## _cr16216 — IMF staff report excerpt (Guyana, 2016)

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### Recent developments
- Real GDP growth: 3 percent in 2015, down from 3.8 percent in 2014 and an average of 5 percent during 2010-13; opening of two new large gold mines in Q4 2015 (without them, 2015 growth would have been 2.3 percent).
- Inflation: Consumer prices contracted by about -1.8 percent (y/y) as of December 2015; twelve-month inflation expected to remain low at around 2.1 percent by year-end 2016.
- Current account and reserves:
  - Current account deficit: 10.8 percent of GDP (2014) → 4.6 percent of GDP (2015).
  - Gross international reserves (months of imports): 3.5 (2014), 3.6 (2015), 3.9 (2016 proj.); reserves stood at 3.6 months of imports at end-2015; reserve coverage projected to increase to 3.8 months at end-2016.
- Fiscal developments (NFPS, percent of GDP):
  - Overall balance after grants: -5.7 (2014) → -0.2 (2015) → -5.5 (2016 proj.).
  - Primary balance: -4.7 (2014) → 0.8 (2015) → -4.5 (2016 proj.).
  - Revenue and grants: 23.6 (2014) → 28.1 (2015) → 28.8 (2016 proj.).
  - Expenditure: 29.3 (2014) → 28.3 (2015) → 34.3 (2016 proj.).
  - Total public sector gross debt: 51.2 (2014) → 48.2 (2015) → 51.7 (2016 proj.).
  - Notable drivers in 2015: revenues increased by 4.2 percentage points of GDP (fuel excises and one-off non-tax revenue); capital expenditures declined nearly 30 percent due to election-related budget delays; transfers to GuySuCo remain a fiscal drag.
- Financial sector indicators:
  - Bank capital adequacy ratios averaged 23.9 percent as of December 2015 (regulatory minimum: 8 percent).
  - Nonperforming loans: 6 percent (end-December 2013) → 11.5 percent (end-December 2015).
  - Credit to the private sector: 9.1 percent (2014) → 6.2 percent (2015) → 6.0 percent (2016 proj.).
  - Average lending rate: 10.9 percent (2014) → 10.6 percent (2015).
- External financing and oil:
  - Exxon Mobil discovery estimated on the order of 700 million barrels; commercial production not expected within the medium-term.
  - PetroCaribe disbursements fell after Venezuela suspended the agreement with Guyana in July 2015.

### Outlook and projections (2016 and medium-term)
- Growth and inflation:
  - Growth projected at 4 percent in 2016, supported by public investment and two new large gold mines.
  - Growth projected at 3.8 percent during 2017–21.
  - Inflation turns positive in 2016 but remains modest.
- External sector:
  - Current account deficit projected to remain at about 4½ percent of GDP in 2016, financed by investment inflows and donor-supported investment.
  - Revival of the Venezuela border dispute led to cessation of rice-for-oil trade in July 2015, decreasing rice exports by about 2 percent of GDP.
  - Current account deficit projected to average about 7.2 percent of GDP in 2017–21.
  - Reserve cover projected to increase from 3½ months at end-2015 to about 5 months at end-2021.
  - Approximately $40 million in grants from the European Union are projected for 2016, improving the current account.
- Fiscal stance and projections:
  - 2016 budget envisages an overall NFPS deficit of 5.5 percent of GDP, driven by a 4 percentage point increase in the share of capital spending and a 2.1 percentage point increase in the share of current spending in GDP; revenues projected to remain broadly flat.
  - Authorities indicated fiscal deficit expected to remain between 5 and 6 percent of GDP over the medium term.
  - Debt-to-GDP ratio projected to rise from about 49 percent in 2015 to 60 percent by 2021 under the stated fiscal stance; risk of debt distress estimated to remain moderate but will rise without fiscal consolidation.

### Monetary policy and liquidity
- BoG objectives: price stability and adequate liquidity to support credit expansion and growth; operationally targets broad money and manages liquidity through open market operations.
- Monetary aggregates and rates:
  - Broad money growth (y/y): 5.2 (2014) → 1.5 (2015) → 11.7 (2016 proj.).
  - Base money grew by 9.1 percent in 2015; benchmark 91-day Treasury bill rate: 1.67 percent (end-2014) → 1.92 percent (end-December 2015).
  - Real interest rate turned positive in 2015 due to deflation.
- Policy guidance:
  - Monetary policy should remain accommodative while inflationary pressures remain contained; staff recommends flexibility in exchange rate to help adjustment to external shocks and preserve reserves.

### Banking sector health and vulnerabilities
- Capitalization and profitability:
  - CARs averaged 23.9 percent as of December 2015.
  - Return on assets: 2.7 percent (end-2014) → 0.6 percent (end-December 2015).
- Asset quality and provisioning:
  - NPLs: 6.0 (2013) → 8.6 (2014) → 11.5 (end-December 2015).
  - Provisioning declined from 69.5 percent of NPLs (end-December 2013) to 38 percent (end-December 2015); regulations require 20 percent provisioning when loan secured by collateral.
  - Staff highlights delayed provisioning, slower accumulation of risk-weighted assets, and strong noninterest income as cushions to CARs.
- Prudential concerns and recommendations:
  - Tighten provisioning requirements.
  - Tighten large exposure limits and restrict related party lending.
  - Strengthen loan classification rules and expand stress testing to include collateral value shocks.
  - Improve supervision perimeter; include credit unions under central bank supervision; strengthen coordination of supervision for insurers and banks in same business groups.
  - FSAP mission to visit Guyana in May to provide granular analysis and assist with prudential toolkit.

### AML/CFT and correspondent banking
- AML/CFT developments:
  - AML/CFT Amendment Act enacted in 2015; amended bill passed in December 2015 redefining ‘beneficial ownership’ and requiring customer identity verification when establishing a business relationship.
  - FATF-identified strategic deficiencies remain: freezing assets framework, operational financial intelligence unit, effective customer due diligence; judicial discretion in freezing assets remains an issue.
  - Authorities plan to upgrade AML/CFT framework to international standards in the first half of 2016 and act on World Bank technical assistance.
- Correspondent banking:
  - Close to half of correspondent banks originate from the Caribbean.
  - Only two banks experienced terminations prior to 2013; two largest banks are foreign-owned, which may attenuate de-risking vulnerability.
  - Staff urges accelerated implementation of the action plan agreed with the FATF.

### Fiscal policy recommendations and structural priorities
- Fiscal consolidation and debt sustainability:
  - Build fiscal buffers and implement consolidation to safeguard debt sustainability and preserve fiscal and external buffers while maintaining growth momentum.
  - Focus consolidation on moderating growth of current expenditures, particularly transfers to public enterprises, to preserve space for public investment while protecting social spending.
  - Narrowing the deficit by 1.5 percent of GDP in 2017–21 through current expenditure reductions would largely stabilize debt, reducing debt in 2021 to 53 percent of GDP compared to 60 percent in the baseline.
- Revenue measures:
  - Broaden the revenue base and strengthen tax administration; caution against counting on unmaterialized revenue gains from enforcement before they materialize; avoid further tax exemptions in expectation of improved collection.
  - Review tax exemptions and VAT application to improve effectiveness.
- Public investment and public enterprises:
  - Maintain quality of public investment; select projects for financial feasibility, productivity impact, and social considerations.
  - Continue reforms of public enterprises, notably sugar and electricity companies; transfers to GuySuCo were equivalent to 1.8 percent of GDP in 2015 and budgeted at about 1.3 percent of GDP for 2016.
- Debt management and financing:
  - Favor concessional external funding and grants; caution on non-concessional and domestic borrowing which could crowd out private credit and raise interest rates.
  - Authorities envisage issuing longer-term domestic bonds to develop domestic capital markets; staff supports with caution.
  - Staff welcomes authorities’ exclusion of possible future oil income from medium-term plans.

