weak integration of oil revenue transfers with budgetary needs.

C. Kuwait
- Kuwait’s experience highlights the need for a sound fiscal policy anchor for macroeconomic stabilization and intergenerational equity.
- A well-designed fiscal rule helps preserve intergenerational equity by underpinning savings for future generations, insulates the economy from oil price shocks, protects government spending from political pressures, and reinforces multi-year budget frameworks to contain fiscal deficits and public debt accumulation.

*International Monetary Fund staff assessment as presented in Annex I: External Sector Assessment (Guyana).*

### Annex IV. Macroeconomic Impact of Scaling Up Public Investment

### Annex IV. Macroeconomic Impact of Scaling Up Public Investment

### DIGNAR model overview
- DIGNAR is a dynamic stochastic general equilibrium model of a small open economy used to analyze the macroeconomic and debt sustainability effects of scaling up public investment in resource-abundant developing countries.
- Mechanisms captured:
  - Increases in public capital can raise the productivity of labor and private capital, inducing more accumulation of these productive factors and, therefore, growth.
  - Natural resource revenues can serve as collateral for borrowing from international markets, enabling public capital buildup before revenues are generated and helping to mitigate and “smooth out” crowding out effects on private consumption and investment.
  - The model is well-suited to studying and quantifying possible “Dutch disease” effects.

### Scenarios calibration
- Public investment efficiency and related parameters:
  - Baseline public investment efficiency: 59 percent (in line with the findings in the 2017 PIMA Assessment).
  - Comparative benchmarks: LAC 70 percent; EMEs 73 percent.
  - In the “aggressive” scenario public investment efficiency is assumed to increase steadily from 59 percent to 70 percent.
  - Depreciation rate of public capital: 7 percent.
- Export projections:
  - Exports in percent of GDP are projected to rise from around 58 percent in 2022 to 87 percent in 2024 before falling steadily to 40 percent by 2045.
- Public investment scaling-up paths:
  - The scenarios reflect the pace of public investment spending and the speed of achieving an overall balanced budget consistent with staff’s recommendation of a fiscal responsibility framework.
  - Baseline scenario:
    - Overall balanced budget achieved by 2025.
    - Public investment in percent of non-oil GDP: 9.5 percent in 2021 → 12.5 percent in 2024 and remaining at that level thereafter.
    - Assumes oil transfers from NRF to the budget consistent with the NRF Act and authorities’ agreement.
  - Aggressive scenario:
    - Overall balanced budget achieved by 2030 (five years later than baseline).
    - Public investment in percent of non-oil GDP: 9.5 percent in 2021 → almost 23 percent in 2026 (for illustrative purposes) → steady decline to 12.5 percent by 2030.
  - Note: Absorption constraints associated with rapid increases in public investment motivate the gradual efficiency rise in the aggressive scenario.

### Macroeconomic implications (simulation results)
- General outcome:
  - Less crowding out of private investment and less contraction of the non-resource sector in the long run under the more gradual “baseline” scenario.
- Effects of the “aggressive” scenario relative to the “baseline” scenario:
  - Private investment:
    - Rapid public investment under the “aggressive” scenario dampens private investment considerably more relative to the “gradual” scenario—by a cumulative 10.8 percent over ten years—due to stronger crowding out effects.
  - Transmission channels driving crowding out:
    - Higher real interest rates from large public sector borrowing in the short term.
    - Massive front-loading of government investment spending leading to higher inflation and more pronounced appreciation of the real exchange rate, which adversely affects export competitiveness.
  - Output and sectoral effects after ten years:
    - Output in the tradable sector is 2.5 percent lower under the “aggressive” scenario compared to the “baseline” scenario after ten years.
    - Non-oil output is 3.3 percent lower under the “aggressive” scenario after ten years.
- Interpretation:
  - Despite a relatively lower amount of public investment spending to improve infrastructure in the baseline, non-oil output growth under the “baseline” scenario is higher in the long term compared to the “aggressive” scenario because the effects of “Dutch disease” and crowding out of private sector demand are lower.

*Annex IV. Macroeconomic Impact of Scaling Up Public Investment*

### References

### 1guyea2022001 - References

### References cited
- Agunias, R., and Newland, K., “Developing a Road Map for Engaging Diasporas in Development” International Organization for Migration (IOM), 2021.
- Bureau of Statistics of Guyana, Guyana Labor Force Survey, November 2021.
- Foray, D., 2014. Smart specialization: Opportunities and challenges for regional innovation policy. Routledge.
- Goldwyn, D., 2019, Guyana Finds Massive Oil Reserves, but Can It Triumph Over the Resource Curse? Goldwyn Global Strategies.
- Hartmann, D., Jara Figueroa, C., Kaltenberg, M., & Gala, P., 2019b. Mapping Stratification: the industry-occupation space reveals the network structure of inequality. Available at SSRN.
- Jara-Figueroa, C., Jun, B., Glaeser, E. L., & Hidalgo, C. A., 2018. The role of industry-specific, occupation-specific, and location-specific knowledge in the growth and survival of new firms. Proceedings of the National Academy of Sciences, 115(50), 12646-12653.
- Lương, T., 2020 Guyana’s Economic Structure after a Major Resource Windfall: Trade and Labor-Market Strategies, The World Bank.
- Neffke, F. M., Otto, A., & Weyh, A., 2017. Inter-industry labor flows. Journal of Economic Behavior & Organization, 142, 275-292.
- International Labor Organization (ILO), The Kuwaiti Labor Market and Foreign Workers: Understanding the Past and Present to Provide a Way Forward, Working Paper.
- International Organization for Migration (IOM), Planning for Prosperity: Labor Migration and Guyana’s Emerging Economy, 2021.

