## 1. Comparative Regional Developments ## Source details **Canonical URL:** [1. Comparative Regional Developments](https://www.imf.org/-/media/files/publications/cr/2023/english/1guyea2023001.pdf) ## Other formats - [Markdown version](/-/media/files/publications/cr/2023/english/1guyea2023001.pdf.md) - [Structured JSON version](/-/media/files/publications/cr/2023/english/1guyea2023001.pdf.json) --- ### Context and overview - Guyana is a small state with large oil production and development needs; after oil production commenced in end-2019, the Guyanese economy has tripled in size. - Population: approximately 800,000 people. - GDP per capita in 2022: US$18,342. - Guyana’s commercially recoverable petroleum reserves: over 11 billion barrels; expected to last 40 years. - Life expectancy and the UN education index remain lower than the median for the LAC region; over 5 percent of the population lacks access to electricity. ### Oil production, fiscal institutions, and recent oil developments - Oil production ramp-up and projections: - Guyana more than doubled its oil production in 2022, to about 400,000 thousand barrels per day (bpd). - Oil production projected to almost triple by 2028 to about 1 million bpd as four new approved fields will come on stream by 2028. - Whiptail (sixth field) expected to be approved by early 2024 and begin producing in 2028; Exxon announced at least two other field discoveries. - Key rule-sets governing oil proceeds: - 2016 Profit Sharing Agreement (PSA) with the Exxon consortium: maximum of 75 percent of oil export receipts can be claimed as cost recovery by the Exxon-led consortium; when cost recovery is at its maximum, Guyana receives 14.5 percent of oil export receipts (including royalties). - Natural Resource Fund (NRF) Act (approved 2019, amended 2021): establishes a sovereign wealth fund; withdrawals to the budget are subject to annual ceilings and parliamentary approval and can be used only to finance national development priorities and “essential projects that are directly related to ameliorating the effect of a major natural disaster.” - In 2020 first oil proceeds were deposited in an offshore account of the NRF; in 2022 the first funds were transferred to the budget (just over 4 percent of GDP). ### Recent macroeconomic developments (real sector, inflation, labor) - Output and sector performance (selected): - Real GDP growth in 2022: 62.3 percent. - Oil GDP growth in 2022: 124.8 percent. - Non-oil GDP growth in 2022: 11.5 percent. - Real non-oil GDP grew by 12.3 percent in first half of 2023 compared to end-December 2022. - Strong performance in agriculture, livestock, forestry, bauxite and diamonds; construction and production of basic construction materials very strong. - Sugar production remained affected by the 2021 floods. - Inflation and labor market: - CPI inflation end-2022: 7.2 percent (driven by global food and transport price shocks). - CPI inflation July 2023: 1.2 percent y-on-y. - CPI housing component (including rent) July 2023: -0.6 percent y-on-y. - Unemployment rate 2022: 12.4 percent; youth unemployment 2022: 25 percent. - Staff analysis suggests large negative output gaps in 2022 and 2023. ### Monetary and credit developments - Broad money growth: - Broad money growth in 2022: 14.5 percent. - Broad money grew by 10 percent in first six months of 2023. - Banking and credit composition (2022 decomposition): - Business Enterprises - Services: 53.8% - Financial Institutions: 18.2% - Households: 16.7% - Business Enterprises - Manufacturing: 8.7% - Business Enterprises - Agriculture: 2.1% - Business Enterprises - Mining & Quarrying: 0.6% - Commercial bank reserves at the Bank of Guyana decreased by 1.4 percent (reflecting a decline in excess reserves). - At end-June 2023: - Banks’ capital adequacy ratio (CAR): 18.4 percent (regulatory minimum 8 percent). - Nonperforming loans to total loans ratio: 3.4 percent (down from 7.8 percent at end-2021). - BoG reforms: revised AQR guidelines and implementation of some Basel II and III pillars raised risk-weighted assets, causing CAR ratios to decline even if capital levels remained the same. ### Fiscal developments and public investment - Fiscal outturns and composition (selected 2022 figures): - Public capital expenditures more than doubled to 20.3 percent of non-oil GDP in 2022. - Oil revenue transfers from the NRF accounted for almost 30 percent of total central government revenues (10 percent of non-oil GDP) in 2022. - Non-oil primary deficit (as share of non-oil GDP) increased to 21.5 percent in 2022 from 9.8 percent in 2021. - Overall fiscal deficit (after grants) as share of non-oil GDP increased by 1¾ percent to 12.2 percent; overall fiscal deficit as share of GDP declined from 7.2 to 5.1 percent due to rapid expansion of GDP. - Share of external financing of the fiscal deficit rose to 38.7 percent. - Total public debt fell from 43.2 to 26.0 percent of GDP. - Government investment plans (high-level projects in 2022): - Power plant construction and offshore gas commercialization; highway to Brazil; two bridges (to Suriname and over the Demerara river); road and railway rehabilitation; agro-processing unit and regional food hub; schools and six regional hospitals; watershed and flood risk management; five water treatment plants. - 2023 budget and public investment projection: - Public investment projected to increase from 8.5 to 13.8 percent of GDP. - Authorities’ largest ten capital spending plans total US$2 billion (transportation, water treatment, new hospitals). - Staff baseline projections allow for capital spending in total of about US$9.3 billion over 2023-28. ### External sector, reserves, and NRF - Current account and reserves (2022): - Current account in 2022: surplus of 23.8 percent of GDP. - GIR accumulation in 2022: about US$120 million. - GIR coverage of imports in 2022: 1.1 months; GIR coverage relative to the ARA EM metric: 50.4 percent. - GIR coverage indicators differ when using non-oil aggregates. - NRF balance at end-2022: over US$800 million (9.8 percent of GDP) — not included in GIR. - Projections: - Oil production projected to increase to about 550,000 bpd in 2023 (about 200 million barrels per year) as Payara comes on stream. - GIR stock expected to reach about 10 percent of GDP by 2028. - Savings in the NRF expected to reach about US$11 billion (36.5 percent of GDP) by 2028. - External sector projections (selected, millions US$ or percent of GDP where noted): - Current Account (incl. official transfers), US$ millions: -893 (2020), -1,982 (2021), 3,451 (2022), 2,945 (2023), 4,070 (2024), 4,247 (2025), 7,051 (2026), 11,122 (2027), 14,259 (2028). - Current account (Percent of GDP): -16.3 (2020), -25.9 (2021), 23.8 (2022), 18.0 (2023), 20.0 (2024), 18.1 (2025), 25.3 (2026), 38.6 (2027), 47.7 (2028). - End of year balance of the NRF (US$ millions): 198 (2020), 608 (2021), 1,426 (2022), 2,095 (2023), 3,100 (2024), 4,332 (2025), 5,993 (2026), 8,253 (2027), 10,920 (2028). ### Outlook and medium-term projections - Growth projections (key series): - Real GDP: 20.2 (2021), 62.3 (2022), 38.4 (2023), 26.6 (2024), 18.8 (2025), 21.2 (2026), 21.2 (2027), 13.5 (2028). - Real Non-Oil GDP: 4.6 (2021), 11.5 (2022), 9.1 (2023), 6.6 (2024), 5.5 (2025–2028). - Real Oil GDP: 46.8 (2021), 124.8 (2022), 56.4 (2023), 35.1 (2024), 23.2 (2025), 25.7 (2026), 25.0 (2027), 15.1 (2028). - Inflation and exchange rate: - Consumer prices (average): 3.3 (2021), 6.5 (2022), 5.5 (2023), 4.7 (2024), 5.5 (2025–2028). - Staff projects inflation to rise to about 5.5 percent per annum in the medium term. - A steady real appreciation in the real exchange rate is expected. - Public finances and debt outlook: - Expected oil revenue transfers to finance increase: about G$278 billion on average, or 15 percent of non-oil GDP and 5 percent of GDP per year. - Staff projects the economy to double in size by 2028. - Public capital spending expected to remain elevated on average about 6½ percent of GDP per year. - Public debt as share of GDP expected to decline from about 30 percent to 26 percent in 2028. - Baseline assumes zero overall fiscal balance by 2028 and maintenance thereafter. ### Key risks and vulnerabilities - Main country-specific risks: - Managing large resource revenue inflows to ensure macroeconomic stability and sustainability while investing in people, physical infrastructure, and institutions. - Vulnerability to natural disasters (flooding) and adverse climate change effects given large share of population in low coastal areas. - Fiscal and capacity constraints related to rapid scaling-up of public investment programs; absorptive and institutional capacity constraints. - Political/timing considerations: PPP/C holds 33 out of 65 seats; next general election scheduled for November/December 2025. - Dutch disease risks: inflationary pressures, appreciation of REER, crowding out private credit. - Global risks: - Highly volatile commodity prices, abrupt global slowdown, cyberthreats, and intensification of regional conflicts. - Stress-test findings (selected): - Real GDP growth shock: PV of the debt-to-GDP ratio could reach 260 percent of GDP by 2033. - Export shock: PV of debt-to-GDP breaches 55 percent benchmark over 2025-33. - Commodity price shock: PV of public debt-to-GDP could reach 72 percent in 2026 and 236 percent by 2033. - Baseline: debt indicators remain below benchmarks; NRF accumulation provides substantial buffers (NRF projected to be almost 100 percent of non-oil GDP by 2028 under some calculations). ### Financial-sector stability and reforms - Progress and indicators: - CAR at end-June 2023: 18.4 percent; nonperforming loans ratio: 3.4 percent. - Liquidity and capital ratios (selected historical series): Liquid assets to total assets: 32.2 (2022); Capital to risk-adjusted assets: 17.1 (2022). - Return on assets: 0.52 (2022). - Policy actions and recommendations: - Strengthen systemic risk monitoring, include stress testing with macro-financial scenarios provided by CARTAC. - Continue strengthening financial sector supervision, implement asset quality reviews as needed, consider enlarging supervisory perimeter to quasi-financial institutions and credit unions. - Improve data collection and statistics on corporate and household balance sheets and real estate prices. - Use macroprudential tools (e.g., loan-to-value ratios or debt-to-income requirements) if needed. ### Governance, transparency, climate, and structural reforms - Governance and AML/CFT: - Guyana undergoing 4th round mutual evaluation by CFATF in 2023-24. - Legislative amendments to strengthen AML/CFT Act enacted in August 2023. - Integrity Commission operationalized; increased compliance with asset declarations in year ending August 2023. - Extractive transparency: - 2022 third validation process for year 2019 under EITI produced a positive assessment; suspension from EITI in early 2023 for late submission of the EITI 2020 report was lifted in June 2023 when the report was published. - NRF governance: NRF Board, Public Accountability and Oversight Committee, and Investment Committee appointed in 2022; notifications of receipts published in Official Gazette since April 2022. - Climate policy and LCDS 2030: - LCDS 2030 (launched July 2022) expands nature conservation (biodiversity, watershed, ocean economy) and monetization through carbon credits. - Carbon credit transaction (2022): sold 37.5 million carbon credits for US$750 million, to be paid during 2022-32. - Guyana committed to maintain forest coverage and sequestration rates; committed to net-zero carbon emissions by 2050. - Structural reforms and business climate: - Petroleum Exploration and Production Act modernized and approved by parliament in August 2023. - Auctioning 14 new offshore blocks under a new PSA with increased royalties to 10 percent (from 2 percent), lower cost recovery ceiling to 65 percent, profit sharing 50/50 after cost recovery, and a new corporate tax of 10 percent on profits. - Local Content Act operationalized in 2022; Local Content Register includes 876 Guyanese companies as of end-June 2023. - Staff supports reforms to address labor shortages, improve infrastructure, expand energy generation and transmission, improve business environment, and diversify into hospitality, light manufacturing, and agribusiness. ### Staff recommendations (summary) - Fiscal policy and framework: - Adopt a comprehensive medium-term fiscal framework (MTFF) for a resource-rich country, modernize PFM and PIM, and use the non-oil primary balance (as percent of non-oil GDP) as the fiscal policy anchor. - Align annual budgetary NRF withdrawals with the MTFF and transition to zero overall fiscal balance by 2028. - Conduct periodic expenditure reviews and an in-depth analysis of absorptive and institutional capacity constraints to inform spending limits. - Consider establishing a precautionary stabilization fund as part of the MTFF to smooth shocks while preserving intergenerational equity. - Monetary and exchange rate policy: - Maintain vigilance in monetary policy to counterbalance large fiscal spending increases; tighten policy if signs of overheating or imbalances arise. - Closely monitor onshoring of FX inflows and deepen domestic financial markets to strengthen monetary policy transmission. - Continue using a set of eight indicators to assess developments and monitor financial stability; use macroprudential tools as needed. - Financial sector and governance: - Strengthen supervision, implement asset quality reviews and stress testing, expand supervisory perimeter, improve data collection and statistics, and continue AML/CFT and anti-corruption reforms. - Structural reforms and climate: - Continue structural reforms to diversify the economy, improve labor market efficiency, and support LCDS 2030 objectives to preserve forest coverage and monetize conservation efforts. ### Key statistics (selected) - GDP per capita 2022: US$18,342. - Oil reserves: over 11 billion barrels; expected to last 40 years. - Real GDP growth 2022: 62.3 percent. - Oil GDP growth 2022: 124.8 percent. - Non-oil GDP growth 2022: 11.5 percent. - CPI inflation end-2022: 7.2 percent; CPI inflation July 2023: 1.2 percent. - CPI housing component (including rent) July 2023: -0.6 percent y-on-y. - Unemployment rate 2022: 12.4 percent; youth unemployment 2022: 25 percent. - Broad money growth 2022: 14.5 percent; broad money growth first six months of 2023: 10 percent. - Public capital expenditures 2022: 20.3 percent of non-oil GDP. - Oil revenue transfers 2022: just over 4 percent of GDP; accounted for almost 30 percent of total central government revenues (10 percent of non-oil GDP). - Non-oil primary deficit 2022: 21.5 percent of non-oil GDP. - Overall fiscal deficit (after grants) 2022: 12.2 percent of non-oil GDP; 5.1 percent of GDP. - Total public debt 2022: 26.0 percent of GDP (down from 43.2 percent). - Current account 2022: surplus of 23.8 percent of GDP. - GIR accumulation in 2022: about US$120 million; GIR coverage of imports in 2022: 1.1 months; GIR relative to ARA EM metric: 50.4 percent. - Banking sector at end-June 2023: CAR 18.4 percent; nonperforming loans ratio 3.4 percent. *Source: IMF staff report chapter "1. Comparative Regional Developments" (extracted content).