### External Balance Assessment (Annex I) — findings and implications
- REER and EBA-lite:
  - REER appreciated by approximately 18 percent during July 2014–January 2016.
  - EBA-lite suggests current account deficit broadly in line with its norm; REER appropriate.
  - Staff’s preliminary analysis: current account deficit gap of 1.1 percent of GDP in 2015, which would require REER appreciation of 4.2 percent; policy gap: 1.0 (percent of GDP); CA elasticity to REER: -0.3; current account norm: -5.7 (percent of GDP); current account balance: -4.6 (percent of GDP); exchange rate gap (percent): -4.2.
- Policy implications:
  - Some nominal exchange rate flexibility together with fiscal consolidation would help contain prospective import growth, boost export competitiveness, and build buffers against external shocks.
  - Limit spending and shift expenditure from wages and transfers toward capital; allow higher capital imports if financed by increased FDI.

### Debt Sustainability Analysis (DSA) — key results and risks
- Recent debt dynamics:
  - Total public sector debt declined from 96 percent of GDP in 2006 to 48.6 percent in 2015.
  - NFPS deficit declined from 8.6 percent of GDP in 2005 to 0.2 percent of GDP in 2015.
- Baseline projections and vulnerabilities:
  - Baseline projects public debt-to-GDP rising to about 60 percent by 2021 and 75 percent by 2036 absent consolidation.
  - PV of external debt-to-GDP rises to 28 percent in the long run.
  - Debt service would rise to 6 percent of revenue in the medium term; stress tests show vulnerability to extreme shocks.
- DSA numeric highlights (selected):
  - PV of external PPG debt-to-GDP (baseline): 2016: 21; 2021: 22; 2026: 25; 2036: 28.
  - Debt service-to-exports (baseline, percent): 2016: 3; 2021: 6; 2026: 7; 2036: 8.
  - Debt service-to-revenue (baseline, percent): 2016: 6; 2021: 6; 2026: 9; 2036: 12.
- Sensitivity and bound tests:
  - One-time 30 percent depreciation (B6) materially increases PV debt-to-GDP (e.g., 2021: 29; 2026: 35; 2036: 40).
  - Alternative A2 (new public sector loans on less favorable terms) raises PV debt-to-GDP to 32 (2026) and 42 (2036).
- Policy recommendations from DSA:
  - Stronger fiscal consolidation to reverse upward debt trajectory.
  - Continue borrowing on highly concessional terms.
  - Monitor PSIP closely to ensure financial viability and productivity gains.
  - Improve debt management and limit non-concessional borrowing.

### Key statistics (selected)
- Real GDP growth: 4.8 (2012), 5.2 (2013), 3.8 (2014), 3.0 (2015 est.), 4.0 (2016 proj.).
- Inflation, end of period: 3.5 (2012), 0.9 (2013), 1.2 (2014), -1.8 (2015 est.), 2.1 (2016 proj.).
- Broad money (annual percent change): 11.5 (2012), 3.8 (2013), 5.2 (2014), 1.5 (2015), 11.7 (2016 proj.).
- Revenue and grants (percent of GDP): 25.6 (2012), 24.6 (2013), 23.6 (2014), 28.1 (2015), 28.8 (2016).
- Expenditure (percent of GDP): 30.2 (2012), 28.3 (2013), 29.3 (2014), 28.3 (2015), 34.3 (2016).
- Overall NFPS balance after grants (percent of GDP): -4.6 (2012), -3.6 (2013), -5.7 (2014), -0.2 (2015), -5.5 (2016).
- Total public sector gross debt (percent of GDP): 62.5 (2012), 57.2 (2013), 51.2 (2014), 48.2 (2015), 51.7 (2016).
- Current account balance (percent of GDP): -11.6 (2012), -13.3 (2013), -10.8 (2014), -4.6 (2015), -2.5 (2016).
- FDI, net (percent of GDP): 10.3 (2012), 7.2 (2013), 8.3 (2014), 3.8 (2015), 5.6 (2016).
- Nominal GDP at market prices (US$ million): 2,854 (2012), 2,990 (2013), 3,078 (2014), 3,164 (2015), 3,335 (2016 proj.).
- Selected DSA projections (public sector gross debt, percent of GDP, baseline): 2014: 51.9; 2015: 48.6; 2016: 52.3; 2017: 53.8; 2018: 53.9; 2019: 56.3; 2020: 57.9; 2021: 59.9.

### Risks and Staff priority actions
- Downside risks: depressed commodity export prices; sluggish global growth; continued slowdown in China; strong U.S. dollar; heightened financial stability risks from rising NPLs; de-risking by correspondent banks.
- Upside risks: higher than expected gold production; earlier development of oil deposits.
- Staff priority actions:
  - Start consolidation in 2017 to preserve fiscal buffers; aim to reduce deficit by about 1.5 percent of GDP over 2017–21 relative to authorities’ plans.
  - Tighten provisioning requirements and strengthen supervision; accelerate AML/CFT reforms and implement FATF action plan.
  - Preserve concessional borrowing and monitor non-concessional and domestic borrowing risks.
  - Advance structural reforms in electricity, transportation, telecommunications; invest in renewable energy, infrastructure, and human capital to remove bottlenecks and promote inclusive growth.

*International Monetary Fund staff report for the 2016 Article IV Consultation (Guyana).*

### 5.7 percent in 2014. Despite the slowdown, revenues as a share of GDP increased by

### _cr16216 - 5.7 percent in 2014. Despite the slowdown, revenues as a share of GDP increased by

### Recent developments
- Real GDP growth: 3 percent in 2015, down from 3.8 percent in 2014 and an average of 5 percent during 2010-13. Growth was supported by the opening of two new large gold mines in Q4 2015 (without them, 2015 growth would have been 2.3 percent).
- Inflation: Consumer prices contracted by about -1.8 percent (y/y) as of December 2015. Twelve-month inflation is expected to remain low at around 2.1 percent by year-end 2016.
- Current account and reserves:
  - Current account deficit narrowed from 10.8 percent of GDP in 2014 to 4.6 percent in 2015.
  - Reserve coverage: Gross international reserves stood at 3.6 months of imports at end-2015; reserve coverage projected to increase to 3.8 months of imports at end-2016. Table shows Gross official reserves (months of imports): 3.5 (2014), 3.6 (2015), 3.9 (2016 proj.).
- Fiscal developments:
  - NFPS overall balance after grants: -5.7 percent (2014) → -0.2 percent (2015) → -5.5 percent (2016 proj.).
  - Primary balance: -4.7 percent (2014) → 0.8 percent (2015) → -4.5 percent (2016 proj.).
  - Revenue and grants: 23.6 percent of GDP (2014) → 28.1 percent (2015) → 28.8 percent (2016 proj.).
  - Expenditure: 29.3 percent of GDP (2014) → 28.3 percent (2015) → 34.3 percent (2016 proj.).
  - Total public sector gross debt: 51.2 percent of GDP (2014) → 48.2 percent (2015) → 51.7 percent (2016 proj.).
  - Notable drivers in 2015: revenues increased by 4.2 percentage points of GDP, buoyed by fuel excises and one-off non-tax revenue; capital expenditures declined by nearly 30 percent due to election-related budget delays; transfers to GuySuCo remain a fiscal drag.
- Financial sector indicators:
  - Bank capital adequacy ratios averaged 23.9 percent as of December 2015.
  - Nonperforming loans increased to 11.5 percent of loans at end-December 2015 from 6 percent at end-December 2013.
  - Credit to the private sector: 9.1 percent (2014) → 6.2 percent (2015) → 6.0 percent (2016 proj.).
  - Average lending rate: 10.9 percent (2014) → 10.6 percent (2015).
- External financing and oil:
  - Exxon Mobil discovery of oil estimated on the order of 700 million barrels; commercial production is not expected within the medium-term.
  - PetroCaribe disbursements fell after Venezuela suspended the agreement with Guyana in July 2015.