### Annex VIII — Progress with Implementation of EITI Recommendations
- Guyana joined the Extractive Industries Transparency Initiative (EITI) in 2017 after announcing commitment in 2010.
- In 2015 the Ministry of Natural Resources commenced appointing members of a Multi-Stakeholder Group (MSG). In February 2017, the MSG was officially launched comprising twelve (12) members, four (4) representatives each from civil society organizations, extractive entities, and government agencies.
- Roles of MSG: approves the work plan for the Secretariat; approves the annual EITI Report; assures that EITI contributes to public debate; oversees day-to-day operations and implementation of the work plan.
- Government set up GYEITI as the national secretariat coordinating EITI implementation.
- Under EITI standards, Guyana commits to:
  - (i) high standards of transparency and accountability in government operations and business;
  - (ii) full disclosure of laws, procedures and conditions under which contracts and licenses to extract and develop the resources are issued, including institutional responsibilities of the State;
  - (iii) full disclosure of exploration, production and exports in the extractive sector;
  - (iv) report ownership structures, including beneficial ownership information, transactions and financial flows in the extractive sector;
  - (v) disclose the fiscal regime for managing natural resource revenues and expenditures as articulated in the Natural Resource Fund Act;
  - (vi) report the contribution of the extractive sector in the economy.
- Guyana published its second EITI Report, covering fiscal year 2018, in April 2021 and entered the validation process under the EITI Standard started in October 2021.
- The 2018 report includes data on mining, oil and gas, fisheries, and forestry.
- Government work plan for 2021–22 with outlined expected outputs by December 2022 for a total cost of 567,000 US dollars. Commitments include publishing all contracts, licenses and permits with geo-located data.
- Disclosures assigned to the e-governance unit of the National Data Management Agency (NDMA). NDMA to work with Guyana Lands and Surveys Commission, Guyana Geology and Mines Commission, Guyana Forestry Commission, and Department of Energy to establish online digital portals.
- NDMA to work with the Deeds Registry to digitize company registration data for public access.

### Annex IX — Progress on 2019 Article IV Policy Recommendations
- Fiscal policy
  - Recommendation: Complement the Natural Resource Fund Act with a fiscal responsibility framework to ensure effective management of the oil wealth; anchor fiscal policy by constraining the annual non-oil deficit to not exceed the expected transfer from the NRF (i.e., a zero-overall fiscal balance).
  - Authorities’ response: Broadly consistent.
    - NRF legislation assented to law in January 2019, providing legal framework for managing natural resource wealth.
    - NRF included a fiscal transfer rule envisaging around half of current oil revenue transferred to the budget and the other half saved.
    - Authorities did not spell out a complementary fiscal framework. New government (August 2020) announced amendments. The Natural Resources Fund Bill, No. 21 of 2021, was signed into law by the President at the end of 2021 and included a new fiscal transfer rule based on a simplified formula. The Budget did not spell out an anchor for fiscal policy.
- Monetary and exchange rate policies
  - Recommendation: Continually reassess monetary policy stance; gradually revert to a neutral stance; over the medium term allow greater exchange rate flexibility.
  - Authorities’ response: Broadly consistent.
    - Monetary policy was accommodative to support economic growth and rebound from the 2020 recession.
    - With recovery and rising inflation, monetary policy should tighten.
    - Authorities have not taken decisive steps to develop financial market infrastructure to allow increased exchange rate flexibility; exchange rate remains broadly stable.
- Financial sector policy
  - Recommendation: Strengthen supervisory and regulatory framework in line with the 2016 FSAP recommendations; closely monitor NPLs and strengthen financial stability; continue to strengthen AML/CFT framework.
  - Authorities’ response: Broadly consistent.
    - Progress: amendments to the Bank of Guyana’s Act to provide emergency liquidity assistance (ELA); amendments to Part VIII of the Financial Institutions Act (FIA) for orderly resolution; National Payment System (NPS) law; Deposit Insurance Act.
    - Work needed on under-provisioning and related party lending.
    - Progress in Crisis Management Plan and Supervision Guideline; accelerated Basel II/III implementation.
    - Strengthened AML/CFT legal framework; completed 2021 NRA; preparing for 2022 Mutual Evaluation by the Caribbean Financial Action Task Force.
    - NPLs have considerably declined in 2021; an Asset Quality Review remains under consideration.
- Structural reforms
  - Recommendation: Structural reforms and infrastructure investment to support economic diversification and inclusive growth.
  - Authorities’ response: Broadly consistent.
    - Authorities reducing the cost of doing business through public investment program and administrative reforms.
    - Commitment to cleaner and more affordable energy matrix, eliminating infrastructure deficits, integrating remote regions per GSDS.
    - Need to decisively implement Green State Development Strategy (GSDS) measures to enhance diversification and inclusive growth.
    - Authorities increasing resources to education and training; need to address skilled labor shortages and implement more liberal immigration policies including free movement from CARICOM.
    - Scaling-up infrastructural investment and expanding generation and transmission capacity; must consider absorptive capacity.
- Governance
  - Recommendation: Continue progress and take steps to tackle capacity weaknesses to strengthen transparency and governance.
  - Authorities’ response: Broadly consistent.
    - Progress: publication of audit reports of public expenditures including for COVID; partial implementation of recommendations; re-establishment of the Integrity Commission.
    - Asset declarations of many public officials submitted annually; public procurement tenders streamed live.
    - Progress implementing recommendations of 2019 and 2021 EITI reports, notably on reconciliation with the fiscal regime.
    - Some progress on information sharing and publication of extractive industries’ financial statements; further progress needed to move towards electronic disclosure and adequate follow-up.

### Annex X — Strategizing on Reducing Climate Change Risks
- Overview and risks
  - Guyana faces serious climate change and natural disaster risks, particularly floods and droughts.
  - Multiple and recurrent floods alternating with droughts have caused significant damage to infrastructure and disruption of economic activity. The worst documented damages reached 60 percent of GDP in 2005.
- Sea level and projections
  - Sea level along the Guyana coastline is rising faster than the global average and is expected to accelerate in the coming decades due to global warming.
  - Sea level off Guyana coast rose at a rate of six times the global average, (0.4 inch, or 10.2 millimeters per year) from 1951 to 1979 (Guyana National Climate Committee, 2002).
  - Projections: sea level could rise by 0.14m to 0.26m by 2030s, and 0.4 to 0.51m by 2100 (McSweeney et al. 2010).
- Exposure, vulnerability, and adaptation capacity
  - High disaster risk index driven by high exposures and lack of coping and adaptive capacities.
  - Coastal vulnerability aggravated by ageing infrastructure ill-equipped for higher water levels and more intense storm surges.
  - About 25 percent of the Guyana’s coast is protected by seawalls, 60 percent by mangroves, and 15 percent by natural sandbanks.
  - Investments in priority areas—upgrading infrastructure to protect against flooding and hinterland adaptation—would increase resilience.
- Policy actions and strategies
  - Guyana has ratified the UNFCCC in 1994 and the United Nations Convention to Combat Desertification in 1997.
  - At the national level, Guyana prepared the Green State Development Strategy (GSDS) Vision 2040, a 20-year national green agenda for sustainable, low-carbon and resilient development with emphasis on inclusiveness and intergenerational equity.
  - Crucial investment in adaptation infrastructure should be part of a comprehensive strategy that fills infrastructure gaps and prioritizes development needs; absorptive capacity of the domestic economy and labor market must be considered when pacing public investment.
  - Incorporating governance-related measures in climate investment programs is crucial to ensure transparency, accountability and integrity.
- Fiscal management and transition risk
  - Saving part of oil wealth in financial assets will promote intergenerational equity and insure against transition risk.
  - A decarbonized world will mitigate climate change effects but poses a medium-term challenge to a lucrative source of revenue.