* ### 1. Comparative Regional Developments _________________________________________________________ 22 ### 1. Comparative Regional Developments ### Context - Guyana is a small state with large oil production and development needs; after oil production commenced in end-2019, the Guyanese economy has tripled in size. - GDP per capita increased to US$18,342 in 2022. - Guyana’s commercially recoverable petroleum reserves—over 11 billion barrels and expected to last 40 years—are among the highest per capita levels in the world. - Population is approximately 800,000 people. - Life expectancy and the UN education index remain lower than the median for the LAC region; over 5 percent of the population lacks access to electricity. - Present value of oil reserves per capita (note: chart referenced in source). ### Oil production and fiscal institutions - Oil production ramp-up: - Guyana more than doubled its oil production in 2022, to about 400,000 thousand barrels per day (bpd). - Oil production is projected to almost triple by 2028 to about 1 million bpd as four new approved fields will come on stream by 2028. - Whiptail, a sixth field, is expected to be approved by early 2024 and begin producing in 2028; Exxon has announced at least two other field discoveries. - Two key rule-sets governing oil proceeds: - 2016 Profit Sharing Agreement (PSA) with the Exxon consortium: a maximum of 75 percent of oil export receipts can be claimed as cost recovery by the Exxon-led consortium; when cost recovery is at its maximum, Guyana receives 14.5 percent of oil export receipts (including royalties). - Natural Resource Fund (NRF) Act (approved 2019, amended 2021): establishes a sovereign wealth fund; withdrawals to the budget are subject to annual ceilings and parliamentary approval and can be used only to finance national development priorities and “essential projects that are directly related to ameliorating the effect of a major natural disaster.” - In 2020 the first oil proceeds were deposited in an offshore account of the NRF; in 2022 the first funds were transferred to the budget (just over 4 percent of GDP). ### Recent developments and policies - Growth and sector performance: - Real GDP growth in 2022: 62.3 percent (world highest). - Oil GDP growth in 2022: 124.8 percent. - Non-oil GDP growth in 2022: 11.5 percent; real non-oil GDP grew by 12.3 percent in first half of 2023 compared to end-December 2022. - Strong performance in agriculture, livestock, forestry, bauxite and diamonds; construction and production of basic construction materials very strong. - Sugar production remained affected by the 2021 floods; increased acreage and yield in rice, coconuts and sweet potatoes supported agricultural growth. - Inflation and labor market: - CPI inflation: 7.2 percent y-on-y at end-2022 (driven by global food and transport price shocks). - CPI inflation declined to 1.2 percent y-on-y in July 2023. - CPI housing component (including rent) in July 2023: -0.6 percent y-on-y. - Unemployment rate estimated at 12.4 percent in 2022; youth unemployment rate estimated at 25 percent. - Staff analysis suggests large negative output gaps in 2022 and 2023. - Monetary and credit developments: - Broad money growth in 2022: 14.5 percent (around 3 percent below nominal growth rate of non-oil GDP). - Broad money grew by 10 percent in first six months of 2023. - Commercial bank reserves at the Bank of Guyana decreased by 1.4 percent (reflecting a decline in excess reserves). - Commercial bank credit composition (2022 decomposition): Business Enterprises - Services 53.8%; Financial Institutions 18.2%; Households 16.7%; Business Enterprises - Manufacturing 8.7%; Business Enterprises - Agriculture 2.1%; Business Enterprises - Mining & Quarrying 0.6%. - Change of private sector credit (percent of GDP, yoy) and sectoral trends noted in charts. - Fiscal developments: - Public capital expenditures more than doubled to 20.3 percent of non-oil GDP in 2022. - Oil revenue transfers from the NRF accounted for almost 30 percent of total central government revenues (10 percent of non-oil GDP) in 2022. - Non-oil primary deficit (as share of non-oil GDP) increased to 21.5 percent in 2022 from 9.8 percent in 2021. - Overall fiscal deficit (after grants) as share of non-oil GDP increased by 1¾ percent to 12.2 percent; overall fiscal deficit as share of GDP declined from 7.2 to 5.1 percent due to rapid expansion of GDP. - Share of external financing of the fiscal deficit rose to 38.7 percent. - Total public debt fell from 43.2 to 26.0 percent of GDP. - External and reserves: - Current account in 2022: surplus of 23.8 percent of GDP. - Gross international reserves (GIR) accumulation in 2022: about US$120 million. - GIR coverage related to total imports in 2022: 1.1 months; GIR coverage relative to the ARA EM metric: 50.4 percent. - GIR coverage indicators differ when using non-oil aggregates (noted in source). - Financial sector soundness: - At end-June 2023, banks’ capital adequacy ratio (CAR): 18.4 percent (regulatory minimum 8 percent). - Nonperforming loans to total loans ratio: 3.4 percent at end-June 2023, down from 7.8 percent at end-2021. - Bank of Guyana reforms: revised AQR guidelines (including revised credit classification and provisioning for the loss category) and implementation of some Basel II and III pillars. - Implementation of Basel II and III raised risk-weighted assets, causing CAR ratios to decline even if capital levels remained the same. - Government investment plans (high-level): - Public spending concentrated on capital spending in 2022 to address urgent needs and start multi-year projects to raise potential output and resilience to climate effects. - Projects include: power plant construction and offshore gas commercialization; highway to Brazil; two bridges (to Suriname and over the Demerara river); road and railway rehabilitation; agro-processing unit and regional food hub; schools and six regional hospitals; watershed and flood risk management; five water treatment plants. ### Outlook and risks - Near-term projections (2023-24): - Oil production is projected to increase to about 550,000 bpd (about 200 million barrels per year) as Payara comes on stream. - Projected real GDP growth in 2023: 38.4 percent. - Projected non-oil real GDP growth in 2023: about 9.1 percent. - Good prospects in agriculture with rehabilitation and expansion of sugar plants following the 2021 floods. - Medium-term projections: - Private investment in oil and gas and services expected to further support growth. - Public capital spending expected to remain elevated on average about 6½ percent of GDP per year. - Expected oil revenue transfers to finance increase: about G$278 billion on average, or 15 percent of non-oil GDP and 5 percent of GDP per year. - Staff projects the economy to double in size by 2028. - Projected medium-term real non-oil GDP growth: 5.5 percent (1.5 percentage points higher than pre-oil average). - Output gap projected to close in 2026. - Inflation projected to rise to about 5.5 percent per annum (3.5 percentage points higher than historical pre-oil average) to reflect pressures on non-tradeable prices, including expected wage pressures. - A steady real appreciation in the real exchange rate is expected. - External position and reserves outlook: - Investment imports related to the oil sector will remain high, sustaining current account surpluses going forward. - GIR stock expected to reach about 10 percent of GDP by 2028. - Savings in the NRF are expected to reach about US$11 billion (36.5 percent of GDP) by 2028. - Key risks: - Managing large resource revenue inflows to ensure macroeconomic stability and sustainability, while investing steadily in people, physical infrastructure, and institutions. - Vulnerability to natural disasters (flooding) and adverse climate change effects given large share of population in low coastal areas. - Fiscal and capacity constraints related to rapid scaling-up of public investment programs. - Political/timing considerations: the People’s Progressive Party/Civic (PPP/C) holds 33 out of 65 seats; next general election scheduled for November/December 2025. ### Key statistics (selected) - GDP per capita in 2022: US$18,342. - Oil reserves: over 11 billion barrels; expected to last 40 years. - Real GDP growth in 2022: 62.3 percent. - Oil GDP growth in 2022: 124.8 percent. - Non-oil GDP growth in 2022: 11.5 percent. - CPI inflation end-2022: 7.2 percent; CPI inflation July 2023: 1.2 percent. - CPI housing component (including rent) July 2023: -0.6 percent y-on-y. - Unemployment rate 2022: 12.4 percent; youth unemployment 2022: 25 percent. - Broad money growth 2022: 14.5 percent; broad money growth first six months of 2023: 10 percent. - Public capital expenditures 2022: 20.3 percent of non-oil GDP. - Oil revenue transfers in 2022: just over 4 percent of GDP; accounted for almost 30 percent of total central government revenues (10 percent of non-oil GDP). - Non-oil primary deficit 2022: 21.5 percent of non-oil GDP. - Overall fiscal deficit (after grants) 2022: 12.2 percent of non-oil GDP; 5.1 percent of GDP. - Total public debt 2022: 26.0 percent of GDP (down from 43.2 percent). - Current account 2022: surplus of 23.8 percent of GDP. - GIR accumulation in 2022: about US$120 million; GIR coverage of imports in 2022: 1.1 months; GIR relative to ARA EM metric: 50.4 percent. - Banking sector at end-June 2023: CAR 18.4 percent; nonperforming loans ratio 3.4 percent. *Source: IMF staff report chapter "1. Comparative Regional Developments" (extracted content).* ### 16. Guyana’s very favorable growth ### Guyana’s very favorable growth ### Outlook and Risks - Growth prospects are very favorable but accompanied by upside and downside risks (Annex III). - Upside risk: further oil discoveries would continue to improve Guyana’s long-term economic prospects. - Short-term upside: a construction boom may support higher short-term non-oil GDP growth than projected. - Short- and medium-term downside: higher inflationary pressures, an appreciation of the real exchange rate beyond the level implied by the projected balanced expansion of the economy. - Global risks: highly volatile commodity prices that could adversely affect growth, fiscal performance, and external buffers. - Climate risk: adverse climate shocks could weaken the macroeconomic outlook. - Note on reserves: additional offshore oilfields in the Stabroek block announced by Exxon potentially account for over 30 percent of the commercially recoverable reserves in that block. *Authorities’ view* - Authorities agreed medium-term growth prospects are better than ever and broadly agreed with the risks, emphasizing vigilance against overheating, inflationary pressures, and excessive real exchange rate appreciation. ### Fiscal Policy and Sustainability - The 2023 budget is dominated by strong oil revenues and high public investment spending. - Public investment projected to increase from 8.5 to 13.8 percent of GDP. - Total revenues projected to grow strongly, driven by: - an increase in oil revenues, to about US$1 billion (6 percent of GDP), which will finance more than one-quarter of the 2023 budget; - capital revenues and carbon credit inflows (1 percent of GDP). - Overall fiscal deficit after grants projected to increase to about 15.5 percent of non-oil GDP and 6.7 percent of GDP. - Non-oil primary deficit projected to increase to 28.8 percent of non-oil GDP in 2023 (up from 21.5 percent in 2022). - Budget execution: Up to June 2023 about 27 percent of the revised budget was executed. - Staff view: current stance appropriate given development needs, absence (as of now) of macroeconomic imbalances, and low public debt, but urges vigilance and a comprehensive fiscal policy strategy. - Fiscal rules and constraints: - Limits from the amended NRF Act and the Fiscal Management and Accountability Act of 2003 provide practical constraints. - Statutory ceilings on domestic and external debt exist and could be recalibrated. - These constraints do not constitute a fiscal anchor embedded in a medium-term fiscal framework. - Debt dynamics and DSA: - Risk of (overall and external) debt distress remains moderate. - Debt carrying capacity now assessed as ‘medium’ for overall public debt and public external debt. - Baseline grounded in authorities’ commitment to maintain zero overall fiscal balance by 2028. - Non-oil primary deficit expected to improve from 28.8 percent in 2023 to about 11 percent in 2028. - Public debt as a share of GDP expected to decline from about 30 percent to 26 percent in 2028. - Macroframework and DSA include latest debt projections reflecting contracted or planned debt; domestic financing assumed to remain relatively elevated in the near term, to about 10 percent of non-oil GDP (or 4 percent of GDP) in 2024, declining to 3 percent of non-oil GDP (or 1 percent of GDP) by 2027 with moderating fiscal impulses. - Staff recommendations: - Adopt a comprehensive medium-term fiscal framework (MTFF) for resource rich countries, encompassing modernization of public financial management (PFM) and public investment management (PIM). - Conduct an expenditure review to assess the speed of addressing development needs without creating macroeconomic imbalances or jeopardizing fiscal sustainability; the review should encompass current expenditures. - Align annual budgetary withdrawals from the NRF with medium-term expenditure and fiscal frameworks. - Use the non-oil primary balance (as a percent of non-oil GDP) as a fiscal policy anchor; design a path consistent with NRF ceilings and transition to zero overall fiscal balance by 2028. - Staff simulations show the spending path consistent with moving toward zero overall fiscal balance by 2028 will be adequate to meet development needs and implement government plans, provided no absorptive capacity constraints or overheating pressures. - Regularly review public spending path in