### Outlook and projections (2016 and medium-term)
- Growth projected at 4 percent in 2016, supported by public investment and two new large gold mines.
- Current account deficit projected to remain at about 4½ percent of GDP in 2016, financed by investment inflows and donor-supported investment.
- Reserve cover projected to increase to 3.8 months of imports at end-2016.
- Monetary stance: monetary policy should remain accommodative as lower prices for imported goods, including fuel, continue to ease inflationary pressures.
- Fiscal stance: 2016 budget envisages an overall NFPS deficit of 5.5 percent of GDP, driven by a 4 percentage point increase in the share of capital spending and a 2.1 percentage point increase in the share of current spending in GDP. Revenues are projected to remain broadly flat.

### Executive Board assessment and staff recommendations
- Commendations and concerns:
  - Directors commended the resilience of Guyana’s economy and welcomed the positive medium-term outlook under an environmentally sustainable and socially inclusive growth strategy.
  - They noted vulnerability to commodity price changes due to dependence on imported oil and concentration of exports on a few commodities.
- Fiscal policy recommendations:
  - Build fiscal buffers and implement fiscal consolidation to safeguard debt sustainability and preserve fiscal and external buffers while maintaining growth momentum.
  - Focus fiscal consolidation on moderating the growth of current expenditures, in particular transfers to public enterprises, to preserve space for public investment while protecting social spending.
  - Broaden the revenue base and strengthen tax administration.
- External and exchange rate policy:
  - Exchange rate appears broadly in line with fundamentals; exchange rate flexibility should play a larger role in helping Guyana cope with external shocks and preserving external reserves.
- Financial sector recommendations:
  - Heightened vigilance due to rising nonperforming loans; recommend tightening provisioning requirements, tightening large exposure limits, restricting related party lending, and strengthening loan classification rules.
  - Strengthen the AML/CFT framework to address remaining deficiencies and implement the agreed action plan with the Financial Action Task Force.
  - Look forward to more granular analysis of financial sector challenges by the upcoming FSAP mission.
- Structural reforms:
  - Advance reforms to promote competition and improve the business climate, including reforms in electricity, transportation, and telecommunications to lower costs and raise productivity.
  - Continue reforms of public enterprises, notably sugar and electricity companies, to improve efficiency and reduce reliance on government support.
  - Invest in renewable energy projects, infrastructure, and human capital to remove structural bottlenecks and make growth more sustainable and inclusive.

### Key statistics (selected from tables and text)
- Real GDP growth: 4.8 (2012), 5.2 (2013), 3.8 (2014), 3.0 (2015 est.), 4.0 (2016 proj.).
- Inflation, average: 2.4 (2012), 2.2 (2013), 1.0 (2014), -0.3 (2015 est.), 0.1 (2016 proj.).
- Inflation, end of period: 3.5 (2012), 0.9 (2013), 1.2 (2014), -1.8 (2015 est.), 2.1 (2016 proj.).
- Broad money: 11.5 (2012), 3.8 (2013), 5.2 (2014), 1.5 (2015), 11.7 (2016 proj.).
- Revenue and grants (percent of GDP): 25.6 (2012), 24.6 (2013), 23.6 (2014), 28.1 (2015), 28.8 (2016).
- Expenditure (percent of GDP): 30.2 (2012), 28.3 (2013), 29.3 (2014), 28.3 (2015), 34.3 (2016).
- Overall NFPS balance after grants (percent of GDP): -4.6 (2012), -3.6 (2013), -5.7 (2014), -0.2 (2015), -5.5 (2016).
- Total public sector gross debt (percent of GDP): 62.5 (2012), 57.2 (2013), 51.2 (2014), 48.2 (2015), 51.7 (2016).
- Current account balance (percent of GDP): -11.6 (2012), -13.3 (2013), -10.8 (2014), -4.6 (2015), -2.5 (2016).
- FDI, net (percent of GDP): 10.3 (2012), 7.2 (2013), 8.3 (2014), 3.8 (2015), 5.6 (2016).
- External debt (percent of GDP): 47.7 (2012), 41.8 (2013), 39.5 (2014), 36.1 (2015), 36.0 (2016).
- Nominal GDP at market prices (US$ million): 2,854 (2012), 2,990 (2013), 3,078 (2014), 3,164 (2015), 3,335 (2016 proj.).

*International Monetary Fund staff report for the 2016 Article IV Consultation (Guyana).*

### 10. The budget projects a moderate increase in revenue supported by improved tax

### _cr16216 - 10. The budget projects a moderate increase in revenue supported by improved tax

### Revenue and fiscal stance
- Revenues are projected to remain broadly stable as a share of GDP in 2016.
- Revenue-lowering measures envisaged:
  - exemptions from excise taxes for newer vehicles.
  - a 10 percent increase in the threshold for nontaxable income.
  - a decline in fuel excise taxes amounting to a 10 percent reduction in gasoline prices.
- Offsetting measures and improvements:
  - planned removal of some discretionary tax exemptions.
  - measures to improve tax efficiency, enforcement and compliance to boost revenue.
- One-off non-tax revenue event in 2015:
  - government transferred excess cash balances from statutory agencies and the Lotto Fund amounting to about 1.4 percent of GDP, resulting in a large one-off increase in non-tax revenues.

### Monetary policy and liquidity
- BoG monetary policy goals: price stability and provision of adequate liquidity for credit expansion and economic growth.
- BoG operational approach:
  - targets broad money.
  - manages liquidity through open market operations.
- Monetary aggregates and rates:
  - Growth in broad money (y/y) slowed to 1.5 percent in 2015 from 5.2 percent in 2014.
  - Credit to the private sector expanded at 6.2 percent in 2015, down from 9.1 percent in 2014.
  - Base money grew by 9.1 percent in 2015, driven mainly by banks’ increasing excess reserves.
  - Benchmark 91-day Treasury bill rate increased to 1.92 percent at end-December 2015 from 1.67 percent a year earlier.
  - The real interest rate turned positive in 2015 and is higher than the nominal rate due to deflation.
- Foreign exchange and reserves:
  - decline in international oil prices tempered demand for foreign exchange in 2015.
  - exchange rate versus the U.S. dollar remained broadly unchanged despite limited central bank intervention.

### Banking sector health
- Nonperforming loans (NPLs) and profitability:
  - NPLs increased to 11.5 percent of loans at end-December 2015 from 6 percent at end-December 2013.
  - NPLs are concentrated in the business sector.
  - Returns on assets fell from 2.7 percent at end-2014 to 0.6 percent at end-December 2015.
- Capital adequacy and provisioning:
  - CARs averaged 23.9 percent as of December 2015 (regulatory minimum: 8 percent).
  - Provisioning declined from 69.5 percent of NPLs at end-December 2013 to 38 percent at end-December 2015 (regulations require 20 percent provisioning when the loan is secured by collateral).
  - Delayed provisioning of NPLs, slower accumulation of risk-weighted assets, and strong noninterest income have cushioned CARs.
- Other vulnerabilities:
  - Related party lending is a source of vulnerability.