*Source: 1guyea2022001 - References (IMF PDF).*

### 7.      Guyana is committed to net-zero carbon emissions, but efforts should continue to

### 7.      Guyana is committed to net-zero carbon emissions, but efforts should continue to 

### LCDS 2030 and emission targets
- The Low Carbon Development Strategy (LCDS) 2030 commits to reduce emissions by 70% before 2030 mainly via maintaining vast forest coverage and monitoring closely oil emissions on a sectoral and additive basis.
- According to LCDS, starting in 2022, Guyana can access market-based mechanisms for forest climate services that includes private, as well as international public sector financing.

### Energy strategy and emissions from oil extraction
- Guyana is committed to address climate change challenges by shifting towards renewable energy sources, hydropower and solar, while entering the international carbon credits market.
- Guyana does not currently have a carbon tax but has implemented a flaring tax at US$45 per ton of carbon.
- Efforts should continue to meet ambitious domestic targets and to compensate for increased emissions from oil extraction.

### Forests, international partnerships, and carbon finance
- Guyana’s vast forests and low deforestation rate support its effort to mitigate climate change.
- Mitigation efforts have benefited from the REDD+ Investment Fund (GRIF), established through an agreement with Norway.
- Guyana has a new proposal to join the LEAF (Lowering Emissions by Accelerating Forest Finance) Coalition.
- The 2022 market-based access for forest climate services will enable a pathway to transition from the existing Guyana-Norway partnership and increase the value of sustainably managing Guyana’s forests.

### Key findings and policy implications
- Findings:
  - LCDS 2030 target: reduce emissions by 70% before 2030.
  - Flaring tax: US$45 per ton of carbon.
  - Market-based mechanisms available starting in 2022 for forest climate services, including private and international public sector financing.
- Policy implications / recommendations:
  - Continue and strengthen monitoring of oil-sector emissions on both a sectoral and additive basis to ensure LCDS targets are met while oil extraction expands.
  - Advance the energy transition toward renewable sources, including hydropower and solar, in line with LCDS objectives.
  - Leverage participation in international carbon finance platforms (e.g., LEAF Coalition, market-based mechanisms) to increase the value of sustainable forest management and to transition from bilateral arrangements.
  - Consider complementary fiscal instruments beyond the flaring tax to internalize carbon externalities, consistent with domestic targets and international carbon market participation.

*Prepared by the International Monetary Fund (IMF) — excerpt from the Staff Report for the 2022 Article IV Consultation (Informational Annex).*

### 2.      The Government of Guyana has been working closely with the World bank on issues related

### 1guyea2022001 - 2.      The Government of Guyana has been working closely with the World bank on issues related

### Background and recent developments
- The Government of Guyana has worked with the World Bank on debt transparency and management in the context of the Sustainable Development Finance Policy (SDFP), increasing periodicity and coverage of debt statistics and strengthening the policy framework for debt management.
- The Guyanese economy was negatively impacted by the pandemic and the 2021 floods but has recovered well, supported by the oil boom; medium-term prospects are more favorable than ever before.
- Non-oil economic growth recovered in 2021 but was dampened by the 2021 floods affecting agriculture and hinterland activity.
- Inflation increased in 2021 owing to higher food and fuel prices and supply-side disruptions and have more recently been exacerbated by the war in Ukraine.
- Guyana’s commercially recoverable petroleum reserves is estimated to be well over 11 billion barrels, the third largest in Latin America and Caribbean, and one of the highest levels of oil reserves per capita in the world.

### Public debt profile and recent trajectory
- Total public-sector debt declined to 42.9 percent of GDP in 2021 (including central government guarantee on NICIL’s G$16.5 billion syndicated loan) from 57.7 percent of GDP in 2011.
- External debt accounts for over 40 percent of total public sector debt.
- Multilateral creditors accounted for over 65 percent of total external debt in 2021.
- The IDB accounted for 46.1 percent of total external debt at end-2021.
- China’s state-owned Export-Import Bank comprised 17.3 percent of total external debt at end-2021.
- Eurobond holders are the only private (commercial) creditors.
- Domestic debt comprises mainly Treasury bills (T-bills) and borrowing from the central bank, which is now securitized.

### Fiscal policy stance and objectives
- Authorities remain committed to fiscal prudence and contracting external loans on highly concessional terms.
- Government plans to diversify the economy and support long-term growth by investing in infrastructure and education.
- Public capital spending is projected to increase from 9.5 percent of non-oil GDP in 2021 to 12.1 percent in 2022 and to 12.5 percent of non-oil GDP over the medium-term.
- Several pillars of the anticorruption framework have been recently strengthened, including the Integrity and Public Procurement Commissions (IC and PPC) and the National Procurement and Tender Administration Board (NPTAB).
- Guyana published its second EITI Report covering fiscal year 2018 in April 2021 and is undergoing validation under the EITI Standard started in October 2021.

### Macroeconomic baseline assumptions (summary)
- Discount rate used to calculate net present value of external debt: 5 percent.
- Baseline scenario incorporates oil fiscal revenues from 2022 onwards and value added to domestic activities through employment and capital flows.
- Fiscal framework constrains the annual non-oil overall fiscal deficit (after grants) to not exceed the expected transfer from the NRF.
- Projections are subject to significant upside and downside risks related to oil prices, oil production, and government fiscal policy stance.