light of new information, capacity constraints, and absorption limits. - Authorities’ view: - Reaffirmed commitment to fiscal discipline while rapidly addressing infrastructure and human capital needs without generating macroeconomic imbalances. - Agreed on need for comprehensive MTFF, updating PFM, and setting a path for the non-oil primary balance, allowing higher public expenditures during transition while moving steadily towards zero overall fiscal balance by 2028. - Capital spending references: - Authorities’ largest ten capital spending plans total US$2 billion, mainly concentrated in transportation, water treatment plants, and construction of new hospitals. - Staff baseline projections allow for capital spending in total of about US$9.3 billion over 2023-28, including the gas to energy project and building of additional hospitals, schools, roads and housing projects as needed. - Annex III shows withdrawals rules from NRF, based on current oil projections and assuming maximum withdrawals allowed each year, are consistent with intergenerational equity. ### Monetary and Exchange Rate Policies - 2022 monetary policy: appropriately tight to counterbalance expansionary fiscal policy. - Reserve requirements increased to 12 percent from 10 percent in September 2022. - Broad money growth remained below the rate of nominal non-oil GDP growth. - Staff advice: - Maintain vigilance in monetary policy stance to counterbalance large fiscal spending increases; tighten policy if signs of overheating or imbalances arise. - Closely monitor absorption of large FX inflows and their impact as increasing oil receipts are brought onshore. - Continue using a set of eight indicators (including credit-to-GDP measures, banking stability index and systemic risk matrix) to assess developments and monitor financial stability. - Use appropriate macroprudential tools (e.g., loan-to-value ratios or debt-to-income requirements) if needed to contain credit growth or signs of overheating. - Medium-term framework: - Staff supports exchange rate continuing to serve as the nominal anchor in the near term given underdevelopment of domestic financial markets, weak monetary policy transmission, and substantial buffers in the NRF. - Concurrent need to deepen financial markets (interbank, domestic debt, FX markets) to strengthen monetary policy transmission. - Over the medium term, consider whether a more flexible exchange rate could serve the economy better. - Authorities’ view: - Agreed on need to maintain macroeconomic stability and appropriate policy mix, continue monitoring indicators, tighten monetary policy and use macroprudential tools as needed. - Reaffirmed exchange rate stability as current nominal anchor and committed to step-by-step deepening of interbank, domestic debt, and FX markets. ### Financial Sector Policy and Stability - Implementation progress: - Authorities systematically implementing financial sector recommendations from the 2016 FSSA report (Annex V). - Bank of Guyana (BoG) expanded supervisory and regulatory perimeter and is updating Crisis Management and Supervision Guidelines. - Remaining FSAP recommendations include monitoring sectoral lending exposures, related party lending, banks’ ownership structure, and increasing competition in the banking sector. - Need to improve data collection and statistics on corporate and household balance sheets and real estate prices to strengthen banking supervision. - Main macro-financial risks: - Government’s ambitious spending plans potentially leading to inflationary pressures and an overvalued real exchange rate beyond baseline expectations, and crowding out private sector lending. - Real shocks (notably adverse weather) can negatively impact agricultural production, exports and banks’ credit portfolios. - Over the medium term, nominal shocks (predominantly commodity price fluctuations) could affect exports and gross international reserves. - Staff support: - Strengthen systemic risk monitoring, including stress testing with more macro-financial scenarios provided by CARTAC. - Continue strengthening financial sector supervision and implement asset quality reviews as needed. - Consider enlarging supervisory perimeter beyond banking sector to include quasi-financial institutions and credit unions and increase supervision efficiency, including adequacy of stress testing. - 2022 financial development initiatives: - Developed a National Financial Inclusion Strategy. - Fully integrated the Real Time Gross Settlement and Central Securities Depository Systems with the National Payment System. - Finalized and enforced two new regulations to safely trade securities on the Central Security Depository (currently utilized for trading of Government securities with plans to roll out more widely). - Authorities’ view: - Committed to maintaining financial stability, completing implementation of 2016 FSAP recommendations, improving data collection and statistics, moving towards broad-based risk-based supervision, and digitalization of banking records to enhance system functioning and potentially lower lending rates. ### Climate Policies - Significant progress: Guyana has become a world leader in forest conservation and supporting global climate change mitigation. - Policy stance: Government reinstated the Low Carbon Development Strategy (LCDS), combining a low carbon pathway with earnings from maintaining forest coverage and preserving sequestration rates. - Carbon credit transaction (2022): - Guyana sold 37.5 million carbon credits for US$750 million, to be paid during 2022-32 (a third of the credits Guyana will receive over 2016-30), described as one of the largest carbon credit transactions in the world. - Commitment: Guyana is committed to maintain its vast forest coverage and monetize these efforts. *Source: IMF country chapter — Guyana’s very favorable growth (1guyea2023001 - 16).* ### 32. The LCDS 2030—a more comprehensive concept to protect Guyana’s natural ### 32. The LCDS 2030—a more comprehensive concept to protect Guyana’s natural ### LCDS 2030: scope and objectives - LCDS 2030 was launched in July 2022. - Expands nature conservation to include: - biodiversity conservation, - watershed management, - the ocean economy, - receiving payments for these efforts (Annex VIII). - Government commitment: - preserve forest coverage and sequestration rates, - preserve biodiversity and ocean diversity for current and future generations in Guyana and globally. - Revenue and spending uses: - Receive income through carbon credit markets to enhance government revenue streams over the medium- to long-term. - Fund flood and watershed management, diversification of the energy matrix, resources for Amerindian communities, and biodiversity conservation. ### Structural reforms, competition, and business climate - Staff support authorities’ plans to implement structural reforms to diversify the economy and support higher and inclusive growth (Annex VII). - Main reform measures focus on: - addressing potential labor shortages and skill mismatches (training, incentives to set up business outside the capital, targeted immigration of skilled labor unavailable domestically, among others), - improving infrastructure, - expanding generation and transmission capacity of the energy sector, - improving the business environment, - continuing to diversify the economy by expanding the hospitality industry, light manufacturing, and agribusiness. - Staff welcome measures to reduce time for permits and inspections through a single digital window and efforts to increase electricity supply, reliability, and reduce cost and time to access it. ### Oil and gas legal and fiscal framework - Petroleum Exploration and Production Act modernized and approved by parliament in August 2023. - Auctioning 14 new offshore blocks for oil and gas exploration under a new Production Sharing Agreement (PSA) which includes: - increased royalties to 10 percent from 2 percent, - lower cost recovery ceiling to 65 percent, - profit sharing after cost recovery remains 50/50 between the government and the contractor, - introduction of a new corporate tax of 10 percent applied to profits. ### Local content and industry participation - Local Content Act brought into operation in 2022, establishing regulations on utilizing local employment and contractors in the energy sector. - Local Content Secretariat (LCS) and Local Content Register established. - Local Content Register includes 876 Guyanese companies as of end-June 2023. - Secretariat has approved over 43 five-year local content master plans to date. ### Authorities’ views on reforms and implementation - Authorities emphasize: - steps to boost the non-oil economy (hospitality, light manufacturing, agribusiness), - reforms to increase digitalization of the economy and labor and total factor productivity, - commencement of construction of the gas-to-shore pipeline to support increased electricity supply, lower cost, and greater reliability. - Acknowledge need to strengthen insolvency and judicial liquidation frameworks and address staffing shortages in the judicial sector. - Active efforts to improve labor market efficiency and reduce mismatches, including investments in vocational training, online training resources, incentives to establish businesses outside the capital, and work with an expert to gather data to inform interventions. ### Governance, AML/CFT, and anti-corruption - AML/CFT: - Guyana undergoing its 4th round mutual evaluation by the Caribbean Financial Action Task Force (CFATF) in 2023-24 focusing on technical compliance and effective implementation of FATF’s 40 Recommendations. - Approved a National Policy and Strategy for Combating Money Laundering, Terrorism Financing addressing risks from the 2021 National Risk Assessment. - Legislative amendments to strengthen the AML CFT Act enacted in August 2023. - Extractive Industries Transparency Initiative (EITI): - 2022 third validation process for year 2019 produced a positive assessment, noted achievements in multi-stakeholder discussions and outreach. - Public demand for information beyond mining, oil, and gas sectors; staff support addressing remaining gaps including electronic disclosure and follow-up reporting (see Annex VIII). - Natural Resource Fund (NRF) governance: - In 2022 appointed the NRF Board of Directors, the Public Accountability and Oversight Committee, and the Investment Committee. - Notifications of receipts of petroleum revenues published in the Official Gazette since April 2022. - Procurement and beneficial ownership: - Public Procurement Commission had five new commissioners sworn in. - National Procurement and Tender Administration Board (NPTAB) designed a comprehensive training program and commenced design of a management information system. - Authorities could consider collecting beneficial ownership information as part of tender processes or a centralized registry, which may require legislation updates. - Integrity Commission and anti-corruption: - Integrity Commission operationalized with resources reflected in the 2023 budget; increased compliance with asset declarations in the year ending in August 2023 and plans to step up efforts. - Guyana undergoing review under the United Nations Convention Against Corruption (UNCAC) and the 6th round in the Follow-Up Mechanism for the Implementation of the Inter-American Convention against Corruption (MESICIC). - On-site review for MESICIC took place during October 2-6, 2023. - Authorities highlight ongoing work with UNCAC, MESICIC, and CFATF and agree on the need to follow up on EITI recommendations with capacity building and legislation efforts. ### Data provision and capacity development - Data provided to the Fund is broadly adequate for surveillance purposes. - Progress in improving data provision since last year’s Article IV has been slow; timeliness, reliability, and coverage affected as the Statistics commission is focused on conducting the once a decade census. - Capacity development needs remain large: - improving GDP and CPI statistics (continuing work with CARTAC) is key, - indicators to assess build-up of imbalances, - capacity development on developing capital markets (financial market infrastructure) is needed. - Authorities concurred with staff on the need to strengthen crucial statistics and widen capacity development efforts. ### Staff appraisal: macroeconomic outlook and risks - Growth and external position: - Guyanese economy continues to experience record growth supported by government modernization plans and oil and gas expansion. - External position at end-2022 assessed to be moderately stronger than level implied by fundamentals and desired policies. - Debt sustainability: - Debt-sustainability analysis (DSA) indicates the risk of overall and external debt distress remains moderate, with debt dynamics improving significantly with incoming oil revenues. - Growth projections and risks: - Overall real GDP growth is projected to grow 38.4 percent in 2023 and on average of 20 percent per year during 2024-28. - Upside risks: further oil discoveries that would improve growth prospects. - Downside risks: inflationary pressures, appreciation of the real exchange rate beyond the level implied by a balanced expansion, adverse climate shocks, and volatile or lower than projected commodity prices. - Key challenges: managing large resource revenue inflows to ensure macro-economic stability and sustainability while investing steadily in people, physical infrastructure, and institutions. ### Staff policy recommendations - Maintain macroeconomic stability through an appropriate policy mix given medium-term risks of inflationary pressures and real exchange rate appreciation. - Staff assess the 2023 policy mix to be appropriate: fiscal policy increasing public investment and broad money growing in line with non-oil GDP. - Recommend moderating fiscal impulses over the medium-term while addressing development needs. - Fiscal framework and public financial management: - Adopt over the medium-term a comprehensive medium-term fiscal framework (MTFF). - As a fiscal anchor, set a path for the non-oil primary balance (as a percent of non-oil GDP) consistent with ceilings on withdrawals from the NRF to ensure inter-generational equity. - MTFF should include a clear medium-term fiscal anchor, a transition path, and an operational target. - Recommend periodic expenditure reviews and setting the pace of public investment to account for absorption and institutional capacity constraints. - Monetary and exchange rate policy: - Continue close monitoring of macroeconomic and financial indicators, tighten monetary policy stance, and use macroprudential tools as needed. - In the medium term, review the exchange rate framework to ensure it best serves the economy. - Financial sector stability: - Support authorities’ efforts to maintain financial stability and complete implementation of the 2016 FSAP recommendations. - Welcome BoG’s asset quality reviews, stress testing exercises, and strategies to promote financial inclusion. - Recommend closely monitoring sectoral lending exposures, related party lending, banks’ ownership structure, and increasing competition in the banking sector. - Governance, transparency, and climate: - Commend progress in strengthening AML/CFT, governance, and anti-corruption frameworks and support further advances in effective implementation. - Commend progress to strengthen management of oil wealth and fiscal transparency and recommend addressing remaining gaps, particularly implementing 2019 EITI recommendations including moving toward electronic disclosure and adequate follow-up. - Welcome authorities’ climate efforts through LCDS 2030 to maintain forest coverage, preserve sequestration rates, enhance nature conservation (biodiversity, watershed management, ocean economy), and receive payments for these efforts. *IMF staff summary derived from the provided chapter text.