### Correspondent banking and AML/CFT
- De-risking:
  - Close to half of Guyana’s correspondent banking providers originate from the Caribbean.
  - Only two of Guyana’s banks experienced terminations on their correspondent bank relationships, which took place prior to 2013.
  - Two of the largest banks are foreign-owned, which may attenuate vulnerability to de-risking.
- AML/CFT actions and remaining deficiencies:
  - AML/CFT Amendment Act enacted in 2015; amended AML/CFT bill passed in December 2015 redefined ‘beneficial ownership’ and required customer identity verification when establishing a business relationship.
  - FATF-identified strategic deficiencies remain, including implementing an adequate framework for freezing assets, establishing an operational financial intelligence unit, and performing effective customer due diligence.
  - Framework continues to fall short of the action plan agreed with the FATF, including judicial discretion in freezing assets.

### Outlook and risks
- Growth projections:
  - Baseline: growth increases to 4 percent in 2016, supported by recovery in public investment and gold mines that began production in late 2015, projected to contribute 1.7 percentage points to growth.
  - Growth projected at 3.8 percent during 2017–21.
  - Inflation turns positive in 2016 but remains modest.
- External balance and reserves:
  - Underlying current account deficit projected to remain at 4½ percent of GDP in 2016.
  - Revival of border dispute with Venezuela led to cessation of rice-for-oil trade in July 2015, decreasing the value of rice exports by about 2 percent of GDP.
  - Current account deficit projected to average about 7.2 percent of GDP in 2017–21.
  - Reserve cover projected to increase from 3½ months at end-2015 to about 5 months at end-2021.
  - Note: Approximately $40 million in grants from the European Union are projected for 2016, which will improve the current account.
- Fiscal sustainability and debt dynamics:
  - Authorities indicated fiscal deficit expected to remain between 5 and 6 percent of GDP over the medium term.
  - Debt-to-GDP ratio projected to rise from about 49 percent in 2015 to 60 percent by 2021 under the stated fiscal stance.
  - Risk of debt distress estimated to remain moderate in the medium-term but will rise without fiscal consolidation.
- Risks:
  - Downside: depressed commodity export prices, sluggish global growth, continued slowdown in China, strong U.S. dollar, heightened financial stability risks from rising NPLs, de-risking by correspondent banks.
  - Upside: higher than expected gold production; sooner than expected development of recently-discovered oil deposits.

### Policy discussions — Fiscal policy recommendations
- Main policy objective: maintain fiscal and debt sustainability while boosting growth.
- Staff recommendations and findings:
  - Moderate current expenditure growth to avoid crowding out space for public investment.
  - Non-interest current expenditures projected to rise by 16.0 percent in 2016, driven by double-digit increases in wages, transfers and goods and services.
  - A more moderate increase in public sector wages would pose smaller risks and attenuate competitiveness pressures.
  - Reduction in transfers, particularly to public enterprises, recommended; narrowing the deficit by 1.5 percent of GDP in 2017–21 through a reduction in current expenditures would largely stabilize debt, reducing debt in 2021 to 53 percent of GDP compared to 60 percent in the baseline.
  - Welcome progress on public enterprise reforms; transfers to GuySuCo were equivalent to 1.8 percent of GDP in 2015 and budgeted at about 1. 3 percent of GDP for 2016.
  - Maintain quality of public investment: carefully select projects considering financial feasibility, productivity impact, and social considerations.
  - Caution against counting on revenue gains from improved enforcement before they materialize; further tax exemptions should not be granted in expectation of improved revenue collection.
  - Broadening the tax base by reviewing tax exemptions and reviewing the VAT to improve its effectiveness.
  - Caution against increases in non-concessional debt; projected deficits financed by a mix of concessional external funding and grants, and domestic borrowing.
  - External financing of about 5½ percent of GDP expected (in line with recent historical experience excluding PetroCaribe).
  - Authorities envisage issuing longer-term domestic bonds to develop domestic capital markets; staff supports but cautions that significant increases in domestic borrowing could crowd out private credit and raise domestic interest rates.
  - Staff welcomes authorities’ exclusion of possible future oil income from medium-term plans; oil revenues not factored in given likely non-materialization in the medium-term.

### Authorities’ views (summarized)
- Plan to strengthen tax administration; expect revenue decreases from some measures to be small and offset by improved administration.
- Expect stronger growth over the medium-term to raise revenue.
- Intend to solicit CARTAC support and staff technical advice to review VAT application since inception.
- Large increase in current expenditure attributed to one-off reclassification changes and an adjustment in wages; authorities expect wage growth to moderate.
- Committed to restructuring public enterprises (GuySuCo restructuring; one underperforming sugar estate targeted for closure; planned budget transfers for 2016 reduced by 25 percent).
- GPL: improved financial performance partly due to low oil prices; further network modernization expected under a new IDB/EU project; tariffs ensure cost recovery.
- Will continue to refrain from non-concessional external borrowing and seek donor financing for major public investment projects on concessional terms.
- Interest in mobilizing private funding including PPPs and developing long-term domestic debt instruments; welcome technical advice on debt market development.
- Reiterate not factoring possible future oil income in medium-term plans.

### Projections table (selected figures from baseline and active scenarios)
- Baseline projections:
  - Real GDP growth (in percent): 2014: 3.8; 2015: 3.0; 2016: 4.0; 2017: 3.9; 2018: 3.8; 2019: 3.8; 2020: 3.8; 2021: 3.8.
  - Overall balance after grants (percent of GDP): 2014: -5.7; 2015: -0.2; 2016: -5.5; 2017: -5.5; 2018: -5.0; 2019: -5.0; 2020: -5.0; 2021: -5.0.
  - Capital expenditure (percent of GDP): 2014: 8.0; 2015: 4.7; 2016: 7.5; 2017: 7.4; 2018: 8.2; 2019: 8.2; 2020: 7.9; 2021: 7.8.
  - Public sector debt-to-GDP: 2014: 51.9; 2015: 48.6; 2016: 52.3; 2017: 53.8; 2018: 53.9; 2019: 56.3; 2020: 57.9; 2021: 59.9.
- Active scenario projections:
  - Real GDP growth (in percent): 2014: 3.8; 2015: 3.0; 2016: 4.0; 2017: 3.3; 2018: 3.6; 2019: 3.8; 2020: 3.8; 2021: 3.8.
  - Overall balance after grants (percent of GDP): 2014: -5.7; 2015: -0.2; 2016: -5.5; 2017: -4.0; 2018: -3.5; 2019: -3.5; 2020: -3.5; 2021: -3.5.
  - Capital expenditure (percent of GDP): 2014: 8.0; 2015: 4.7; 2016: 7.5; 2017: 7.4; 2018: 8.2; 2019: 8.2; 2020: 7.9; 2021: 7.8.
  - Public sector debt-to-GDP: 2014: 51.9; 2015: 48.6; 2016: 52.3; 2017: 52.3; 2018: 51.0; 2019: 52.0; 2020: 52.4; 2021: 53.2.

*From: _cr16216 - 10. The budget projects a moderate increase in revenue supported by improved tax*

### 31. The authorities noted that the exchange rate is market determined. Exchange rate

### _cr16216 - 31. The authorities noted that the exchange rate is market determined. Exchange rate

### Exchange rate and stability
- The authorities noted that the exchange rate is market determined.
- Exchange rate stability reflects the confidence that market participants have in the currency and the economy needs that confidence.
- Over the past year, exchange rate depreciation was modest, with the central bank making net purchases of foreign exchange.
- Staff view: "Exchange rate flexibility should play a larger role in facilitating adjustment to external shocks."
- Staff assessment: The exchange rate is broadly in line with fundamentals and "it should play a stronger automatic stabilizer role going forward."