### Main quantitative projections and assumptions
- Real GDP growth is projected at 16.8 percent on average during 2022-2032, with considerable volatility reflecting projected movements in oil production.
- Inflation (measured by CPI) is projected to average 4.3 percent during 2022-2032.
- Central government overall balance is expected to average close to zero percent of GDP during 2022-2032.
- Text Table comparisons (period averages):
  - Real GDP growth: 2019 DSA 10.4 | 2022 DSA (2022-32) 16.8
  - Real Non-oil GDP growth: 2019 DSA 4.3 | 2022 DSA 5.4
  - Consumer prices (eop) 1/: 2019 DSA 2.8 | 2022 DSA 4.3
  - Central Government overall bal. (pct of GDP) 2/: 2019 DSA 1.3 | 2022 DSA -0.1
  - External current account balance (pct of GDP): 2019 DSA 0.1 | 2022 DSA 26.5
- A significantly smaller and shrinking overall fiscal deficit (less than 1 percent of GDP) is projected over 2022-2024, thereafter a zero overall budget balance over the long-run.
- Oil production expectations and revenues:
  - Oil production is expected to increase by 2025 by more than 300,000 barrels per day (to 720,000), compared to the 2019 DSA.
  - By end-2027 more than US$21 billion are expected to be accumulated in the NRF, from US$607 million at end-2021.
  - Starting from 2022, oil revenues coming into the budget will have a significant positive impact on budget financing and debt dynamics.
- Natural Resource Fund (NRF) withdrawal rules incorporated in projections:
  - The NRF Bill allows extraction of the entire amount deposited in the NRF, over US$600 million, in the first year of operation (2022).
  - Thereafter withdrawal rules: US$500 million can be withdrawn and then a reducing percentage of what remains, starting with 75% from the second five hundred million; 50% from the third five hundred million; 25% from the fourth five hundred million; 5% from the fifth five hundred million; and then 3% from any amounts in excess of US$2.5 billion.
- Public debt dynamics:
  - With real growth averaging close to 17 percent a year over 2022-2032 and real interest rates lower than growth, public debt to GDP ratio is projected to fall from 22.8 percent in 2022 to 12.7 percent in 2032.
- Current account:
  - Projected to improve to a surplus of 26.5 percent of GDP on average during the forecast period.
- Domestic financing structure (projected shift over time):
  - Share of short-term T-bills in domestic financing projected to fall from 85% in 2022-27 to 65% in 2028-32, 45% in 2033-37, and to 40% in 2038-42.
  - Share of short-term bonds (1-3 years) increases from 10% to 30% over this period.
  - Share of medium-term bonds (4-7 years) increases from 5% to 30% over this period.
- External borrowing:
  - Given projected large increases in oil revenue receipts, it is assumed that the government will not need to borrow externally after 2027.
  - Medium-term external financing of the government’s fiscal deficit is projected to decline steadily from 2023 to 2027.

### Risks and vulnerabilities
- Downside risks:
  - Increased dependence on oil revenue exposing the economy to oil price volatility.
  - Excessively rapid increases in government spending from oil revenues could produce inflationary pressures, real exchange rate appreciation, and governance concerns (“natural resource curse”).
  - New COVID-19 variants and vaccination delays could worsen the pandemic’s impact.
  - Prolonged disruption of international commodity markets and oil price volatility, aggravated by the Russian invasion of Ukraine.
- Upside risks:
  - Further oil discoveries and higher production (some announced in April 2022 but not incorporated into projections) could significantly improve long-term prospects.
  - Oil prices may be higher than current projections if sanctions on Russia intensify.

### Realism checks and stress considerations
- Forecast errors: Past external debt projection forecast errors are relatively low; forecasts of public and external debt to GDP ratios have been slightly higher than actual outturns, largely due to stronger real GDP growth and stronger-than-anticipated FDI flows.
- Realism of fiscal adjustment: A three-year adjustment in the primary balance of 6.7 percentage point of GDP over 2021-2024 is large but considered consistent with recommendations to use accumulated oil revenues only after improving management and governance in 2022; large projected primary surpluses derive mostly from oil revenues flowing into the budget from 2022 onwards and a commitment to a balanced budget without increasing expenditures beyond those revenues.
- Structural changes from new oil production materially alter historical relationships between investment rates and real GDP growth, affecting standard multiplier applications.

*Source: IMF staff report (excerpts).*

### 12.      Guyana is assessed having a “weak” debt carrying capacity, given the large oil-related

### 12.      Guyana is assessed having a “weak” debt carrying capacity, given the large oil-related imports.

### Composite Indicator and Debt Carrying Capacity
- CI score: 2.66.
- CI score falls just below the range of 2.69–3.05 for “medium” rated countries.
- Change since 2019: Debt carrying capacity has fallen from a clear “medium” in the 2019 DSA, mainly due to lower import coverage of FX reserves, as oil-related imports have been revised upwards.
- Staff expectations and mitigating factors:
  - Staff expects import coverage of FX reserves to improve significantly over the medium-term.
  - Authorities are building up substantial external buffers in the Natural Resource Fund (NRF).
  - DSA calculations do not take into account structural changes the economy is going through and ignore expected reserve accumulation in the NRF, and hence may underestimate the true debt absorption capacity.

### CI Score Components (10-year average contributions)
- CPIA: Coefficient 0.39; 10-year average 3.27; Contribution 1.26 (47%).
- Real growth rate (in percent): Coefficient 2.72; 10-year average 8.52; Contribution 0.23 (9%).
- Import coverage of reserves (in percent): Coefficient 4.05; 10-year average 20.29; Contribution 0.82 (31%).
- Import coverage of reserves^2 (in percent): Coefficient -3.99; 10-year average 4.12; Contribution -0.16 (-6%).
- Remittances (in percent): Coefficient 2.02; 10-year average 5.01; Contribution 0.10 (4%).
- World economic growth (in percent): Coefficient 13.52; 10-year average 3.05; Contribution 0.41 (15%).
- CI Score: 2.66 (100%); CI rating: Weak.