* ### 57. It is proposed that the next Article IV consultation takes place on the standard 12- ### 1guyea2023001 - 57. ### Consultation timing - It is proposed that the next Article IV consultation takes place on the standard 12-month cycle. ### Comparative regional developments (Figure 1) — key findings - Real GDP Growth (y/y percent change): Guyana outpaced regional peers owing to the oil boom (chart series 2007–2022). - Inflation (period average, y/y percent change): Guyana’s inflation performance has been relatively better compared to peers (chart series 2007–2022). - Public Sector Balance (Percent of GDP): Guyana’s fiscal performance was behind peers in earlier years (chart series 2007–2022). - External Debt (Percent of GDP): Public debt trajectory improved considerably (chart series 2007–2022). - Domestic Debt (Percent of GDP): Domestic debt developments also show improvement (chart series 2007–2022). - Current Account Balance (Percent of GDP): The current account balance reached a large surplus in 2022 (chart series 2007–2022). ### Real sector indicators (Figure 2) — key findings - Non-oil growth drivers: Recovery in agriculture post‑2021 floods and a boost in construction contributed to impressive growth in non-oil GDP. - Inflation drivers: 2022 ended with higher inflation owing to higher food prices. - Commodity production (index: 2007=100): Gold and bauxite production recovered in 2022; agricultural production was high in 2022. - Sectoral contributions to real growth (2012–2022): Agriculture, Mining and Quarrying, Services, Construction and Manufacturing have varying contributions; construction and agriculture notable in recent years. ### External sector developments (Figure 3 and Table 3) — key findings and projections - Current account (Prel. 2022 and projections): - Current Account (incl. official transfers): -893 (2020), -1,982 (2021), 3,451 (2022), 2,945 (2023), 4,070 (2024), 4,247 (2025), 7,051 (2026), 11,122 (2027), 14,259 (2028) — in millions of U.S. dollars. - Current account (Percent of GDP): -16.3 (2020), -25.9 (2021), 23.8 (2022), 18.0 (2023), 20.0 (2024), 18.1 (2025), 25.3 (2026), 38.6 (2027), 47.7 (2028). - Trade and exports: - Exports (f.o.b., US$ millions): 2,590 (2020), 4,356 (2021), 11,299 (2022), 13,235 (2023), 16,750 (2024), 19,034 (2025), 22,163 (2026), 26,384 (2027), 29,267 (2028). - Oil exports (US$ millions): 1,064 (2020), 2,975 (2021), 9,874 (2022), 11,423 (2023), 14,817 (2024), 16,950 (2025), 19,935 (2026), 24,049 (2027), 26,822 (2028). - Growth of Value of Exports: 55.8 (2020), 65.8 (2021), 148.9 (2022), 17.1 (2023), 26.3 (2024), 13.6 (2025), 16.3 (2026), 18.9 (2027), 10.9 (2028). - Capital and financial flows: - Net FDI (net, US$ millions): 1,269 (2020), 2,222 (2021), -3,054 (2022), -2,360 (2023), -2,918 (2024), -2,778 (2025), -4,896 (2026), -8,295 (2027), -10,946 (2028). - Financial Account (US$ millions): 879 (2020), 1,898 (2021), -3,819 (2022), -2,994 (2023), -4,109 (2024), -4,288 (2025), -7,106 (2026), -11,180 (2027), -14,310 (2028). - Reserves and Natural Resource Fund: - Gross international reserves (US$ millions): 680.6 (2020), 810.8 (2021), 932.4 (2022), 1,064.6 (2023), 1,305.7 (2024), 1,677.7 (2025), 2,078.6 (2026), 2,552.8 (2027), 3,057.6 (2028). - End of year balance of the NRF (US$ millions): 198 (2020), 608 (2021), 1,426 (2022), 2,095 (2023), 3,100 (2024), 4,332 (2025), 5,993 (2026), 8,253 (2027), 10,920 (2028). ### Fiscal sector developments (Figure 4; Tables 1, 2, 4a–4c) — key findings and projections - Central Government revenue and expenditure (Percent of GDP, selected years): - Revenue: 20.0 (2020), 16.7 (2021), 14.2 (2022), 17.6 (2023), 15.4 (2024), 14.5 (2025), 13.0 (2026), 13.4 (2027), 13.9 (2028). - Expenditure: 28.4 (2020), 24.2 (2021), 19.6 (2022), 24.6 (2023), 20.4 (2024), 17.5 (2025), 15.0 (2026), 14.4 (2027), 13.9 (2028). - Capital expenditure: 6.7 (2020), 6.5 (2021), 8.5 (2022), 13.8 (2023), 10.6 (2024), 8.1 (2025), 6.0 (2026), 4.9 (2027), 3.9 (2028). - Oil-related revenue (Percent of GDP): 0.0 (2020), 0.0 (2021), 4.2 (2022), 6.1 (2023), 5.7 (2024), 5.3 (2025), 4.6 (2026), 4.5 (2027), 4.4 (2028). - Fiscal balances (Percent of GDP): - Overall balance (after grants): -8.4 (2020), -7.7 (2021), -7.2 (2022), -5.1 (2023), -6.7 (2024), -5.0 (2025), -3.0 (2026), -2.0 (2027), -1.0 (2028) — (Table 2 shows variations when expressed before/after grants). - Non-oil Primary Balance (after grants): -7.2 (2020), -6.7 (2021), -21.5 (2022), -28.8 (2023), -27.6 (2024), -22.5 (2025), -19.0 (2026), -15.0 (2027), -11.2 (2028). - Public debt (Percent of GDP): - Total public sector gross debt: 51.1 (2020), 43.2 (2021), 26.0 (2022), 29.9 (2023), 29.0 (2024), 28.2 (2025), 26.0 (2026), 26.5 (2027), 26.0 (2028). - External debt: 27.2 (2020), 25.2 (2021), 15.7 (2022), 18.9 (2023), 19.3 (2024), 18.9 (2025), 18.2 (2026), 19.0 (2027), 18.9 (2028). - Domestic debt: 23.8 (2020), 17.2 (2021), 10.3 (2022), 11.0 (2023), 9.7 (2024), 9.3 (2025), 7.8 (2026), 7.6 (2027), 7.1 (2028). ### Financial soundness indicators (Figure 5; Table 6) — key findings - Liquidity and capital: - Liquid assets to total assets: 30.4 (2016), 29.3 (2017), 30.2 (2018), 31.6 (2019), 41.0 (2020), 33.8 (2021), 32.2 (2022). - Capital to risk-adjusted assets: 25.4 (2016), 27.1 (2017), 28.7 (2018), 28.0 (2019), 29.1 (2020), 27.9 (2021), 17.1 (2022). - Asset quality and provisioning: - Nonperforming loans to total loans: 12.9 (2016), 12.1 (2017), 11.9 (2018), 11.1 (2019), 10.8 (2020), 7.8 (2021), 4.6 (2022). - Provision for loan loss to total loans (chart series): provisioning increased significantly in 2022. - Concentration and profitability: - Top 20 Borrowers to Total Loans: elevated levels through 2012–2022 (chart series). - Return on assets: 0.55 (2016), 0.57 (2017), 0.59 (2018), 0.73 (2019), 0.59 (2020), 0.50 (2021), 0.52 (2022). - Operating expense to total income: ranges around mid‑40s percent historically; slight decline noted. ### Monetary developments (Figure 6; Table 5) — key findings and projections - Monetary aggregates (annual percentage change): - Broad money: 14.5 (2020), 13.8 (2021), 14.5 (2022), 16.8 (2023), 12.8 (2024), 11.6 (2025), 10.7 (2026), 10.8 (2027), 10.9 (2028). - Monetary base: expanded in 2022 owing to increased reserves. - Interest rates: - Lending interest rate and Treasury bill (91 days) declined in 2022, but the spread with the savings rate remains high (chart series). - Credit developments: - Domestic credit of the banking system (annual percent change): 17.2 (2020), 20.1 (2021), 22.5 (2022), 24.3 (2023), 19.7 (2024), 10.5 (2025), 10.8 (2026), 7.7 (2027), 4.0 (2028). - Credit growth was slightly below nominal non-oil GDP growth in 2022; business credit accounted for most of the increase in 2022 (chart series). - Monetary survey (end‑period, G$ billions): - Base Money (end of period): 292.2 (2020), 295.2 (2021), 470.8 (2022), 751.0 (2023), 1,070.5 (2024), 1,440.6 (2025), 1,848.6 (2026), 2,301.7 (2027), 2,807.0 (2028). - Broad Money (end of period): 643.6 (2020), 732.3 (2021), 838.6 (2022), 979.2 (2023), 1,104.3 (2024), 1,232.6 (2025), 1,364.1 (2026), 1,511.0 (2027), 1,676.0 (2028). ### Key macroeconomic projections (Tables 1–3, summary) - Output and prices (annual percent change, selected): - Real GDP: 20.2 (2021), 62.3 (2022), 38.4 (2023), 26.6 (2024), 18.8 (2025), 21.2 (2026), 21.2 (2027), 13.5 (2028). - Real Non-Oil GDP: 4.6 (2021), 11.5 (2022), 9.1 (2023), 6.6 (2024), 5.5 (2025–2028 each year listed as 5.5). - Real Oil GDP: 46.8 (2021), 124.8 (2022), 56.4 (2023), 35.1 (2024), 23.2 (2025), 25.7 (2026), 25.0 (2027), 15.1 (2028). - Consumer prices (average): 3.3 (2021), 6.5 (2022), 5.5 (2023), 4.7 (2024), 5.5 (2025–2028 each year listed as 5.5). - External sector (selected): - Crude oil production (million barrels): 42.7 (2021), 101.4 (2022), 138.7 (2023), 182.5 (2024), 219.0 (2025), 268.3 (2026), 335.8 (2027), 386.9 (2028). - Oil price assumption (US$/b): 70.8 (2021), 99.0 (2022), 82.4 (2023), 81.2 (2024), 77.4 (2025), 74.3 (2026), 71.6 (2027), 69.3 (2028). - Income and per capita (memorandum): - Nominal GDP (G$ billion): 1,597.4 (2021), 3,029.4 (2022), 3,404.6 (2023), 4,236.5 (2024), 4,905.4 (2025), 5,815.6 (2026), 6,014.5 (2027), 6,235.8 (2028). - Per capita GDP, US$: 9,707.0 (2021), 18,353.1 (2022), 20,564.6 (2023), 25,513.0 (2024), 29,452.9 (2025), 34,813.6 (2026), 35,896.4 (2027), 37,106.3 (2028). ### Indicators of external and financial vulnerability (Table 7) - Public sector debt-to-GDP: 51.1 (2020), 43.2 (2021), 26.0 (2022), 29.9 (2023), 29.0 (2024), 28.2 (2025), 26.0 (2026), 26.5 (2027), 26.0 (2028). - NPV of public sector debt-to-GDP: 32.3 (2020), 39.3 (2021), 21.6 (2022), 24.9 (2023), 24.7 (2024), 24.1 (2025), 22.5 (2026), 23.1 (2027), 22.9 (2028). - Gross official reserves (US$ millions): 680.6 (2020), 810.8 (2021), 932.4 (2022), 1,064.6 (2023), 1,305.7 (2024), 1,677.7 (2025), 2,078.6 (2026), 2,552.8 (2027), 3,057.6 (2028). - Current account balance-to-GDP: -16.3 (2020), -25.9 (2021), 23.8 (2022), 18.0 (2023), 20.0 (2024), 18.1 (2025), 25.3 (2026), 38.6 (2027), 47.7 (2028). *Source: Guyanese authorities; UNDP Human Development Report; World Bank; Bank of Guyana; Ministry of Finance; and IMF staff calculations and projections.* ### Annex I. External Sector Assessment ### Annex I. External Sector Assessment ### Overall assessment - The external position of Guyana in 2022 was moderately stronger than the level implied by fundamentals and desirable policies. - The real exchange rate against currencies of trading partners appreciated. - Reserve adequacy deteriorated slightly to 1.1 months of imports and 50.4 percent of the Assessing Reserve Adequacy Emerging Markets metric. - Guyana accumulated gross international reserves (GIR) of about US$120 million in 2022. - As oil production increases, the external position is expected to continue improving with current account surpluses and accumulation of buffers in GIR and the Natural Resource Fund (NRF). - The outlook is favorable, but there are inflationary and appreciation pressures that need close monitoring. ### Current account - Guyana’s current account swung to a surplus of 23.8 percent of GDP in 2022, after having been in deficit over the last 20 years. - Oil exports grew over 200 percent in 2022, more than offsetting higher imports driven by services imports in the oil sector and elevated commodity prices. - National savings turned positive and increased to 33.7 percent of GDP, from -17.0 percent of GDP, driven by both private and public sectors. - Investment imports related to the oil sector have previously led to large deficits and will continue to cause fluctuations, but high oil production will sustain current account surpluses going forward. - Staff assessment and model outcomes: - EBA-lite CA model with an unadjusted current account norm: cyclically adjusted CA norm 5.9 percent of GDP vs cyclically adjusted actual 23.7 percent of GDP → current account gap 17.8 percent and policy gap 2.1 percent, implying a substantial REER undervaluation of 41.1 percent. - Adjustment applied to CA norm to reflect medium-term increase in public savings (because NRF is held offshore and cyclically adjusted fiscal balance excludes oil receipts not transferred to the budget): adjusted CA norm 22.0 percent of GDP → current account gap 1.7 percent of GDP and a 3.9 percent undervaluation of the REER. - Conclusion: external position in 2022 was moderately stronger than level implied by fundamentals and desired policies. ### Real exchange rate (REER) - REER appreciated in 2022 by 3.0 percent due to higher inflation in Guyana and depreciation in currencies of major trading partners; NEER appreciated by 4.7 percent. - Guyana’s main trading partners: the United States, Trinidad and Tobago, Japan, and China. - Inflation in Guyana in 2022 was higher than its partners except the United States, contributing to REER appreciation. - As of July 2023, the REER has remained stable. - Staff assessment: - EBA-lite REER model: REER norm 112.3 vs actual level 110.6 → REER gap -1.5 percent and policy gap -3.8 percent, implying a current account gap of 0.7 percent of GDP. - Staff assess the REER in 2022 was broadly in line with fundamentals and policies, but appreciation pressures require continued monitoring. - Policy gap is driven by negative real interest rates and lower private credit growth. - Going forward: high public investment may improve growth and competitiveness in the non-oil economy but risks creating inflationary and appreciation pressures, especially as oil receipts are brought onshore to the government budget. ### Capital and financial accounts - Capital and financial accounts dominated by foreign direct investment (FDI), which recorded a net outflow equal to 21 percent of GDP in 2022. - In 2022: - FDI inflows in the oil sector: US$4,269.1 million or 29.4 percent of GDP. - Net FDI in the non-oil sector: US$119.8 million or 0.8 percent of GDP. - Government oil revenue inflows into the NRF: US$1,411.9 million or 9.7 percent of GDP. - Withdrawals from the NRF: US$607.6 million or 4.2 percent of GDP. - Public external debt disbursements: US$261.3 million or 1.8 percent of GDP. - Repatriation of investment by oil operators caused the 2022 net outflow and is expected to increase over 2023-28. - Guyana received debt