### Monetary policy stance and transmission
- With inflationary pressures muted, the monetary policy stance should remain accommodative.
- Lower prices for imported goods, including fuel, continue to restrain inflation despite the expansionary fiscal policy.
- Monetary policy has traction, with private credit playing an important role in the monetary transmission mechanism.
- With the implementation of the new credit reporting act, banks will gradually have access to better information on borrower’s creditworthiness, which should:
  - boost high-quality lending,
  - help reduce lending rates,
  - reduce banks’ excess reserves.
- Recommendation: As long as inflationary pressures remain contained, a more accommodative monetary policy stance, with base and broad money growing above nominal GDP, remains appropriate.
- Authorities’ views:
  - The authorities agreed that the monetary policy stance should remain accommodative.
  - They will continue to monitor movements in international prices and their impact on inflation and growth.
  - In addition to open market operations, they plan to manage liquidity through foreign-exchange market intervention.
- Staff caution: Authorities should stand ready to tighten monetary conditions if inflationary pressures arise.

### Financial sector structure and vulnerabilities
- The financial sector is dominated by commercial banks:
  - Three foreign banks and three local banks, whose combined assets correspond to about 70 percent of financial sector assets, and are equivalent to 68 percent of GDP.
  - The largest bank is Trinidad-based, followed by a domestic bank, accounting for 40 and 22 percent of commercial bank assets, respectively.
  - The domestic bank plays a relatively large role in lending to businesses, and is the bank with the highest share of NPLs.
- Among non-bank financial institutions:
  - The New Building Society (NBS) is the largest entity, accounting for about 7 percent of financial sector assets and over a quarter of non-bank financial institution assets.
- Foreign exchange and interest rate risk:
  - Vulnerabilities to foreign exchange and interest rate risks appear limited.
  - A depreciation of the exchange rate would improve the financial position of the overall banking system since banks in aggregate carry net long positions in foreign exchange (84 percent of capital and reserves as of December 2015).
  - Interest rate risks are mitigated by banks’ ability to adjust interest rates on existing loans, though higher interest burden on debtors can increase credit risk.
  - Banks are exposed to credit risk in their CARICOM securities.
  - Stress tests suggest weaker banks are vulnerable to downgrades on their investment portfolio.

### Capitalization, nonperforming loans, and prudential concerns
- Banks remain well capitalized, but heightened vigilance is warranted due to increases in NPLs.
- Since the 2006 FSAP, insurance companies and the NBS were brought under central bank supervision; staff supports plans to include credit unions under central bank supervision.
- Banking system aggregate capital appears well positioned to absorb an increase in provisioning up to the levels observed prior to the recent rise in NPLs without breaching the prudential threshold of 8 percent, but individual banks with higher NPLs have weaker buffers.
- Provisioning rules:
  - While all banks meet provisioning requirements, only 20 percent provisioning is required when the loan is secured by collateral.
  - Staff note that collateral can be difficult to seize and its value may decline following aggregate or sectoral shocks, suggesting a case for tighter requirements from a macroprudential perspective.

### Strengthening supervision and regulatory recommendations
- Staff recommendations to address risks from loan concentration, related party lending, loan classification weaknesses, collateral valuation, and realization challenges:
  - Tighten provisioning requirements.
  - Tighten large exposure limits.
  - Impose restrictions on related lending.
  - Tighten loan classification rules.
- Stress-testing enhancements:
  - Expand the stress testing toolkit to include shocks to loan collateral values.
  - Take into account inter-linkages among economic sectors, borrowers, and financial entities.
- Additional recommendations:
  - Improve coordination of supervision of insurers and banks within the same business group.
  - Continue monitoring risks from global banks’ de-risking activity.
- Implementation support:
  - An FSAP mission will visit Guyana in May to provide a more granular analysis and assist with strengthening the prudential toolkit.

### Anti-Money Laundering and Combating the Financing of Terrorism (AML/CFT)
- Recent steps towards strengthening the AML/CFT framework are welcome, but remaining deficiencies should be addressed promptly.
- Authorities are urged to accelerate the implementation of the action plan agreed with the Financial Action Task Force.
- Authorities’ planned actions:
  - Upgrade the AML/CFT framework to international standards in the first half of 2016.
  - Receive and act on technical assistance from the World Bank.
  - Continue monitoring global banks’ de-risking decisions and consider potential solutions with CARICOM.

### Structural policies to raise productivity and inclusive growth
- Focus areas supported by the mission:
  - Improvements in infrastructure, human capital, and financial inclusion to promote inclusive growth.
  - Integrating remote hinterland areas via transportation, access to electricity, social services, and agency banking.
- Productivity-enhancing reforms:
  - Lower production costs in sugar and rice sectors.
  - Leverage renewable energy resources to reduce electricity costs (electricity costs are among the highest in the region).
  - Improve connectivity of small green-technology electricity generators to the grid.
  - Promote business outsourcing, telecommunications and ICT services for diversification.
  - Increase statutory retirement age to help place the National Insurance Scheme on a more sustainable footing and contribute to higher potential output.
- Business climate:
  - World Bank’s 2015 Doing Business Report ranked Guyana 137th out of 189 countries in ease of doing business.
  - 2015–16 World Economic Forum’s Global Competitiveness Report ranked Guyana 121st out of 140 countries in competitiveness.
  - Key bottlenecks: access to electricity and credit, resolving insolvencies, transport infrastructure, electricity, telecommunications, institutional quality, ICT, and innovation.
  - Public investment program can help relieve structural bottlenecks and raise productivity.
- Authorities’ initiatives:
  - Commitment to renewable energy projects, noting a memorandum of understanding with a private company for a 25 megawatt wind farm.
  - Energy policies to draw on IDB’s comprehensive analysis of the country’s energy matrix.
  - Mini hydro stations and solar panels expected to play a central role in hinterland electrification.
  - Projects to bridge the divide between the coastal area and the hinterland; four hinterland communities selected for township development.
  - Plans to liberalize the regulatory framework for telecommunications and ICT services and increase airlift supply to promote tourism and non-traditional exports.

### Staff appraisal — key macroeconomic assessments and recommendations
- Growth and outlook:
  - In 2015, real GDP grew at 3 percent.
  - Growth is projected to increase to 4 percent this year, supported by the level effect of two new large gold mines, and an increase in public investment.
- Public investment:
  - The public investment program can promote environmentally sustainable and socially inclusive growth and help address high costs of electricity, transportation and telecommunications.
- Oil prices and vulnerability:
  - Lower oil prices narrowed the current account deficit and improved the fiscal balance through higher excise revenues and reduced electricity subsidies.
  - Oil prices remain uncertain and can suddenly reverse; oil represents a major source of fiscal and external vulnerability, particularly after termination of PetroCaribe financing.
- Fiscal policy:
  - Moderation of the fiscal policy stance is needed to preserve fiscal and external buffers.
  - Sizable deficits of 5 to 6 percent of GDP in the medium-term would imply a large increase in debt and raise sustainability concerns.
  - Staff recommends starting consolidation in 2017 to preserve fiscal buffers for use when adverse shocks materialize.
  - Staff recommends a reduction in the fiscal deficit by 1.5 percent of GDP for 2017–21, compared to the authorities’ current plans, to largely stabilize the debt to GDP ratio over the medium-term.
  - Consolidation should limit the growth of current expenditure and reduce public enterprises reliance on government support.
  - Expenditure measures can be complemented by improvements in tax administration and review of tax exemptions to broaden the tax base.
- Debt and financing:
  - The largely concessional nature of the debt is an important source of resilience and should be preserved.
  - Non-concessional financing should be approached with care, including domestic borrowing which can drive up interest rates.
- Monetary policy reaffirmed:
  - The monetary policy stance should remain accommodative while inflationary pressures remain contained.
- Financial sector vigilance:
  - Banks remain well capitalized, but heightened vigilance is warranted due to increases in nonperforming loans.
  - Scope exists for tightening provisioning requirements including for collateralized loans, large exposure limits, restrictions on related lending, and loan classification rules.
  - An FSAP mission will visit Guyana in May to provide a more granular analysis and assist authorities with the prudential toolkit.
- AML/CFT:
  - Authorities should address remaining deficiencies promptly and accelerate implementation of the FATF-agreed action plan.