### External debt burden thresholds (by Debt Carrying Capacity rating)
- For Weak:
  - PV of debt in % of Exports: 140
  - PV of debt in % of GDP: 30
  - Debt service in % of Exports: 10
  - Debt service in % of Revenue: 14
- For Medium:
  - PV of debt in % of Exports: 180
  - PV of debt in % of GDP: 40
  - Debt service in % of Exports: 15
  - Debt service in % of Revenue: 18
- For Strong:
  - PV of debt in % of Exports: 240
  - PV of debt in % of GDP: 55
  - Debt service in % of Exports: 21
  - Debt service in % of Revenue: 23

### Coverage of Public Debt and Contingent Liabilities in Stress Tests
- Country coverage notes:
  - Other elements of general government not captured in 1.: 0.0 percent of GDP.
  - SOE's debt (guaranteed and not guaranteed by the government): 1/2 percent of GDP.
  - PPP: 35 percent of PPP stock → authorities and IDA confirmed PPP stock is zero → 0.00.
  - Financial market (default minimum value): 5 percent of GDP.
  - Total (2+3+4+5) (in percent of GDP): 7.0.
- Authorities indicated no PPP debt outstanding as of end-2021.
- World Bank Investments in IDA Countries Report shows no outstanding PPI investments and projects in Guyana for 2013–21.
- Government liabilities included under the contingent liability shock: SOE debt and debt of financial institutions implicitly or explicitly guaranteed by the government.

### External PPG Debt: Baseline and Stress Tests
- Baseline projections:
  - PV of external PPG debt: 6.5 percent of GDP in 2022 → 3.4 percent in 2032.
  - Decline driven by amortization and reduced need for new external debt due to incoming oil revenues to the central government budget starting from this year.
- 2019 vs current: Base debt ratios for 2021 are significantly higher than had been projected in 2019 due to COVID-19 impacts: urgent pandemic spending, revenue losses from economic contraction, and tax policy measures to support households and businesses.
- Standardized stress tests (combined shock):
  - Combined shock includes temporary shocks to real GDP growth, primary balance, exports, other flows (including current transfers and FDI), and nominal exchange rate depreciation.
  - Under combined shock: PV of debt-to-GDP ratio could increase to 49 percent in the first year after the shocks, decline to 35 percent by 2030, and to 31 percent by 2032.
  - Export shock: leads to relatively small breaches of the PV of debt-to-GDP benchmark over 2024-30.
  - Debt service to revenue indicator benchmark breached under both combined and export shocks for years 2030-32.
  - Note: Shocks under stress tests could be overestimated because they are based on historical macroeconomic paths that include structural changes caused by oil production.

### Risk Assessment and Buffers
- Risk of external debt distress in baseline: moderate; all solvency and liquidity indicators remain below benchmarks.
- Natural Resource Fund accumulation: expected to accumulate substantial savings amounting to almost 216 percent of non-oil GDP by 2027.
- Guyana’s current low level of external debt provides substantial space to absorb shocks.
- Only shocks in the upper quartile of the observed distribution of shocks would downgrade the country to high risk of debt distress (per Moderate Risk tool).

### Public Sector Debt: Baseline and Vulnerabilities
- Baseline projections:
  - PV of public debt-to-GDP ratio: 19.2 percent in 2022 → 10.6 percent in 2032.
  - Decline driven by amortization, reduced need for external borrowing with increasing oil revenues from 2022 onwards, and assumed adoption of a full fiscal responsibility framework targeting an overall balanced budget of zero.
- Standardized stress tests:
  - Real GDP growth shock: PV of debt-to-GDP ratio could reach close to 165 percent of GDP by 2032.
  - Commodity price shock: could breach vulnerability threshold in 2024, pushing PV of public debt-to-GDP to 42 percent in 2024 and rising to 160 percent by 2032.
  - Implication: highlights importance of structural reforms to diversify the domestic economy and reduce reliance on the oil sector, and the importance of adopting a fiscal responsibility framework to safeguard long-term debt sustainability.

### Conclusion (LIC DSF framework)
- Overall assessment: Guyana’s risk of external and overall debt distress remains moderate.
- Baseline: debt dynamics improve considerably; debt indicators remain well below benchmarks over the projection period.
- Key projection: PV of external debt-to-GDP ratio projected to decline to around 3.4 percent over the coming decade as external borrowing is eliminated by accumulation of external assets.
- Stress tests: indicate vulnerability of Guyana’s external public debt ratio to shocks, particularly an extreme combined shock to real GDP growth, primary balance, exports, other flows (current transfers and FDI), and nominal exchange rate depreciation.
- Mitigating factors reiterated:
  - Substantial space to absorb shocks due to current low external debt.
  - NRF expected accumulation: almost 216 percent of non-oil GDP in 2027.

*Source: Excerpt from Guyana Debt Sustainability Analysis (IMF).

### 21.      The authorities broadly agreed with the analysis and conclusions of the DSA, emphasizing

### 1guyea2022001 - 21.      The authorities broadly agreed with the analysis and conclusions of the DSA, emphasizing

### Authorities' view
- The authorities broadly agreed with the analysis and conclusions of the DSA, emphasizing the major structural changes taking place in the Guyanese economy and the significant savings accumulated and projected to accumulate in the Natural Resource Fund, which are not counted in gross official FX reserves, but represent considerable buffers.
- Note: "Only the transfers from the NRF to the budget are included into reserves."