relief under HIPC (completion point in December 2003) and IMF relief in 2005 under MDRI. - Risks and vulnerabilities: - Growing oil production increases vulnerability of the financial account to external shocks (oil production and oil price shocks affect government oil revenue and oil-related FDI). - Non-oil FDI recovery is vulnerable to business climate changes. - Given favorable growth prospects, concessional external public borrowing, and low reliance on other private financial flows, vulnerabilities are assessed as contained. ### Reserves level - In 2022, Guyana accumulated US$121.5 million of GIR, equal to 6.4 percent of GDP. - As of end-2022, GIR metrics: - 1.1 months of imports - 2.8 months of non-oil imports - 50.4 percent of the Assessing Reserve Adequacy (ARA) Emerging Markets (EM) metric - 23.2 percent of broad money (M2) - 1,467.1 percent of short-term debt - NRF balance at end-2022: over US$800 million (9.8 percent of GDP) — not included in GIR. - Projections and interpretation: - GIR expected to be above most adequacy metrics by end-2028, with substantial buffers accumulated in the NRF. - NRF projected to grow to about US$11 billion by 2028, about 36.5 percent of GDP. - GIR is currently below adequate coverage by months of imports and the ARA EM metric, but these metrics are skewed by oil-sector activity (large oil-related investment imports and large oil exports). - Imports coverage is expected to exceed adequate coverage relative to non-oil imports by end-2023 and relative to total imports by end-2028. - Adequacy across other metrics indicates current GIR provides adequate buffers against capital flight and limited market access in adverse shocks. ### Annex II — Inflation and REER developments in countries with large oil production and exports - After almost three years of exporting oil, Guyana’s oil sector accounts for over 60 percent of its economy. - Higher medium-term growth could imply higher inflation and a steady appreciation of the real exchange rate even with balanced expansion. - Literature evidence: - Harding et al. (2020) find a 1.5 percent cumulative appreciation of the real exchange rate in the ten years following an oil discovery (equal to 10 percent of a country’s GDP), or 0.2 percent per year. - Calibrated to Guyana’s discoveries (net present value of approved fields at least 7000 percent of GDP in 2019), Guyana’s exchange rate is expected to cumulatively appreciate about 10 percent between 2019 and 2024, or 1.9 percent per year. - Adjustments also include labor reallocation from traded to non-traded sectors and changes in labor productivity. - Historical cross-country comparisons (1970-2022, WEO data): - Only 5 countries besides Guyana became new oil exporters in last 50 years: Aruba (1999), Chad (2003), Equatorial Guinea (1992), Sudan (1999), (Timor-Leste excluded for lack of data). - Key patterns from recent oil producers: - Over the next three years from the analysis, oil will account for almost 90 percent of exports in Guyana, given larger absolute oil production. - Inflation rose on average to 4.9 percent per year in the subsequent five years after oil onset, compared to 1.9 percent per year in the five years prior (excluding Sudan due to hyperinflation). - REER appreciated on average 1.1 percent per year in the subsequent five years, compared to 0.2 percent in the five years prior (excluding Equatorial Guinea due to 1994 CFA franc devaluation). - Guyana’s inflation and REER appreciation in the first two years align with experiences of recent oil producers. - Implications: - Expansion of the non-oil economy, increased inflation, and REER appreciation are likely, though a wide range of paths is possible. - Labor market changes (construction and services booms) will be important to monitor and manage. - Domestic policies and policy mix are critical for macro stability and balanced economic expansion. ### Annex III — Risk Assessment Matrix (selected risks, likelihood, impact, and policy responses) - Global risks - Intensification of regional conflict(s). - Likelihood: High - Impact: Medium. Higher commodity prices increase inflation, but also support the current and public sector accounts. Trade disruptions weigh on domestic activity. - Policy response: Tighten monetary policy if needed; diversify supply chains; invest in domestic production and renewable energy. - Abrupt global slowdown or recession. - Likelihood: Medium - Impact: Medium. Weaker growth by trading partners reduces external demand; lower commodity prices worsen fiscal and external balances. - Policy response: Prepare medium-term fiscal plans; build external buffers; stand ready to provide temporary fiscal, FX, and liquidity support. - Commodity price volatility. - Likelihood: Medium - Impact: Medium. Higher commodity prices increase inflation; while higher oil prices strengthen fiscal and external balances, excessive volatility reduces confidence and adversely affects growth and spending plans. - Policy response: Tighten monetary policy if needed; tighten fiscal framework to build and use buffers; strengthen safety nets; invest in renewable energy and domestic production. - Cyberthreats. - Likelihood: Medium - Impact: Medium. Widespread disruptions including to socioeconomic activities and financial market stability. - Policy response: Strengthen financial stability and resilience frameworks, including AMF/CFT. - Extreme climate events. - Likelihood: Medium - Impact: High. Damage to infrastructure, agriculture, and mining results in economic, social, and fiscal costs. - Policy response: Implement Low Carbon Development Strategy; build structural and financial resilience (resilient infrastructure, disaster insurance, contingent credit); strengthen fiscal framework to allow buffer use. - Domestic risks - Political tensions and potential social unrest (esp. around 2025 elections and perceived unfairness in use of oil revenues). - Likelihood: High - Impact: High. Worsen governance, hinder growth, and may delay budget approval. - Policy response: Improve governance; strengthen political institutions; set up precautionary stabilization buffer for essential expenditures. - Excessive dependence on oil revenues. - Likelihood: High - Impact: High. Greater volatility across macro variables (GDP, fiscal, current account, inflation, REER). - Policy response: Adopt fiscal strategy to reduce volatility and ensure sustainability; continue structural reforms and public investment to boost non-oil potential growth; deepen interbank, domestic debt, and FX markets. - Large foreign exchange inflows from oil-financed spending. - Likelihood: High - Impact: Medium. Absorption of oil inflows increases credit risk and exchange rate pressures. - Policy response: Enhanced monitoring of financial system; deepen interbank, domestic debt, and FX markets. - Adverse Dutch disease effects from rapid public spending. - Likelihood: High - Impact: High. Inflationary pressures, appreciation of REER, crowding out private credit, governance concerns. - Policy response: Gradually scale up public spending to avoid exceeding capacity constraints; embed fiscal plans in a medium-term framework; continue procurement and anti-corruption reforms. *Source: Annex I. External Sector Assessment (excerpts).* ### Annex IV. Fiscal Strategy ### Annex IV. Fiscal Strategy ### Context and overarching challenge - Guyana is at a critical juncture; fiscal policy must ensure oil wealth is managed effectively and equitably. - Long-term fiscal and debt sustainability are not of pressing concern but cannot be ignored because oil is an exhaustible resource. - Near- and medium-term policy challenges are likely to be: - overheating, - absorptive and institutional capacity constraints, - inflationary and real exchange rate pressures (including risk of “Dutch disease”). - Savings in the Natural Resource Fund (NRF) are projected to rise substantially, “around 36.5 percent of GDP by 2028.” ### Fiscal-policy objectives for resource-rich countries (RRCs) - Fiscal policy must balance: - promoting and maintaining macroeconomic stability, - safeguarding sustainability of public finances, - ensuring equitable intertemporal distribution of oil wealth, - meeting infrastructure and human capital needs while accounting for absorptive and institutional capacity constraints. ### Recommended fiscal framework and anchor - Staff recommends adoption of a comprehensive fiscal policy framework built on: - a medium-term fiscal framework (MTFF), - updated public financial management (PFM) and public investment management (PIM) frameworks, - a clear and realistic medium-term fiscal anchor. - Operational target suggested: the non-oil primary balance as a percent of non-oil GDP. - Annual budgetary withdrawals from the NRF should be consistent with the MTFF and best PFM practices. - Staff suggests a medium-term fiscal anchor of “zero overall fiscal balance by 2028” following a transition path with higher public spending to meet urgent human capital and physical infrastructure needs. - An in-depth analysis by an independent consultant of absorptive and institutional capacity constraints should inform expenditure limits and the MTFF. ### Simulations, scenarios, and key quantitative projections - Modified Permanent Income Hypothesis (PIH) simulations: - Show consistency with ambitious public investment plans over the medium term, with a steady and significant decline in capital spending as a share of non-oil GDP. - Staff projections are consistent with achieving zero overall fiscal balance by 2028. - Savings accumulation projections: - Modified PIH approach consistent with savings accumulation in the NRF to “over 96 percent of non-oil GDP (more than 36 percent of GDP) by 2028,” and even more in the long term under staff projections and current operational rules. - Staff assess that a more gradual decline in capital spending, consistent with moving steadily towards zero overall fiscal balance by 2028 (instead of the overall surpluses implied by PIH), is also fiscally sustainable. - Public debt and fiscal metrics: - Projected steady decline in public debt-to-GDP ratio from “around 30 percent in 2023 to 26 percent in 2028.” - Low oil-price scenario: - A permanent reduction in oil prices of “US$30 from the baseline” (noted as one standard deviation of oil prices over the period 1996-2021) would have a large adverse impact on the fiscal position. - Under that low oil-price scenario, NRF savings would still be sizeable, “around 25 percent of GDP by 2028.” - External vulnerability: - “80 percent of exports are constituted by oil,” underscoring exposure to export shocks and the role of stabilization mechanisms. ### Precautionary stabilization fund and design metrics - Rationale: - Current NRF withdrawals are not integrated with budgetary financing and cannot be readily drawn down except for a major natural disaster. - A precautionary stabilization fund, established in the medium- to long-term as part of the MTFF, would help avoid procyclical fiscal policy and unfavorable borrowing in case of adverse shocks. - Possible design approach: - Relate the fund to net financial assets of the government (deducting government debt from financial assets) as a ratio to commodity (oil and gas) revenues—NFACR—or use another indicator. - The fund should include only liquid government assets usable to respond to shocks. - The size (floor) can be calibrated as a function of the degree of protection desired—for example, to insure against “75 percent of shocks, or 90 percent or 95 percent of shocks.” - Literature suggests having a floor; NFACR could be calculated as net financial assets in year t divided by average commodity revenues for years (t-1) to (t-3). In most cases a floor of “3-5 is considered adequate.” ### Policy recommendations (staff summary) - Adopt a comprehensive medium-term fiscal framework to guide public expenditure decisions, allowing urgent public spending while accounting for absorptive and institutional capacity constraints. - Conduct an in-depth analysis of absorptive and institutional capacity constraints to inform the spending path. - Use a zero overall fiscal balance by 2028, following a transition with higher spending, as a medium-to-long-term anchor; staff simulations indicate this is consistent with fiscal sustainability and intergenerational equity as the non-oil primary deficit steadily improves under a modified PIH approach. - Consider establishing a precautionary stabilization fund in the medium- to long-term as part of the MTFF to accumulate precautionary savings to smooth fiscal adjustment in prolonged adverse shocks without undermining long-term savings for intergenerational equity. - Conduct periodic reviews of the operational target, including the spending path, to ensure macroeconomic stability and preserve competitiveness. *Source: Annex IV. Fiscal Strategy — IMF staff report content provided in the supplied PDF.