*Source: IMF staff report content provided in the supplied PDF excerpt.*

### 56. Staff recommends that the next Article IV consultation with Guyana be held on the

### _cr16216 - 56. Staff recommends that the next Article IV consultation with Guyana be held on the

### Growth and inflation
- Real GDP growth: 2012: 4.8; 2013: 5.2; 2014: 3.8; 2015: 3.0; 2016 (proj.): 4.0; 2017 (proj.): 3.9.
- Real GDP per capita growth: 2012: 4.5; 2013: 4.8; 2014: 3.4; 2015: 2.6; 2016 (proj.): 3.7; 2017 (proj.): 3.5.
- Consumer prices (average): 2012: 2.4; 2013: 2.2; 2014: 1.0; 2015: -0.3; 2016 (proj.): 0.1; 2017 (proj.): 2.1.
- Consumer prices (end of period): 2012: 3.5; 2013: 0.9; 2014: 1.2; 2015: -1.8; 2016 (proj.): 2.1; 2017 (proj.): 2.1.
- Staff observations: Growth momentum slowed in 2015, driven by a slowdown in investment and lower commodity prices; inflation remained subdued.

### Real sector and commodities
- Sectoral notes: slowdown in public construction pushed down real GDP growth; share of sugar recovered in 2014–15; rice agreement with Venezuela was suspended in the second half of the year and is likely to reduce future output.
- Commodity production indices (index: 2007=100): shown for Rice, Bauxite, Gold, and Nominal GDP (figures presented visually in source).
- Nominal GDP (G$ billion): 2015: 653.3; 2016 (proj.): 692.1; 2017 (proj.): 735.1.
- Per capita GDP, US$: 2015: 4,125; 2016 (proj.): 4,335; 2017 (proj.): 4,545.
- Staff observation: Low commodity prices remain a drag on nominal GDP.

### External sector
- Current account balance (US$ millions): 2012: -330.0; 2013: -397.9; 2014: -331.3; 2015: -144.2; 2016 (proj.): -107.1; 2017 (proj.): -209.9; 2018 (proj.): -232.7; 2019 (proj.): -292.1; 2020 (proj.): -344.6; 2021 (proj.): -325.7.
- Current account (percent of GDP): 2012: -11.6; 2013: -13.3; 2014: -10.8; 2015: -4.6; 2016 (proj.): -3.2; 2017 (proj.): -6.0.
- Exports (f.o.b., US$ millions): 2012: 1,415.5; 2013: 1,375.9; 2014: 1,167.7; 2015: 1,169.9; 2016 (proj.): 1,223.7; 2017 (proj.): 1,329.5.
- Imports (c.i.f., US$ millions): 2012: 1,996.7; 2013: 1,847.3; 2014: 1,737.9; 2015: 1,474.9; 2016 (proj.): 1,541.4; 2017 (proj.): 1,714.6.
- Fuel and lubricants imports (US$ millions): 2012: 638.0; 2013: 574.7; 2014: 573.4; 2015: 350.8; 2016 (proj.): 317.7; 2017 (proj.): 407.0.
- Gross official reserves (US$ millions, end period): 2012: 855.6; 2013: 776.9; 2014: 665.6; 2015: 598.5; 2016 (proj.): 666.9; 2017 (proj.): 804.8.
- Months of imports of goods and services: 2012: 4.1; 2013: 4.0; 2014: 3.5; 2015: 3.6; 2016 (proj.): 3.8; 2017 (proj.): 4.2.
- Staff observations: The sharp decline in international oil prices in 2015 helped narrow the current account deficit by reducing the value of fuel imports; exports have been on a declining trend due to lower commodity prices; remittances remain a relatively stable source of foreign exchange; FDI and official capital transfers were subdued in 2015; the PetroCaribe agreement was discontinued.

### Fiscal sector and public debt
- Nonfinancial public sector revenue and grants (percent of GDP): 2012: 25.6; 2013: 24.6; 2014: 23.6; 2015: 28.1; 2016 (proj.): 28.8; 2017 (proj.): 26.4.
- Expenditure (percent of GDP): 2012: 30.2; 2013: 28.3; 2014: 29.3; 2015: 28.3; 2016 (proj.): 34.3; 2017 (proj.): 31.9.
- Overall balance after grants (percent of GDP): 2012: -4.6; 2013: -3.6; 2014: -5.7; 2015: -0.2; 2016 (proj.): -5.5; 2017 (proj.): -5.5.
- Capital expenditure (percent of GDP): 2012: 10.7; 2013: 8.6; 2014: 8.2; 2015: 5.7; 2016 (proj.): 9.6; 2017 (proj.): 8.3.
- Public sector debt (total gross, percent of GDP, end period): 2012: 63.7; 2013: 57.9; 2014: 51.9; 2015: 48.6; 2016 (proj.): 52.3; 2017 (proj.): 53.8.
- External public sector debt (percent of GDP): 2012: 47.7; 2013: 41.8; 2014: 39.5; 2015: 36.1; 2016 (proj.): 36.0; 2017 (proj.): 35.5.
- Memorandum: Nominal GDP at market prices (G$ billion): 2015: 653.3; 2016 (proj.): 692.1; 2017 (proj.): 735.1.
- Staff observations and recommendation: Fiscal performance improved in 2015 due to a decline in capital expenditures and savings from low oil prices; current expenditure has increased as a share of GDP; fiscal savings net of grants would decline in the medium term; persistently large primary deficits in the medium term would increase public sector debt; fiscal measures are needed to rebuild fiscal buffers and put public debt on a declining trajectory.

### Financial sector and banking system
- Banking system soundness indicators (selected):
  - Capital to risk-adjusted assets and capital to total assets: banks remain well capitalized.
  - Provision for loan loss to total loans and NPLs to total loans: provisioning for NPLs is falling behind; asset quality is deteriorating.
  - Return on equity and return on assets: banks' profitability weakened significantly in 2015.
  - Liquid assets to total assets and customer deposit to total loans: banks remain liquid.
  - Top 20 borrowers to total loans: credit concentration has remained stable.
- Selected numeric indicators (Table 6 / Table 5 excerpts):
  - Share of nonperforming loans in total loans: 2012: 6.0; 2013: 6.0; 2014: 8.6.
  - Loan loss provisions to nonperforming loans: 2012: 73.1; 2013: 69.5; 2014: 45.4.
  - Risk-based capital-asset ratio (end of period): 2012: 19.3; 2013: 21.2; 2014: 21.8.
  - Return on assets: 2012: 2.4; 2013: 2.6; 2014: 2.7.
- Staff observations and recommendations: The banking system is well capitalized and liquid but asset quality and profitability deteriorated rapidly in 2015; increase loan loss provisions; strengthen risk-based supervision; implement macroprudential regulations; contingency planning and crisis resolution framework.

### Monetary developments
- Broad money (annual percent change): 2012: 11.5; 2013: 3.8; 2014: 5.2; 2015: 1.5; 2016 (proj.): 11.7; 2017 (proj.): 15.6.
- Base money (annual percent change): 2012: 12.8; 2013: 2.7; 2014: 10.2; 2015: 9.1; 2016 (proj.): 5.9; 2017 (proj.): 6.2.
- Domestic credit of the banking system (annual percent change): 2012: 7.5; 2013: 25.8; 2014: 20.5; 2015: 17.6; 2016 (proj.): 17.5; 2017 (proj.): 12.2.
- Private sector credit growth (percent): 2012: 20.1; 2013: 14.5; 2014: 9.1; 2015: 6.2; 2016 (proj.): 6.0; 2017 (proj.): 6.0.
- Credit growth slowed sharply in 2015, particularly to businesses, while mortgage lending remained relatively stable.
- Interest rates: lending and Treasury bill rates remained broadly stable over the period shown.
- Staff observation: Monetary conditions are broadly supportive of growth.