### External Debt Sustainability Framework — Baseline (selected indicators, 2019–2042)
- External debt (nominal), % of GDP: 2019: 24.9; 2020: 23.8; 2021: 17.8; 2022: 10.1; 2023: 10.6; 2024: 10.5; 2025: 9.7; 2026: 8.0; 2027: 7.8; 2032: 5.5; 2042: 2.0.
- Change in external debt: 2019: -2.5; 2020: -1.1; 2021: -6.0; 2022: -7.7; 2023: 0.5; 2024: -0.1; 2025: -0.8; 2026: -1.7; 2027: -0.2; 2032: -0.5; 2042: -0.2.
- Identified net debt-creating flows: 2019: -6.1; 2020: -8.2; 2021: -10.2; 2022: -10.9; 2023: -9.0; 2024: -12.0; 2025: -22.4; 2026: -26.9; 2027: -26.2; 2032: -21.0; 2042: -3.3.
- Non-interest current account deficit, % of GDP: 2019: 52.8; 2020: 16.0; 2021: 25.2; 2022: -44.0; 2023: -31.0; 2024: -28.8; 2025: -17.6; 2026: -26.4; 2027: -26.8; 2032: -21.3; 2042: -3.2.
- Exports, % of GDP: 2019: 34.6; 2020: 51.0; 2021: 60.1; 2022: 80.4; 2023: 80.9; 2024: 80.3; 2025: 80.9; 2026: 85.1; 2027: 84.9; 2032: 75.6; 2042: 41.5.
- Imports, % of GDP: 2019: 99.3; 2020: 77.6; 2021: 93.9; 2022: 34.1; 2023: 46.9; 2024: 29.0; 2025: 33.6; 2026: 21.0; 2027: 17.7; 2032: 19.5; 2042: 22.8.
- Net FDI (negative = inflow), % of GDP: 2019: -57.3; 2020: -23.2; 2021: -28.8; 2022: 38.3; 2023: 24.1; 2024: 18.7; 2025: -2.5; 2026: 1.4; 2027: 0.8; 2032: 0.5; 2042: 0.0.
- Endogenous debt dynamics: 2019: -1.6; 2020: -0.9; 2021: -6.6; 2022: -5.2; 2023: -2.1; 2024: -1.8; 2025: -2.3; 2026: -1.9; 2027: -0.2; 2032: -0.2; 2042: -0.1.
- Residual (includes exceptional financing), selected years: 2019: 3.6; 2020: 7.1; 2021: 4.2; 2022: 3.2; 2023: 9.5; 2024: 11.8; 2025: 21.6; 2026: 25.2; 2027: 26.0; 2032: 20.5; 2042: 3.1.
- Sustainability indicators (selected):
  - PV of PPG external debt-to-GDP ratio (projections): 2024: 11.6; 2025: 6.5; 2026: 6.6; 2027: 6.5; 2028: 6.0; 2029: 4.9; 2030: 4.8; 2031: 3.4; 2032: 1.2.
  - PV of PPG external debt-to-exports ratio (projections): 2024: 19.4; 2025: 8.1; 2026: 8.1; 2027: 8.1; 2028: 7.4; 2029: 5.7; 2030: 5.6; 2031: 4.5; 2032: 2.8.
  - PPG debt service-to-exports ratio (projections): 2024: 4.4; 2025: 2.7; 2026: 1.8; 2027: 0.8; 2028: 0.8; 2029: 0.7; 2030: 0.7; 2031: 0.6; 2032: 0.5.
  - PPG debt service-to-revenue ratio (projections): 2024: 6.8; 2025: 7.0; 2026: 6.5; 2027: 4.4; 2028: 4.0; 2029: 3.8; 2030: 3.6; 2031: 3.9; 2032: 2.4; 2042: 0.5.
- Gross external financing need (Billion of U.S. dollars): 2019: -0.2; 2020: -0.3; 2021: -0.2; 2022: -0.8; 2023: -1.1; 2024: -1.8; 2025: -4.5; 2026: -6.8; 2027: -7.3; 2032: -6.7; 2042: -1.6.

### Public Sector Debt Sustainability Framework — Baseline (selected indicators, 2019–2042)
- Public sector debt, % of GDP: 2019: 43.6; 2020: 51.1; 2021: 42.9; 2022: 22.8; 2023: 20.9; 2024: 18.8; 2025: 16.2; 2026: 13.7; 2027: 13.5; 2032: 12.7; 2042: 10.2.
- Of which external debt, % of GDP: 2019: 24.9; 2020: 23.8; 2021: 17.8; 2022: 10.1; 2023: 10.6; 2024: 10.5; 2025: 9.7; 2026: 8.0; 2027: 7.8; 2032: 5.5; 2042: 2.0.
- Change in public sector debt: 2019: -3.5; 2020: 7.5; 2021: -8.2; 2022: -20.1; 2023: -2.0; 2024: -2.1; 2025: -2.6; 2026: -2.5; 2027: -0.1; 2032: -0.2; 2042: -0.3.
- Identified debt-creating flows: 2019: -1.1; 2020: 5.4; 2021: -7.7; 2022: -18.3; 2023: -3.2; 2024: -2.9; 2025: -3.8; 2026: -3.1; 2027: -0.4; 2032: -0.5; 2042: -0.3.
- Primary deficit (percent of GDP), selected: 2019: 2.0; 2020: 7.2; 2021: 6.7; 2022: 0.4; 2023: 0.2; 2024: 0.0; 2025: -0.2; 2026: -0.2; 2027: -0.1; 2032: -0.1; 2042: 0.0.
- Revenue and grants (percent of GDP): 2019: 23.4; 2020: 20.6; 2021: 16.9; 2022: 14.3; 2023: 14.4; 2024: 14.3; 2025: 12.9; 2026: 11.6; 2027: 12.1; 2032: 15.6; 2042: 23.3.
- Primary (noninterest) expenditure (percent of GDP): 2019: 25.4; 2020: 27.9; 2021: 23.6; 2022: 14.7; 2023: 14.6; 2024: 14.2; 2025: 12.7; 2026: 11.4; 2027: 12.0; 2032: 15.5; 2042: 23.3.
- Automatic debt dynamics: 2019: -3.1; 2020: -1.8; 2021: -14.3; 2022: -18.7; 2023: -3.4; 2024: -2.9; 2025: -3.6; 2026: -3.0; 2027: -0.3; 2032: -0.4; 2042: -0.3.
- Residual: 2019: -2.3; 2020: 2.1; 2021: -0.5; 2022: -1.7; 2023: 1.2; 2024: 0.9; 2025: 1.2; 2026: 0.6; 2027: 0.3; 2032: 0.3; 2042: 0.1.
- Sustainability indicators (selected):
  - Debt service-to-revenue and grants ratio (selected years): 2019: 64.0; 2020: 68.2; 2021: 129.3; 2022: 39.1; 2023: 33.9; 2024: 21.8; 2025: 13.8; 2026: 9.9; 2027: 10.2; 2032: 14.9; 2042: 12.0.
  - Gross financing need (percent of GDP): 2019: 17.0; 2020: 21.3; 2021: 28.5; 2022: 6.0; 2023: 5.1; 2024: 3.1; 2025: 1.6; 2026: 1.0; 2027: 1.1; 2032: 2.2; 2042: 2.7.