* ### 2019. DIC operationalized on April 3, 2019. ### 1guyea2023001 - 2019. DIC operationalized on April 3, 2019. ### Financial-sector policy actions and implementation status - Amend the BOG Act 1998 to facilitate the ELA framework. Status: NT. - Bill passed in parliament on July 13, 2018 and assented to on September 7, 2018. - Expedite preparation of required regulations to support the recently adopted insurance law. Status: I. Note: Regulations came into effect in 2018. - Adopt a robust law to govern the NPS, enable the safe and efficient use of electronic payments, and strengthen the regulatory framework. Grant the BoG enforcement powers. Status: I. Note: The National Payments Systems laws has been passed by the Parliament in July 2018. - Strengthen the AML/CFT framework in line with international standards. Status: I. Note: The authorities enacted legislative amendments to the AML/CFT Act to on August 5, 2023. - Extend maturities of government securities to facilitate capital market development and use in sterilizing structural liquidity. Status: NT. Note: IMF TA was provided in July 2017. The implementation of TA recommendations is being examined. - Legend: I: immediate; NT: near term; MT: medium term. ### Macro-financial linkages and financial system structure - Macro-financial linkages occur largely through the real sector; shocks are typically: - Real: adverse weather reducing agricultural production and exports. - Nominal/external: commodity price fluctuations affecting exports and gross international reserves. - Major channels from the real sector to the financial sector: - Bank credit extended mainly to primary sectors (construction) and at lower rates to households. - Adverse weather and other real shocks (pandemic) led to loan impairment and increased NPLs. - Banks’ balance sheets are highly securitized: about 35 percent of total commercial bank’s assets are in debt securities issued by the government. - Low financial deepening and inclusion, and limited credit extended by banks to the private sector and other financial institutions. - Fiscal-to-financial linkages: - Central bank previously provided free overdraft facilities to the government. - In 2020 government accessed central bank resources during delayed budget approval and financing. - In June 2021 the government securitized the inherited overdraft at the BOG using variable-rate debentures, with tenors ranging from 1 to 20 years, totaling G$200 billion (approximately US$960 million). - Treasury Bills (TBs) account for around 45 percent of total domestic public debt, with commercial banks holding about 78 percent of the total outstanding stock of TBs. - Debentures issued to the Bank of Guyana (BoG) account for a further 53 percent of the total stock of domestic public debt. - External-sector linkages: - Developments in commodity prices could have a larger impact in the future on Guyana’s increasing reliance on oil. - Financial system composition and vulnerability: - Banks’ assets account for about 70 percent of financial system’s assets, equivalent to about 63 percent of GDP. - Non-bank sector (insurance companies, credit unions and pension funds) account for 13.3 percent of total financial sector assets and comprises six institutions (the biggest being the Building Society). - About 10 percent of commercial bank’s assets are held in foreign securities. - Calculations show that credit-to-GDP-gap (calculated as credit to output gap) has been much more volatile recently. - Decomposition of Private Sector Credit (Percent, 2022): - Business Enterprises - Services: 53.8% - Households: 18.2% - Business Enterprises - Manufacturing: 16.7% - Business Enterprises - Agriculture: 8.7% - Business Enterprises - Mining & Quarrying: 2.1% - Financial Institutions: 0.6% - Credit-to-GDP gap chart (series presented as public and private credit to GDP gap from 2001–2022) indicates recent volatility. ### Growth accounting and non-oil growth insights - Historical findings: - A prior study ("Guyana: Why Has Growth Stopped? An Empirical Study on the Stagnation of Economic Growth", Working paper 07/86) found a large change in growth in TFP during 1991–2004, suggesting significant changes beyond labor and capital accumulation. - Guyana transitioned from a state-run centralized economy to a market economy with numerous structural reforms and privatizations (sugar, bauxite, banking). - Public debt declined from about 700 percent of GDP in 1991 to 270 percent of GDP in 2000, and to about 52 percent of GDP by 2015. - Updated staff analysis (extended labor and capital series until 2019; initial capital stock assumed to be G$16.06 billion in 1990 prices): - Results confirm the 2007 findings: while growth can be explained by labor and capital changes, a significant residual remains. - The residual suggests other factors—governance, business environment, and structural reforms—have supported growth and could enhance productivity going forward. - Comparative real GDP trends (2016–2023 chart): - Series shown for Guyana, Tourism-dependent Caribbean, and Commodity-exporting Caribbean (simple regional averages). ### Climate change risks and adaptation strategy - Disaster risk and exposure: - Guyana has one of the highest disaster risks in the world due to high exposure and lack of coping and adaptive capacities. - The 2023 UN World Risk Index places Guyana in the 66th position out of 181 countries (and the highest in the Caribbean). - The worst documented damages reached 60 percent of GDP in 2005. - Guyana experienced floods in 1996, 2005, 2006, 2008, 2010, 2011, 2013, 2014, 2015, and 2021; droughts in 1997-1998, 2009-2010, and 2015-2016. - Sea-level rise and coastal vulnerability: - 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. - The country’s low-lying coastline, in some areas 2 m below sea level, increases flooding risk. - Projections suggest sea level could rise by 0.14m to 0.26m by 2030s, and 0.4 to 0.51m by 2100. - IPCC 2021 report forecasted Georgetown to be under water by 2030 due to rising sea levels (as reported). - Existing natural defenses: - About 25 percent of Guyana’s coast is protected by seawalls, 60 percent by mangroves, and 15 percent by natural sandbanks. - Strategy and actions: - Guyana ratified UNFCCC in 1994 and UN Convention to Combat Desertification in 1997; implementing Low Carbon Development Strategy (LCDS) 2030. - Payment for maintaining forest coverage mechanism; received funds from Norway contingent on indicators. - REDD+ Investment Fund (GRIF) and proposal to join LEAF Coalition referenced. - In November 2022 Guyana sold 37.5 million TREES carbon credits for US$750 million, to be paid during 2022-32 (a third of the credits Guyana will receive over 2016-30). - Government invested over G$35.8 billion (11.8 percent of GDP) to upgrade drainage and irrigation networks. - Rehabilitation and maintenance of sea and river defense structures at multiple areas (La Resource/Maria’s Delight, Leguan, Good Success/New Hope, Bygeval, Bengal, Glasgo). - Planned investments: five water treatment plants, a flood recovery and economic resilience program, and a flood risk management program (including an East Demerara conservancy and two large pump stations), financed by the Caribbean Development Bank, Islamic Bank and International Development Agency. - Guyana committed to net-zero carbon emissions by 2050. - Flaring tax implemented at US$45 per ton of carbon. - Modernized Petroleum Exploration Act allows for increased regulation of the oil and gas sector. - Renewable energy projects: - Plans to relaunch Request for Proposals for the Amaila Falls Hydropower Project (planned construction start 2023 but delayed). - Construction of a 1.5 MW hydropower facility at Kumu and rehabilitation/upgrade of 700 kW Moco-Moco hydropower plant. - Solar power: 1 MW solar farm in Lethem commissioned in 2022; work advanced on 1.5 MW in Bartica and 0.75 MW in Wakenaam. - Tender launched for completion of a total of 33 MW solar photovoltaic (PV) system to be connected to the GPL power system at Linden. ### Strengthening transparency in the natural resource sector (EITI) - EITI participation and governance: - Guyana joined EITI in 2017 after commitment announced in 2010. - In February 2017 a Multi-Stakeholder Group (MSG) of twelve members (four each from civil society, extractive entities, and government agencies) was officially launched. - MSG approves the work plan for the Secretariat, approves the annual EITI Report, and assures EITI contributes to public debate. - Guyana published its second EITI Report, covering fiscal year 2018 in April 2021 and received the validation report under the EITI Standard on April 26, 2022, for the year 2019. - EITI commitments (selected): - Full disclosure of laws, procedures and conditions under which contracts and licenses are issued. - Full disclosure of exploration, production and exports in the extractive sector. - Report ownership structures, including beneficial ownership information, transactions and financial flows in the extractive sector. - Disclose the fiscal regime for managing natural resource revenues and expenditures as articulated in the Natural Resource Fund Act. - Report the contribution of the extractive sector in the economy. - Assessment and implementation gaps: - Guyana has fully met six EITI Requirements, mostly met six, and partly met 14 requirements. - EITI has established a functioning platform for multi-stakeholder discussions and tailored the scope to address public demands beyond mining, oil, and gas. - Since 2021 GYEITI has developed outreach channels (youth competitions, social media, newsletters, hybrid public conferences), though outreach during the pandemic was not sufficiently regular and more sustained outreach is expected in the 2022-23 work plan. - MSG noted non-binding areas for development: - Include issues beyond minimum EITI scope (energy transition, environmental impacts, gender aspects). - Weaknesses in government and industry engagement in the EITI process, including disclosures of required data; delays in reconstituting the MSG in 2021 affected implementation. - Weaknesses in industry participation in EITI reporting, particularly in the mining sector. - Only a minority of government revenues have been disclosed through EITI to the levels of disaggregation and reliability required, due to weaknesses in company reporting and taxpayer confidentiality constraints. - Gaps linked to weaknesses in government systems and record-keeping, including lack of integration between databases of line ministries and the Ministry of Finance, and tax administration in the extractive industries (including lack of consistent tax identification numbers). - Ensuring complete and reliable revenue disclosures would support public finance management reforms. *Source: 1guyea2023001 - 2019. DIC operationalized on April 3, 2019.* ### Annex X. Progress on Previous Article IV Policy ### Annex X. Progress on Previous Article IV Policy Recommendations ### Fiscal policy - IMF recommendation: Complement the Natural Resource Fund Act with a fiscal responsibility framework to ensure effective management of the oil wealth. To anchor fiscal policy, a complementary fiscal framework that constrains the annual non-oil deficit to not exceed the expected transfer from the NRF (i.e., a zero-overall fiscal balance). - Authorities’ response: Broadly consistent - The Natural Resources Fund Bill, No. 21, was signed into law by the President at the end of 2021 and included a new fiscal transfer rule from the NRF to the budget based on a simplified step formula that allows for increasing savings accumulation in the NRF. - The 2023 Budget did not spell out a medium-term anchor for fiscal policy. ### Monetary and exchange rate policies - IMF recommendation: Continually reassess the monetary policy stance to reflect changes in the macroeconomic outlook and risks. Monetary policy should tighten to contain inflationary pressures from international commodity prices, the economic recovery, and higher government spending. Over the medium term, consider revising the monetary policy framework, including allowing greater exchange rate flexibility. - Authorities’ response: Broadly consistent - Monetary policy was tight to counterbalance the expansionary fiscal policy and large net foreign asset inflows and contain inflationary pressures. - The financial market infrastructure to strengthen the monetary policy transmission mechanism and allow increased exchange rate flexibility, if needed, was not developed. ### Financial sector policy - IMF recommendation: Strengthen supervisory and regulatory framework in line with the 2016 FSAP recommendations. Closely monitor NPLs and take steps to strengthen financial sector stability. - IMF recommendation: Continue to strengthen the AML/CFT framework. - Authorities’ response: Broadly consistent - Progress implementing 2016 FSAP recommendations including passing: - Amendments to the Bank of Guyana’s Act to provide emergency liquidity assistance (ELA) to deposit taking financial institutions; - Amendments to Part VIII of the Financial Institutions Act (FIA) for orderly resolution of a failing institution; - The National Payment System (NPS) law to facilitate the establishment, regulation and oversight of a modern national payment system; - The Deposit Insurance Act to foster financial stability by protecting depositors and by contributing to the resolution of member institutions. - Work needs to accelerate in areas of under-provisioning and related party lending. - Authorities registered some progress in adopting a Crisis Management Plan and Supervision Guideline; accelerated Basel II/III implementation. - Authorities have closely monitored NPLs; an Asset Quality Review to examine banks’ credit risks remains under consideration. NPLs have considerably declined in 2021. - Guyana has strengthened its AML/CFT legal framework to be consistent with the FATF standards and recently completed its 2021 NRA. Current efforts are focused on implementing recommendations made in the NRA. The 2023 Mutual Evaluation by the Caribbean Financial Action Task Force is underway. ### Structural reforms - IMF recommendation: Structural reforms and infrastructure investment are needed to support economic diversification and achieve inclusive economic growth. - Authorities’ response: Broadly consistent - Authorities continue to reduce the cost of doing business through the public investment program and administrative reforms. - Commitments include: a cleaner and more affordable energy matrix, eliminating infrastructure deficits, integrating remote regions in the Hinterland. - Authorities are scaling-up investment in infrastructural development and expanding the generation and transmission capacity of the electricity company to help in unlocking growth, and help address potential labor shortages and skill mismatches. ### Governance - IMF recommendation: Continue the progress that has been made and take additional steps to tackle capacity weaknesses to strengthen transparency and governance. - Authorities’ response: Broadly consistent - Recent progress on the anti-corruption framework includes publication of audit reports of public expenditures, including for COVID, and partial implementation of recommendations as well as the re-establishment of the Integrity Commission. - Authorities indicated asset declarations of a large number of public officials are submitted annually, and public procurement tenders are streamed live. - Progress on implementing recommendations of the 2019 and 2021 EITI reports, notably on the reconciliation with the fiscal regime. - Some progress on information sharing and publication of extractive industries’ financial statements, but further progress is needed to improve Guyana’s overall score to address remaining gaps, including in moving towards electronic disclosure and adequate follow-up. *Prepared by the Western Hemisphere Department — Annex X. Progress on Previous Article IV Policy Recommendations.