### Social indicators (selected)
- Population, 2015 (thousands): 767.
- Life expectancy at birth (years), 2014: 66.
- Population not using an improved water source (%), 2010: 6.0.
- Under-five mortality rate (per 1,000 live births), 2010: 30.
- Gini index, 1992–2007: 44.6.
- Population living below the poverty line (%), 2000–06: 35.
- HDI rank, 2014: 124.

### External financing and macro framework
- Financing requirement (US$ millions): 2012: 471.5; 2013: 383.1; 2014: 298; 2015: 168; 2016 (proj.): 250; 2017 (proj.): 388.
- Available financing components (selected, US$ millions): NFPS loans, private sector net flows, official transfers, etc., shown in Table 5.
- Memorandum oil price assumption (US$/b): 2012: 105.0; 2013: 104.1; 2014: 96.2; 2015: 50.8; 2016 (proj.): 34.8; 2017 (proj.): 41.0.

### Risks Assessment Matrix (selected risks and policy responses)
- Significant China slowdown — Likelihood: L/M; Impact: H. Policy response: Greater exchange rate flexibility to absorb external shocks.
- Surge in the U.S. dollar — Likelihood: H; Impact: M. Policy response: Greater exchange rate flexibility to stem real appreciation and attenuate impact on current account deficit.
- De-risking of global banks leading to loss of correspondent banking services — Likelihood: H; Impact: H. Policy response: Implement the action plan agreed with the FATF; strengthen customer due diligence; consider temporary mechanisms involving public support, including subsidizing correspondent banks; collectively approach potential correspondent banks with other Caribbean countries.
- Larger than expected slowdown in key sectors and losses/contingencies at public enterprises — Likelihood: M; Impact: M. Policy response: Allow automatic stabilizers to work; fiscal consolidation/restructuring of problem enterprises; medium-term expenditure framework.
- Significant deterioration in domestic banks’ credit portfolio — Likelihood: H; Impact: M. Policy response: Increase loan loss provisions; strengthen risk-based supervision; macroprudential regulations; contingency planning and crisis resolution framework.

*Source: _cr16216 - 56. Staff recommends that the next Article IV consultation with Guyana be held on the (IMF staff report content provided).*

### Annex I. External Balance Assessment

### Annex I. External Balance Assessment

### Real Effective Exchange Rate (REER)
- The REER appreciated by approximately 18 percent during July 2014–January 2016, notwithstanding modest nominal depreciation relative to the US dollar.
- The REER appreciation largely reflects developments in the value of the US dollar—which the Guyanese dollar follows closely—against the Euro and other major currencies.
- Guyana’s exchange rate regime is a de facto stabilized arrangement.

### EBA-lite Assessment and Model Results
- Staff used the EBA-lite template to assess external stability in Guyana.
- The EBA-lite estimation results are sensitive to the terms of trade, which developed favorably in 2015 and led to a narrowing of the current account deficit.
- Model based estimates suggest that the current account deficit is broadly in line with its norm and that the real exchange rate is appropriate.
- Staff’s preliminary analysis suggests:
  - current account deficit gap of 1.1 percent of GDP in 2015, which would require real exchange rate appreciation of 4.2 percent.
  - policy gap: 1.0 (percent of GDP).
  - CA elasticity to REER: -0.3.
  - current account norm: -5.7 (percent of GDP).
  - current account balance: -4.6 (percent of GDP).
  - exchange rate gap (percent): -4.2.

### Medium-Term Projection and Risks
- Staff’s baseline medium term projection envisages a substantial widening of the current account deficit to about 8 percent due to:
  - expansionary fiscal policies, and
  - the projected recovery in oil prices.
- Higher imports of capital and intermediate goods would be desirable when underpinned by increased FDI inflows.
- The REER appreciation during July 2014–January 2016 occurred despite modest nominal depreciation relative to the US dollar.

### Policy Implications and Recommendations
- Some flexibility in the nominal exchange rate together with fiscal consolidation would help:
  - contain prospective import growth,
  - boost export competitiveness, and
  - build buffers against potential external shocks.
- Discussions highlighted the need to limit spending, notably due to sustainability considerations, while shifting expenditure from wages and transfers toward capital.
- Allowing higher imports of capital and intermediate goods is appropriate if financed by increased FDI.

### Key Statistics and Metrics (as reported)
- REER appreciation: approximately 18 percent (July 2014–January 2016).
- Current account gap (2015): 1.1 percent of GDP.
- Required REER appreciation (per staff analysis): 4.2 percent.
- Policy gap: 1.0 (percent of GDP).
- CA elasticity to REER: -0.3.
- Exchange rate gap (percent): -4.2.
- Current account norm: -5.7 (percent of GDP).
- Current account balance: -4.6 (percent of GDP).

*Source: _cr16216 - Annex I. External Balance Assessment.*

### 2.      The work of the World Bank is aligned along the two main areas of the CAS.

### 2.      The work of the World Bank is aligned along the two main areas of the CAS.

### Strengthening Environmental Resilience and Sustainability
- Two active flood risk management projects:
  - IDA funded Flood Risk Management Projects: $11.9 million, supporting the reduction of vulnerability of coastal areas to flooding of coastal areas.
  - Grant funded (Guyana REDD + Investment Fund – GRIF) Cunha Canal Rehabilitation Project: US$3.7 million, approved in December 2015.

### Improving the Quality of Education
- Three projects to improve education quality:
  - Guyana Secondary Education Improvement Project (IDA loan): US$10 million.
  - University of Guyana Science and Technology Support Project (IDA loan): US$13.7 million.
  - Early Childhood Education: grant funded by the Global Partnership for Education.

### Financial Sector Support
- Financial Sector Reform and Strengthening Initiative (FIRST) grant to the Bank of Guyana: US$0.5 million.

### IDA Financing Notes
- Guyana’s total IDA 16 allocation for FY12–14: 14.3 SDR/US$21.9 million.
- IDA 17 indicative allocation for FY15–17: 16.5 SDR/US$22.7 million.
- Financing to Guyana is usually done at concessionary rates and channeled through IDA and trust funds.

### Statement of World Bank Projects (As of February 22, 2016) — key figures (In millions of U.S. dollars)
- Guyana Secondary Education Improvement (loan): Original Principal 10.0; Disbursed 7.4; Available 1.6.
- UG Science and Technology Support (loan): Original Principal 13.7; Disbursed 7.2; Available 5.2.
- GY Flood Risk Management (loan): Original Principal 11.9; Disbursed 8.0; Available 2.6.
- Total: Original Principal 35.6; Disbursed 22.6; Available 9.4.
- Note: Amounts may not add up to Original Principal due to changes in the SDR/US exchange rate since signing.