### Key macroeconomic and fiscal assumptions (selected)
- Real GDP growth (in percent), selected years: 2019: 5.4; 2020: 43.5; 2021: 23.8; 2022: 57.8; 2023: 25.2; 2024: 21.2; 2025: 28.2; 2026: 25.5; 2027: 3.3; 2032: 5.1; 2042: 5.1.
- GDP deflator in US dollar terms (change in percent), selected years: 2019: 2.6; 2020: -26.3; 2021: 14.0; 2022: 21.9; 2023: -9.6; 2024: -6.7; 2025: -5.9; 2026: -3.7; 2027: -0.7; 2032: -1.5; 2042: 0.4.
- Effective interest rate (percent): 2019: 1.8; 2020: 1.8; 2021: 1.9; 2022: 2.0; 2023: 1.9; 2024: 1.9; 2025: 2.1; 2026: 2.2; 2027: 1.3; 2032: 1.2; 2042: 1.1.
- Growth of exports of G&S (US dollar terms, in percent), selected: 2019: 16.8; 2020: 55.8; 2021: 66.2; 2022: 157.2; 2023: 13.9; 2024: 12.3; 2025: 21.5; 2026: 27.2; 2027: 2.3; 2032: 0.8; 2042: -4.1.
- Growth of imports of G&S (US dollar terms, in percent), selected: 2019: 49.5; 2020: -17.4; 2021: 70.8; 2022: -30.3; 2023: 56.0; 2024: -30.2; 2025: 40.2; 2026: -24.4; 2027: -13.9; 2032: 5.6; 2042: 7.0.
- Government revenues (excluding grants, % of GDP), selected: 2019: 22.3; 2020: 20.0; 2021: 16.6; 2022: 14.0; 2023: 14.4; 2024: 14.3; 2025: 12.9; 2026: 11.6; 2027: 12.1; 2032: 15.6; 2042: 23.3.
- Nominal GDP (Billion of US dollars), selected projection years: 2022: 5; 2024: 5; 2026: 8; 2028: 15; 2030: 17; 2032: 19; 2034: 23; 2036: 28; 2038: 28; 2040: 33; 2042: 52. (As listed: "Nominal GDP (Billion of US dollars)  5                   5                   8               15            17           19            23            28            28            33           52")
- Nominal dollar GDP growth (selected): 2019: 8.1; 2020: 5.8; 2021: 41.1; 2022: 92.3; 2023: 13.2; 2024: 13.1; 2025: 20.7; 2026: 20.8; 2027: 2.6; 2032: 3.5; 2042: 5.5; later entry: 9.4; 16.2.

### Sensitivity analysis and stress tests (selected results)
- Public and publicly guaranteed external debt indicators are reported with baseline paths and a range of stress tests (Alternative Scenarios, Bound Tests, Tailored Tests) for 2022–2032.
- Thresholds and notable breaches:
  - Debt service-to-exports ratio, Debt service-to-revenue ratio, PV of debt-to-exports ratio, PV of debt-to-GDP ratio are stress-tested against benchmarks (e.g., Threshold values shown as 30, 140, 10, 1414 in tables/figures).
  - Table 3 and Table 4 present multiple scenarios. Bold values indicate breaches of thresholds (tables list many year-by-year scenario outcomes).
- Most extreme stress tests identified by category (examples shown in figures):
  - Most extreme shock for debt service-to-revenue ratio: "Combination".
  - Most extreme shock for PV of debt-to-exports ratio: "Exports".
  - Most extreme shock for PV of debt-to-GDP ratio: "Combination".
  - Most extreme shock for debt service-to-exports ratio: "Exports".

### Figures and diagnostics (high-level)
- Figures illustrate:
  - Indicators of public and publicly guaranteed external debt under alternative scenarios, 2022–2032.
  - Drivers of debt dynamics — contributions from real GDP growth, nominal interest rate, price and exchange rate changes, current account + FDI, and residuals.
  - Realism tools: public and private investment rates, fiscal adjustment paths, and implied contributions to real GDP growth under different fiscal multipliers.
  - Qualification of the "Moderate" risk category, 2022–2032, with thresholds for PV debt/GDP (x=20 percent), PV debt/exports (y=40 percent), and debt service thresholds (x=12 percent, y=35 percent).

### Selected statement excerpt
- Statement by Mr. Bevilaqua, Mr. Fuentes, and Ms. Mahabir on Guyana (August 31, 20 22) — key excerpt:
  - Authorities thanked the mission team and acknowledged work of former mission chief.
  - Authorities believe the report does not fully represent the current dynamism and prospects of the Guyanese economy, citing an energy boom after the discovery and production of oil and natural gas.
  - Foreign oil and gas companies have raised long-term production forecasts, expected to attract new capital investment and lift the growth outlook to a double-digit expansion for at least the next five years.
  - Authorities felt that this macroeconomic outlook should have been more prominently featured rather than left in annex tables.
  - Context: the administration overcame challenging socio-political conditions including a parliamentary no-confidence motion in December 2018 and delayed elections until March 2020, with electoral results delayed until August.

_Italic: Sources: Country authorities; and staff estimates and projections (as presented in the provided content)._

### 2020. This situation impacted the authorities’ ability to respond to the pandemic crisis through

### 1guyea2022001 - 2020. This situation impacted the authorities’ ability to respond to the pandemic crisis through

### Recent macroeconomic developments
- The new oil discovery in Guyanese waters has propelled the country into becoming the fastest growing economy in the world.
- The Guyanese economy is projected to grow 57.8 percent in 2022, according to staff estimates.
- Growth drivers:
  - Oil sector expansion.
  - All major sectors regaining momentum from the full reopening of the economy as the pandemic gradually wanes.
  - Supporting fiscal measures alleviating rising costs of production and services.
- Q1 2022: real GDP growth was consistent with the forecast; the non-oil sector exhibited a strong performance led by agriculture, manufacturing, and services.
- Oil sector developments:
  - Upward trend in international oil prices prompted foreign operators to bring forward investments, accelerating development of oil fields.
  - Exxon Mobil reported it had already exceeded its original year-end daily production target of 340,000 barrels of oil equivalent per day.
- Oil export growth, along with higher public and private investment, is expected to provide a sustained boost to domestic demand and overall economic growth, despite a high base of comparison and lingering pandemic impact.
- Inflation:
  - Despite a slight recent moderation, inflationary pressures continue.
  - Inflation was already surging prior to the war in Ukraine due to rising commodity prices and disruptions in global value chains.
  - Domestic inflation, particularly food, has somewhat slowed during Q2 2022 as authorities took measures to ease cost-of-living and guarantee food security.
  - For year-end 2022, the inflation rate is expected to remain around 4 percent according to official estimates.