* ### 1. The coverage of public sector debt used in this report is central government debt and ### 1guyea2023001 - 1. The coverage of public sector debt used in this report is central government debt and ### Coverage of public sector debt - Coverage defined as central government debt and central government-guaranteed debt. - External debt defined on a residency basis and includes the external debt of the central government. - Since December 2020 central government domestic debt includes a central government-guaranteed five-year syndicated loan amounting to G$16.5 billion (2.1 percent of GDP) raised by the National Industrial and Commercial Investments Limited (NICIL) for restructuring Guyana Sugar Corporation (GuySuCo). - State-owned enterprises’ (SOEs) debts are included in central government debt because SOEs are not allowed to borrow directly; the central government borrows and on-lends to SOEs. - Subnational and local governments’ debts are not included in the DSA because the central government does not issue explicit or implicit guarantees on them. - Central government domestic debt includes borrowing by the Social Security Administration. - Central government domestic debt included borrowing from the Central Bank of Guyana (BOG) during 2015-2020 amounting to G$163.3 billion (14.3 percent of GDP) as of end-2020; in June 2021 the government securitized the inherited overdraft at the BOG using variable-rate debentures, with tenors ranging from 1 to 20 years, totaling G$200 billion (approximately US$960 million). - Text Table 1 indicates inclusion flags: Central government (checked), Social security fund (o/w checked), Guarantees to other entities including SOEs (checked), Non-guaranteed SOE debt (checked). ### Contingent liabilities and stress testing - DSA includes a combined contingent liabilities stress test which does not adjust the default setting for PPP debt because authorities indicated no PPP debt outstanding as of end-2021. - Financing requirements by developmental agencies are met directly through central government borrowing. - 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 include default value regarding SOE debt and debt of financial institutions implicitly or explicitly guaranteed by the government. - Text Table 2 variables used in stress test (default and country-specific adjustments): - Other elements of the general government not captured in 1.0: 0.0 percent of GDP - SoE's debt (guaranteed and not guaranteed by the government): 2.0 percent of GDP - PPP: 0.0 (35 percent of PPP stock; authorities and IDA confirmed PPP stock is zero) - Financial market (default value 5 percent of GDP is minimum): 5.0 percent of GDP - Total (2+3+4+5): 7.0 percent of GDP ### Background on debt levels and composition - Total gross public debt declined to 26 percent of GDP in 2022 (including central government guarantee on NICIL’s G$16.5 billion syndicated loan), down from 49.5 percent of GDP in 2012 and from 43.2 percent in 2021. - Share of domestic debt in total public debt increased from just under 42 percent in 2018 to just over 60 percent in 2022. - Rice exports to Venezuela helped repay part of debt under PetroCaribe; no further borrowing from Venezuela since suspension in 2015. - The December 2020 NICIL five-year syndicated loan (G$16.5 billion; 2.1 percent of GDP) was re-classified as domestic public debt because the government had been obliged to meet debt service obligations during the year. - Interest rate on the 2018 government-guaranteed loan secured by NICIL’s assets: 4.75 percent. - Total external debt accounts for over 40 percent of total public sector debt, mostly to multilateral institutions. - Multilateral creditors accounted for around 67 percent of total external debt in 2022. - IDB accounted for 46.7 percent of total external debt in mid-2022. - China’s Export-Import Bank comprised 16.2 percent of total external debt in mid-2022. - 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 stance, debt management and legal/administrative constraints - Authorities committed to fiscal prudence and contracting external loans on highly concessional terms. - Fiscal policy limits: amended Natural Resource Fund (NRF) Act and the Fiscal Management and Accountability Act of 2003 provide constraints. - Authorities intend to maintain Guyana’s risk of debt distress at a moderate (or lower) level. - Guyana has statutory ceilings on domestic and external debt, recalibrated every three years. - Government working with World Bank on Sustainable Development Finance Policy (SDFP) to increase periodicity and coverage of debt statistics, strengthen debt management policy framework, and publish audited SOE financial statements. - Progress on public investment management (PIM) including introduction of a pre-appraisal mechanism for new capital investments. ### Macroeconomic assumptions and baseline scenario for DSA - Baseline incorporates macroeconomic effects of oil production through revenue transfers to the budget from 2022 onwards and value added to domestic activities via employment and capital flows. - Baseline includes authorities’ ambitious public capital expenditure plans over the medium term. - Fiscal policy anchor assumption: zero overall fiscal balance (after grants) from 2028 onwards; authorities agreed to this advice on September 11, 2023. - Discount rate used to calculate NPV of external debt: 5 percent (consistent with 2018 guidance note on Bank-Fund DSA for low-income countries). - Baseline projections subject to significant upside and downside risks related to oil prices and production, and the government’s fiscal policy stance. ### Recent macroeconomic developments and projections - 2022 growth: - Real oil GDP grew by 62.3 percent in 2022. - Non-oil GDP grew by 11.5 percent in 2022. - First half of 2023 growth estimates: - Real GDP estimated to have grown by 59.5 percent in the first half of 2023. - Non-oil GDP estimated to have grown by 12.3 percent in the first half of 2023. - Inflation (Urban CPI): 7.2 percent in end-2022. - Current account: - Surplus of around 24 percent of GDP in 2022, compared with a deficit of around 26 percent of GDP in 2021. - Gross international reserves coverage to imports: 1.1 months at end-2022 (low due mostly to large imports for oil exploration); coverage reached 2.8 months of non-oil imports. - Credit to the economy grew in line with nominal non-oil GDP; credit to the private sector remained supportive. ### Medium- to long-term outlook, projects and risks - Oil production projected to increase from 278 thousand barrels per day (bpd) in 2022 to over 1 million bpd by 2028 as three new approved fields (Payara, Yellowtail and Uaru) come on stream. - Commercially recoverable petroleum reserves estimated to be well over 11 billion barrels and expected to last over 40 years. - Government plans for oil revenue use: support non-oil growth via human capital (schools and hospitals), increasing access to energy and lowering energy costs, investing in transport infrastructure (highway to Brazil, bridge to Suriname, bridge and deep water port, plus rehabilitation of the road and railway network), infrastructure for resilience to natural disasters and climate change, and increasing value added exports (e.g., agribusiness). - Public capital spending projected to increase from 20.3 percent of non-oil GDP in 2022 to 32.1 percent in 2023 (2022 level up from 9.6 percent in 2021). - Upside risks: further oil discoveries, construction boom. - Downside risks: overheating (inflationary pressures and real exchange rate appreciation), ‘Dutch disease’, highly volatile commodity prices, adverse climate shocks (mostly flooding) or environmental risks related to oil production, limited administrative and institutional capacity raising public expenditure management execution risks, and potential crowding out of private sector credit or delays in operationalization of new oil fields. ### Governance and transparency measures - NRF governance strengthened through appointment of: - NRF Board of Directors, - Public Accountability and Oversight Committee, - Investment Committee (all appointed in 2022). - Notifications of receipts of petroleum revenues published in the Official Gazette since April 2022; hearings planned in Parliament. - New Production Sharing Agreement (PSA) to apply to all new auctioned oil blocks with more favorable terms for Guyana. - Fourteen new offshore exploration blocks put on auction under terms that increase government’s share of oil revenues. - Public procurement framework strengthened: five new commissioners appointed to the Public Procurement Commission; NPTA publishing all contracts with information on beneficial owners of successful bidders and designing comprehensive procurement training. - Progress on anti-corruption alignment with international best practices and strengthening public financial management system. - Compliance with Financial Action Task Force (FATF) recommendations. - Guyana suspended from EITI in early 2023 for late submission of the EITI 2020 report; suspension lifted in June 2023 when the report was published. *Source: 1guyea2023001 - 1. The coverage of public sector debt used in this report is central government debt and* ### 13. The main macroeconomic assumptions underlying the DSA are: ### 1guyea2023001 - 13. The main macroeconomic assumptions underlying the DSA are: ### Macroeconomic assumptions and drivers - Real GDP growth: - Projected at 13.5 percent on average during 2023-2033. - Growth rose sharply in 2022 as Liza-2 started operating early in the year. - Additional oil and gas production starts: Payara (2024), Yellowtail (2026), Uaru (2027) — all included in the macro framework and the DSA. - Non-oil sector growth benefits from sharp increases in public capital investment and upward revisions to 2023 real non-oil GDP growth based on strong H1 2023 performance. - Inflation (CPI): - Projected to average 5.4 percent during 2023-2033. - Higher than the 2022 DSA forecast of 3.8 percent, reflecting higher projected global food and commodity prices and the impact of higher fiscal spending on domestic demand. - Public finances and fiscal stance: - Central government overall fiscal deficit (after grants) projected to average around 1.6 percent of GDP during 2023-2033. - 2022 public capital expenditures rose to 8.5 percent of GDP (a 2 percentage point increase versus 2021). - 2023 budget envisages public investment increasing from 8.5 to 13.8 percent of GDP. - Staff recommends careful monitoring of inflationary and overheating pressures and absorptive capacity constraints while viewing the expansionary stance as appropriate given development needs. - Staff baseline assumes a steady move toward a zero overall balance (after grants) by 2028 and maintaining a zero overall fiscal balance thereafter, contingent on no absorptive capacity constraints and/or overheating pressures. - Natural Resource Fund (NRF) withdrawal rules (as revised): - The NRF Bill allows withdrawal of the entire amount deposited in the NRF by end-2021 (~US$608 million) in 2022. - In any given year, permitted withdrawals from prior-year deposits follow a tiered ceiling: - 100 percent of the first US$500 million; - 75 percent of the second US$500 million; - 50 percent of the third US$500 million; - 25 percent of the fourth US$500 million; - 5 percent of the fifth US$500 million; - 3 percent of any amounts in excess of US$2.5 billion. - Oil production, revenues, and external sector: - Oil production expected to increase from 101 million barrels in 2022 to 387 million barrels by 2028 (compared to 265 million barrels in the 2022 DSA). - By end-2028 almost US$11 billion is expected to be accumulated in the NRF, up from US$608 million at end-2021. - Estimated oil revenues will more than cover additional spending planned on priority social sectors and infrastructure and the cost of gradually paying off the government’s overdraft with the central bank. - Real growth averaging 13.5 percent per year over 2023-2033 and substantially exceeding the real interest rate paid by the government implies public debt-to-GDP projected to fall from almost 30 percent in 2023 to 23.4 percent in 2033. - Current account balance projected to average a surplus of 35.7 percent of GDP during the forecast period. - Gross international reserves (months of projected imports of goods and services) expected to increase from 1.0 in 2023 to 3.6 by 2028 and to 11.5 by 2033. - Financing and domestic markets: - Share of domestic financing of the overall fiscal deficit projected to increase from 67 percent in 2023 to 98 percent in 2026. - Assumed that the government will not need to borrow externally after 2026; net external financing of the fiscal deficit projected to decline steadily from 2026 onwards. ### Baseline quantitative assumptions and selected period averages (Text Table 3) - Real GDP growth (2023 2024 2025 2026 2027 Avg 2023-27 Avg 2023-33) - 2023 DSA - current: 38.4 26.6 18.8 21.2 21.2 25.2 13.5 - 2022 DSA - previous: 25.2 21.2 28.2 25.5 3.3 20.7 12.0 - Real Non-oil GDP growth - 2023 DSA - current: 9.1 6.6 5.5 5.5 5.5 6.4 6.0 - 2022 DSA - previous: 5.1 5.1 5.2 5.2 5.2 5.2 5.2 - Consumer prices (eop) 1/ - 2023 DSA - current: 3.8 5.5 5.5 5.5 5.5 5.2 5.4 - 2022 DSA - previous: 6.0 4.1 3.5 3.5 3.5 4.1 3.8 - Central Government overall balance 2/ (after grants) - 2023 DSA - current: -6.7 -5.0 -3.0 -2.0 -1.0 -3.5 -1.6 - 2022 DSA - previous: -0.5 -0.2 0.0 0.0 0.0 -0.1 -0.1 - External current account balance - 2023 DSA - current: 18.0 20.0 18.1 25.3 38.6 24.0 35.7 - 2022 DSA - previous: 30.4 28.3 17.2 26.1 26.6 25.7 24.1 - Notes: - 1/ Measured as percent (y/y) change. - 2/ After grants. - Sources: Guyanese authorities, IMF staff calculations and projections. ### Debt sustainability, risks, and stress tests - Debt carrying capacity and classification: - Guyana assessed as having a “medium” debt carrying capacity based on a CI score of 2.86 (range for “medium” is 2.69–3.05), an improvement from “weak” in the 2022 DSA. - CI score components contribution highlights: CPIA contribution 44%; import coverage of reserves contribution 40%; other components smaller or negative. - External PPG debt (baseline and shocks): - Baseline: PV of external PPG debt expected to decline from 6.0 percent of GDP in 2023 to 2.5 percent in 2033. - Standardized export shock: PV of external PPG debt-to-GDP could increase from 6 percent in 2023 to 61 percent in 2025 before declining to 49 percent by 2033; breach of benchmark begins in 2025. - Caveat: Standardized shocks may overestimate downside because they are based on historical macro paths that do not account for structural changes from oil production, resilience investments, NRF accumulation, and FDI-linked dynamics. - Overall assessment: Risk of external debt distress remains moderate in the baseline scenario; Guyana has substantial space to absorb shocks given current low external debt. - Public sector debt: - Baseline: PV of public debt-to-GDP projected to decline from almost 25 percent in 2023 to just over 21 percent in 2033; does not breach the 55 percent benchmark. - The transition to a zero overall fiscal balance (after grants) by 2028 and maintenance thereafter contributes to the declining public-debt-to-GDP ratio. - Key risk factors (upside and downside): - Upside: Further oil discoveries and a construction boom could raise long-term prospects and short-term growth above baseline. - Downside: “Natural resource curse” risks — rapid increases in government spending from oil revenues leading to higher inflationary pressures and real exchange rate appreciation (Dutch disease); public investment management and governance concerns; adverse climate shocks; increased dependence on oil revenues exposing the economy to oil price volatility; long-term global decarbonization reducing oil demand and prices. - Realism and validation: - Forecast errors historically at a relatively low level; past projections of public and external debt to GDP have been slightly higher than actual outturns due mainly to stronger-than-forecast real GDP growth. - The three-year adjustment in the primary balance of 4.7 percentage points of GDP over 2023-2026 is judged consistent with using accumulated oil revenues to address urgent human capital and infrastructure needs, accounting for absorptive capacity constraints. - Projected medium-term growth is significantly lower than implied by standard fiscal multipliers due to major structural changes from new oil field production. *Source: IMF staff — Guyana DSA chapter (text provided).