### Fiscal Reforms and Policies
- Short-term fiscal stance:
  - Fiscal policy will remain sensitive to growth needs and inflationary pressures.
  - The NRF Act allowed Parliament to authorize a US$607.6 million transfer to support the 2022 budget to invest heavily in capital expenditure while supporting the needs of the vulnerable population.
  - Strong oil windfall is allowing temporary lowering or removal of taxes on selected items, including gas and diesel fuels, to mitigate rising inflation.
  - Authorities are supporting farmers to access fertilizers at a more affordable cost due to the significant rise in fertilizer prices.
- Medium-term fiscal framework:
  - Authorities are committed to gradually adjust the fiscal stance and strengthen the medium-term fiscal framework.
  - Framework will reflect the annual non-oil overall fiscal deficit (after grants) constrained to not exceed the expected transfer from the NRF over the medium to longer term.
  - Such actions aim to put the country on a more sustainable fiscal position and reduce risk of macroeconomic imbalances.
  - Staff’s 2025 target for a balanced budget may take longer given significant investment needs in physical and human capital.
- Debt and fiscal buffers:
  - Oil windfall will help boost fiscal buffers and significantly improve the public debt outlook.
  - Guyana currently exhibits one of the lowest debt-to-GDP ratios in the region, with all external debt indicators below the relevant indicative vulnerability thresholds according to staff’s Debt Sustainability Analysis.
  - Authorities established statutory ceilings on domestic and external debt, to be recalibrated to reflect evolving financing needs and debt-carrying capacity.
  - Staff’s assessment may be inconsistent with growing international reserves and rising imports associated with oil production; a more adequate metric to estimate debt-carrying capacity for oil producing economies may be needed.
  - Using imports net of capital imports for the energy sector may be a more suitable benchmark.

### Monetary Policy and Financial Sector developments
- Bank of Guyana (BoG) policy focus:
  - BoG has maintained its focus on price stability.
  - BoG continues to monitor local and international conditions to react to global tightening, especially to rate increases in the US by the Federal Reserve.
- Foreign exchange and reserves:
  - Rapid growth of the oil sector increased foreign exchange transactions in all market segments including bank and non-bank.
  - Monetary authorities have strategically intervened in the market to avoid disorderly conditions.
  - Increase in international reserves due to foreign exchange inflows, complemented by IMF’s injection of SDRs.
- Overdraft and domestic debt:
  - The inherited overdraft at the Bank of Guyana was effectively addressed with the issuance of debentures in June 2021, though this contributed to a rise in domestic debt.
- Financial sector resilience and modernization:
  - The financial sector remains resilient.
  - Authorities committed to continue implementing 2016 FSAP recommendations, particularly regarding Basel II and III.
  - Modernization of the payment system has accelerated with adoption of digital payments.
  - Integration of the Guyana Real Time Gross Settlement (G-RTGS) and Guyana Central Securities Depository (G-CSD) systems with the Automated Clearing House (ACH) system would help accelerate digital payments adoption in an orderly fashion.

### Structural reforms
- Diversification efforts:
  - Despite focus on energy, diversification will be intensified given international push away from fossil fuels.
  - Funds are being devoted to boost the non-oil sector with expansion into non-traditional areas such as wheat and soya bean, and investment in a seed bank to increase food security and diversification.
  - Tourism industry expected to benefit from international hotel chains such as Hyatt, Best Western and Marriot starting or completing construction of new hotels across the country.
- Human capital:
  - Human capital investment remains a top priority.
  - Ministry of Labor, through Board of Industrial Training, is implementing programs to boost technical capacity in areas related to new and emerging sectors to reduce geographical and occupational inter-industry skills mismatches.
  - Policies to improve the education system include investing in expanding schools at all educational levels.
  - Authorities are reviewing immigration policy to address evolving trends and meet present labor market needs.
- Infrastructure:
  - Infrastructure investment will strategically support sustainable growth.
  - Projects include construction of new highways, bridges, and roads to boost the non-energy sector and ramp up capital expenditure.
  - Examples of projects to be undertaken: the New Demerara River Bridge, the Corentyne River Bridge linking Guyana and Suriname, and road infrastructure linking Guyana to Brazil.
  - Construction sector will benefit from authorities’ push to increase housing stock across the country.
  - Procurement process commitments: open and competitive, including public and online viewing of opening of bids and publication of awardees.
- Governance and anti-corruption:
  - Authorities committed to strengthen governance; anti-corruption framework aligned with international best practices standards.
  - Ongoing improvements in legal framework, public financial management practices and policy coordination across public agencies remain a priority.
  - Guyana is part of the Extractive Industries Transparency Initiative (EITI); authorities recognize that adequately following up on EITI recommendations is paramount.
  - Government working on increasing public awareness about anti-corruption functions, increasing efficiency of the Integrity Commission and the National Procurement and Tender Administration Board.
- Climate change and environment:
  - Investment in climate change adaptation is a key policy element.
  - Plans for multiple utility-scale, photovoltaic solar projects distributed across the country supported by Norway’s International Climate and Forest Initiative and implemented by the IDB.
  - Country looking to enter the international carbon credit market to issue between 8 and 10 million carbon credits in ART-TREES (Architecture for REDD+ Environmental Excellence Standard).
  - Implemented a flaring tax at US$45 per ton of carbon and commits to reduce emissions by 70 percent before 2030.

### Conclusion
- Authorities have made considerable progress capitalizing on the energy boom despite limitations imposed by the pandemic, political instability, and human capacity constraints.
- As the country addresses long-standing development challenges, authorities reiterate their commitment to maintain productive engagement and close collaboration with the Fund and CARTAC.

*IMF staff report content as provided in the source document.*

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_Source: https://www.imf.org/-/media/files/publications/cr/2022/english/1guyea2022001.pdf_