* ### 22. The standardized stress tests show again that shocks to real GDP, exports, and commodity ### 22. The standardized stress tests show again that shocks to real GDP, exports, and commodity ### Key findings - Under the real GDP growth shock, the PV of the debt-to-GDP ratio could reach 260 percent of GDP by 2033. - A shock to exports would result in the PV of debt-to-GDP breaching the 55 percent benchmark over 2025-33. - A commodity price shock could result in a breach of the vulnerability threshold in 2026, pushing the PV of public debt-to-GDP to 72 percent that year and rising to 236 percent by 2033. - The baseline scenario shows debt indicators remaining well below their respective benchmarks over the projection period. - The PV of external debt-to-GDP ratio is projected to decline to around 2.5 percent over the coming decade as the need for external borrowing is eliminated by the accumulation of external assets. - The Natural Resource Fund is expected to accumulate substantial savings over the medium term, amounting to almost 100 percent of non-oil GDP in 2028. - Results from the Moderate Risk tool indicate Guyana still has substantial space to absorb shocks. ### Stress test scenarios and projections - Real GDP growth shock: - PV of debt-to-GDP: 260 percent of GDP by 2033. - Export shock: - PV of debt-to-GDP: breaches the 55 percent benchmark over 2025-33. - External public debt ratio: vulnerable to an export shock. - Commodity price shock: - PV of public debt-to-GDP: 72 percent in 2026 and 236 percent by 2033. - Baseline: - Debt indicators remain below benchmarks across the projection period. - External borrowing need eliminated through external asset accumulation; PV external debt-to-GDP ~2.5 percent over the coming decade. ### Vulnerabilities and drivers - Shocks to real GDP, exports, and commodity prices produce the largest increases in the PV of the debt-to-GDP ratio. - High historical standard deviations of real GDP and exports—driven by very high growth rates associated with new oil-field production such as Liza 2 in 2022—have increased the size of shocks used in the standardized stress tests and made breaching thresholds easier. - Reliance on the oil sector increases exposure to oil-price shocks and hence fiscal and debt vulnerabilities. ### Policy recommendations and implications - Adopt structural reforms to diversify the domestic economy, ensuring broad-based growth and reducing reliance on the oil sector to lower exposure to oil price shocks. - Adopt a comprehensive medium-term fiscal framework to safeguard long-term debt sustainability and to indicate a clear medium-term fiscal anchor. - In the presence of an adverse shock, the anchor and framework would indicate the optimal fiscal path. - Anticipate that if a shock materializes, authorities would most likely adjust the execution of their capital spending. ### Authorities’ views - The coming into production of new oil fields—and in particular of Liza 2 in 2022—has led to very high growth rates of real GDP and of exports in these years and, as a consequence, to very high historical standard deviations of these variables. This in turn has affected the size of the shocks used in the standardized stress tests and made it much easier to breach the thresholds. *Source: 1guyea2023001 - 22. The standardized stress tests show again that shocks to real GDP, exports, and commodity* ### 24. The authorities broadly agreed with the analysis and conclusions of the DSA, emphasizing ### 24. The authorities broadly agreed with the analysis and conclusions of the DSA, emphasizing ### Authorities' assessment and macro policy priorities - Authorities broadly agreed with the DSA analysis and conclusions, emphasizing: - Major structural changes taking place in the Guyanese economy. - Savings accumulated and projected to accumulate in the Natural Resource Fund (NRF), which are not counted in gross official FX reserves, but represent considerable buffers.18 - Importance of addressing Guyana’s large physical infrastructure and human capital needs. - Footnote: Only the transfers from the NRF to the budget are included into reserves.18 ### External debt sustainability — baseline indicators (selected figures from Table 1) - External debt (nominal), in percent of GDP: - 2020: 23.8 - 2021: 18.0 - 2022: 10.3 - 2023: 11.0 - 2024: 9.7 - 2025: 9.3 - 2026: 7.8 - 2027: 7.6 - 2028: 7.1 - 2033: 4.7 - 2043: 1.5 - Change in external debt (percent of GDP): - 2020: -1.1 - 2021: -5.9 - 2022: -7.6 - 2023: 0.6 - 2024: -1.3 - 2025: -0.4 - 2026: -1.5 - 2027: -0.3 - 2028: -0.4 - 2033: -0.5 - 2043: -0.2 - Identified net debt-creating flows (percent of GDP): - 2020: -8.2 - 2021: -10.0 - 2022: -11.2 - 2023: -7.1 - 2024: -8.0 - 2025: -7.8 - 2026: -9.4 - 2027: -11.4 - 2028: -12.1 - 2033: -39.0 - 2043: -11.6 - Non-interest current account deficit (percent of GDP): - 2020: 15.9 - 2021: 25.6 - 2022: -23.9 - 2023: -18.2 - 2024: -20.2 - 2025: -18.2 - 2026: -25.4 - 2027: -38.6 - 2028: -47.8 - 2033: -41.3 - 2043: -11.8 - Deficit in balance of goods and services (percent of GDP): - 2020: 26.5 - 2021: 34.0 - 2022: -28.3 - 2023: -19.4 - 2024: -22.8 - 2025: -21.4 - 2026: -29.2 - 2027: -43.8 - 2028: -53.7 - 2033: -76.0 - 2043: -24.6 - Exports (percent of GDP or reported series formatting in table): - 51.0, 60.4, 79.3, 82.6, 83.8, 82.2, 80.7, 92.7, 99.2, 94.2, 36.0 - Imports (percent of GDP or reported series formatting in table): - 77.5, 94.4, 51.0, 63.2, 61.0, 60.8, 51.4, 49.0, 45.5, 18.2, 11.4 - Net FDI (negative = inflow, percent of GDP): - 2020: -23.2 - 2021: -29.0 - 2022: 21.0 - 2023: 14.5 - 2024: 14.4 - 2025: 11.8 - 2026: 17.6 - 2027: 28.8 - 2028: 36.6 - 2033: 2.2 - 2043: 0.2 - Endogenous debt dynamics (contribution, percent of GDP): - 2020: -0.9 - 2021: -6.5 - 2022: -8.3 - 2023: -3.4 - 2024: -2.2 - 2025: -1.4 - 2026: -1.5 - 2027: -1.5 - 2028: -0.9 - 2033: 0.1 - 2043: 0.0 - Contribution components: - Contribution from nominal interest rate: 0.4, 0.3, 0.2, 0.2, 0.2, 0.2, 0.2, 0.1, 0.1, 0.1, 0.0 - Contribution from real GDP growth: -10.2, -3.4, -5.9, -3.5, -2.3, -1.6, -1.7, -1.6, -1.0, 0.0, 0.0 - Contribution from price and exchange rate changes: 8.9, -3.4, -2.6, ... (table continues) - Residual (percent of GDP): - 2020: 7.2 - 2021: 4.1 - 2022: 3.6 - 2023: 7.7 - 2024: 6.7 - 2025: 7.5 - 2026: 7.9 - 2027: 11.1 - 2028: 11.6 - 2033: 38.6 - 2043: 11.4 - Sustainability indicators (selected): - PV of PPG external debt-to-GDP ratio (projections series excerpt): 5.8, 6.0, 5.4, 5.2, 4.3, 4.2, 4.0, 2.5, 0.7 - PV of PPG external debt-to-exports ratio (projections excerpt): 7.4, 7.3, 6.5, 6.4, 5.3, 4.5, 4.0, 2.7, 1.9 - PPG debt service-to-exports ratio (selected values): 2.7, 1.7, 0.8, 0.7, 0.6, 0.5, 0.5, 0.3, 0.3, 0.3, 0.2 - PPG debt service-to-revenue ratio (selected values): 7.0, 6.3, 4.4, 3.3, 3.2, 3.0, 3.3, 2.1, 1.9, 1.8, 0.3 - Gross external financing need (Billion of U.S. dollars): - -0.3, -0.2, -0.3, -0.5, -1.1, -1.4, -2.1, -2.8, -3.3, -14.5, -8.6 ### Public sector debt — baseline indicators (selected figures from Table 2) - Public sector debt (percent of GDP): - 2020: 51.1 - 2021: 43.2 - 2022: 26.0 - 2023: 29.9 - 2024: 29.0 - 2025: 28.2 - 2026: 26.0 - 2027: 26.5 - 2028: 26.0 - 2033: 23.2 - 2043: 15.1 - Of which: external debt (percent of GDP) mirrors external DSA series: - 23.8, 18.0, 10.3, 11.0, 9.7, 9.3, 7.8, 7.6, 7.1, 4.7, 1.5 - Change in public sector debt (percent of GDP): - 2020: 7.5 - 2021: -7.9 - 2022: -17.2 - 2023: 3.8 - 2024: -0.9 - 2025: -0.8 - 2026: -2.2 - 2027: 0.5 - 2028: -0.5 - 2033: -0.7 - 2043: -0.9 - Identified debt-creating flows (percent of GDP): - 2020: 5.4 - 2021: -7.4 - 2022: -15.3 - 2023: 1.6 - 2024: -1.1 - 2025: -1.1 - 2026: -2.5 - 2027: -0.8 - 2028: -1.3 - 2033: -0.5 - 2043: -0.8 - Primary deficit (percent of GDP): - 2020: 7.2 - 2021: 6.7 - 2022: 4.8 - 2023: 6.3 - 2024: 4.8 - 2025: 2.8 - 2026: 1.8 - 2027: 0.9 - 2028: -0.1 - 2033: -0.1 - 2043: 0.0 - Revenue and grants (percent of GDP): - 2020: 20.6 - 2021: 17.1 - 2022: 14.5 - 2023: 17.9 - 2024: 15.4 - 2025: 14.5 - 2026: 13.0 - 2027: 13.4 - 2028: 13.9 - 2033: 16.8 - 2043: 20.4 - Automatic debt dynamics — contribution from interest rate/growth differential (percent of GDP): - -8.4, -12.1, -19.2, -4.6, -5.9, -3.9, -4.3, -1.7, -1.2, -0.5, -0.8 - PV of public debt-to-GDP ratio (selected projections): - 21.6, 24.9, 24.7, 24.1, 22.5, 23.1, 22.9, 21.0, 14.3 - Debt service-to-revenue and grants ratio (selected): - 68.2, 129.0, 73.0, 4.6, 31.0, 46.1, 51.2, 55.3, 52.4, 30.9, 14.5 - Gross financing need (percent of GDP): - 21.3, 28.7, 15.4, 7.1, 9.5, 9.5, 8.4, 8.3, 7.2, 5.1, 2.9 ### Key macroeconomic and fiscal assumptions (selected) - Real GDP growth (percent): - 2020: 43.5 - 2021: 20.1 - 2022: 62.3 - 2023: 38.4 - 2024: 26.6 - 2025: 18.8 - 2026: 21.2 - 2027: 21.2 - 2028: 13.5 - 2033: -0.4 - 2043: 0.8 - Average/other series: 14.9, 13.5 (table formatting) - GDP deflator in US dollar terms (change, percent): - -26.3, 16.6, 16.9, -18.8, -1.7, -2.5, -2.2, -14.6, -8.6, 5.6, 8.0, 0.9, -3.1 - Effective interest rate (percent) 4/: - 1.8, 1.8, 2.0, 1.7, 1.8, 1.9, 2.0, 1.2, 1.2, 1.0, 0.8, 1.7, 1.4 - Growth of exports of G&S (US dollar terms, percent): - 55.8, 65.8, 148.9, 17.1, 26.3, 13.6, 16.3, 18.9, 10.9, 1.0, 0.8, 28.0, 11.0 - Growth of imports of G&S (US dollar terms, percent): - -28.6, 70.6, 2.4, 39.4, 20.1, 15.5, 0.3, -1.5, -3.6, 1.7, 2.2, 16.2, 0.7 - Government revenues (excluding grants, percent of GDP): - 20.0, 16.7, 14.2, 17.6, 15.4, 14.5, 13.0, 13.4, 13.9, 16.8, 20.4, 18.6, 15.2 - Nominal GDP (Billion of US dollars) — intermittent entries in table: 5, 8, 15, 16, 20, 24, 28, 29, 30, 37, 75 (table formatting indicates year alignment) ### Sensitivity analysis and stress tests — key messages (Tables 3–4, Figures 1–5) - Sensitivity and bound tests presented for 2023–2033 include: - A. Alternative scenarios (e.g., variables at historical averages). - B. Bound tests (B1 Real GDP growth; B2 Primary balance; B3 Exports; B4 Other flows; B5 Depreciation; B6 Combination). - C. Tailored tests (C1 Combined contingent liabilities; C2 Natural disaster; C3 Commodity price; C4 Market Financing — marked "n.a." where not applicable). - Selected outcomes (Table 3, public and PPG external debt indicators, 2023–2033): - Baseline sequences and scenario values show variability across indicators (examples in table: Baseline entries 65 54 44 43 33 etc.; A1 and bound test series produce higher ratios in many years). - Thresholds applied: 40 for external indicators; 180 and 15 for certain tailored metrics (as reported in the tables). - Public debt sensitivity (Table 4 highlights): - Baseline and alternative scenarios produce large divergences under severe shocks (examples: B1 Real GDP growth projection sequences show very large increases under adverse growth scenarios). - TOTAL public debt benchmark and PV of Debt-to-Revenue Ratio series indicate potential significant stress under commodity price, growth, or combined contingent liabilities shocks (tables show very large numbers in stressed paths, e.g., commodity price shock sequences). - Figures 1–5 illustrate: - Indicators of public and PPG external debt under alternative scenarios (debt service-to-revenue, PV of debt-to-exports, PV of debt-to-GDP, debt service-to-exports). - Drivers of debt dynamics (contributions from primary deficit, real interest rate, real GDP growth, real exchange rate, other flows). - Realism tools and qualification of the "Moderate" category for 2023–2033 with thresholds and space indicators (figures show baseline relative to thresholds for PV debt/GDP, PV debt/exports, debt service ratios). ### Implications and policy considerations drawn from the DSA content - NRF buffers: The DSA and authorities note substantial buffers in the Natural Resource Fund that are not counted in gross official FX reserves; only transfers from the NRF to the budget are included in reserves. These buffers materially affect the fiscal and external policy space assessment. - Priority needs: The authorities emphasize addressing large physical infrastructure and human capital needs as central policy priorities amid rapid structural change. - Debt sustainability outlook: - Baseline projections show declining external and public debt ratios over the 2020–2043 horizon under the assumptions in the tables. - Stress tests reveal vulnerability to adverse shocks (growth, exports, commodity prices, contingent liabilities), with some scenarios producing large increases in debt and debt-service indicators. - Fiscal-space and financing: - Government revenues (excluding grants) are projected to vary across years (see series), affecting primary balances and gross financing needs. - Gross external financing needs and gross financing needs are reported and should guide financing strategy under both baseline and stress scenarios. *Sources: Country authorities; and staff estimates and projections.* --- _Source: https://www.imf.org/-/media/files/publications/cr/2023/english/1guyea2023001.pdf_