### Disbursements and Debt Service (Calendar Year)
- Total disbursements by year: 2006: 12.6; 2007: 2.6; 2008: 5.7; 2009: 8.3; 2010: 3.0; 2011: 0.9; 2012: 1.1; 2013: 2.0; 2014: 2.4; 2015: 7.2; 2016*: 0.4.
- Repayments by year: 2006: 2.0; 2007: 0.1; 2008: 0.1; 2009: 0.1; 2010: 0.1; 2011: 0.1; 2012: 0.1; 2013: 0.2; 2014: 0.3; 2015: 0.2; 2016*: 0.0.
- Net disbursements by year: 2006: 10.5; 2007: 2.5; 2008: 5.5; 2009: 8.2; 2010: 2.9; 2011: 0.8; 2012: 1.0; 2013: 1.8; 2014: 2.2; 2015: 6.9; 2016*: 0.4.
- Interest and fees by year: 2006: 0.9; 2007: 0.1; 2008: 0.1; 2009: 0.1; 2010: 0.1; 2011: 0.1; 2012: 0.08; 2013: 0.08; 2014: 0.1; 2015: 0.1; 2016*: 0.0.
- * January–February 2016

---

### Relations with the Inter-American Development Bank (IDB)

### 2016 Highlights
- Net cash flow was negative in 2015 for the first time in the last decade. With respect to loans, this trend is expected to continue in 2016.
- From the 2014–2015 Fund for special operations allocation period, a total of $1.7 million for 3 Technical Cooperation (TC) projects was approved to support the collection of data and enhance data gathering capabilities in Guyana. Among these TCs is one for the design and execution of a survey of living conditions, which has not been undertaken in Guyana since 1992.

### 2016 Program and Expected Approvals
- Country Strategy (CS) for Guyana 2012-2016 in final year of implementation; new CS preparation at preliminary stage. Potential new priority areas: social sectors, agriculture and private sector development.
- Projects expected to be approved in 2016:
  - GY-L1044: Modernization of the Justice Administration System — 8.0 (US$ million)
  - GY-L1058: Support to Improve Maternal and Child Health — 5.0 (US$ million)
  - GY-L1059: Enhancing the National Quality Infrastructure for Diversification and Trade Promotion — 9.0 (US$ million)
  - GY-L1060: Sustainable Agricultural Development Program — 18.0 (US$ million)
  - Total 2016: 40.0 (US$ million)

### Technical Cooperation (TC) and Small and Vulnerable Countries Funding
- Three new TCs scheduled for approval in 2016:
  - GY-T1120: Institutional Strengthening to Guyana Social Safety Net
  - GY-T1121: Improving the Delivery and Outcomes of Maternal and Child Health Services
  - GY-T1122: Women Community Based Groups for Rural Road Maintenance
- 2016 allocation of US$1.76 million received for Guyana under the Small and Vulnerable Countries Funding is yet to be programmed.

### Portfolio in Execution (as of February 2016) — key figures
- Active investment portfolio: nine investment loan projects for an approved amount of US$167.5 million; two investment loans co-financed with EU/CIF grant resources for US$96.25 million; one loan guarantee for US$2.5 million; and four investment grant projects for US$19.41 million.
- Total approved amount: US$285.66 million; total undisbursed balance: US$200 million.
- Recent portfolio changes in 2015:
  - Exited projects: GY-L1019 (Second Low Income Program, approved: US$27.9 million) and GY-0055 (Georgetown Solid Waste Management, approved: US$18.1 million).
  - GY-L1025 (Georgetown Sanitation Improvement Program, approved: US$9.5 million) extended 6 months; to be closed in 2016.
  - Wrap up activities ongoing for GY-L1006 (Support for Competitiveness Program, approved: US$48.7 million).
  - GY-L1028 (Expansion and Integration of Basic Nutrition, undisbursed balances US$3.1 million) reformulated in December 2015 to support hinterland housing.
- Four new TCs added in 2015 from FSO allocation for Small and Vulnerable Countries:
  - GY-T1114: Support to Statistical Capacities of Guyana — US$0.4 million
  - GY-T1118: Design and Execution of a Labor Force Survey in Guyana — US$0.4 million
  - GY-T1119: Execution of Crime and Victimization Survey — US$0.15 million
  - GY-T1117: Design and Execution of a Household Survey of Living Conditions — US$0.75 million

### Net Loan Flows and Outstanding Debt
- Net loan flows projected negative in 2016 due to repayments higher than expected disbursements.
- As of 31 January 2016, Guyana’s total outstanding debt to the IDB: US$488,044,005.
- Projected negative net flows for 2016: US$4.06 million (table excludes projected disbursement of investment grants).
- If projected disbursement amount of $5.56 million of the two major investment grants were included, result would be, although low, a positive net flow for 2016.

### Main Portfolio Indicators as at February 2016
- Investment Loans in Execution:
  - Number: 11
  - Available balance (US$ million): 151.2
  - Percent available balance of total investment portfolio: 63.77
  - Median age of portfolio (years): 4.1 years
- Performance Index (No. of investment projects: 12):
  - Problem (0-0.4): 3
  - Alert (0.4-.0.8): 2
  - Satisfactory (>0.8): 3
  - N/A: 4
- MIF in Execution:
  - Number: 3
  - Undisbursed balance (US$ million): 2.4
- TC and Investment Grants in Execution:
  - Guyana TCs (number): 11
  - Undisbursed balance (US$ million): 9.8
  - Investment grants (Number): 6
  - Undisbursed balance (US$ million): 48.9
- Note: Excludes the fully disbursed PBL: GY-L1043.

### IDB Historical and Projected Cash Flow Indicators (selected rows, US$ million)
- a. Loan Disbursements (annual): 2011: 51.7; 2012: 51.4; 2013: 58.5; 2014: 26.2; 2015: 14.7; 2016 (p): 15.2.
- b. Repayments (principal): 2011: 2.1; 2012: 2.5; 2013: 4.5; 2014: 5.3; 2015: 8.1; 2016 (p): 10.0.
- c. Net Loan Flow (a-b): 2011: 49.6; 2012: 48.9; 2013: 54.0; 2014: 20.9; 2015: 6.6; 2016 (p): 5.2.
- e. Interests and Charges: 2011: 4.8; 2012: 5.3; 2013: 6.4; 2014: 7.4; 2015: 8.4; 2016 (p): 9.3.
- f. Net Cash Flow (c-d-e): 2011: 44.4; 2012: 43.1; 2013: 47.6; 2014: 13.5; 2015: -1.8; 2016 (p): -4.1.

### Loans and Investment Grants in Execution (as at February 15, 2016) — selected entries (In US$ millions)
- Loans (Total Loans: 11): Approved 219.4; Disbursed 70.7; % Disbursed 54%; Available 148.7.
- Total Loans, inclusive of Guarantee: 221.9; Disbursed 70.7; % Disbursed 54%; Available 151.2.
- Investment Grants (Total Investment Grants: 6): Approved 61.1; Disbursed 12.3; % Disbursed 38.3; Available 48.87.

---

### Relations with the Caribbean Development Bank (CDB) (As of December 31, 2015)

### CDB Overview and Guyana Exposure
- CDB accounts for over 20 percent of Guyana’s multilateral debt stock.
- Total loans approved for Guyana from CDB inception (January 26, 1970) to December 31, 2015: $298.3 million, representing 6.5 percent of CDB’s total approved lending, making Guyana CDB’s sixth largest borrower out of 19 borrowing member countries.
- Guyana’s cumulative grant approvals from CDB as of December 31, 2015: US$31.1 million (largest recipient after Haiti).

### Outstanding and Undisbursed Balances (as of December 31, 2015)
- Outstanding balances: $143.6 million.
- Undisbursed balances: $57.15 million.
- Summary table of approvals and undisbursed balances (In US$ million):
  - Enhancement of TVET (10-Dec-2008): Approved 7.50; Undisbursed 0.08.
  - Community Roads Improvement Program (22-Jul-2010): Approved 16.29; Undisbursed 0.16.
  - Fourth Road Project (12-Dec-2012): Approved 34.20; Undisbursed 21.65.
  - Sea and River Defense Resilience Project (12-Dec-2013): Approved 25.00; Undisbursed 24.96.
  - Sugar Mechanization Project (11-Dec-2014): Approved 7.50; Undisbursed 7.50.
  - Total Approved: 82.99; Total Undisbursed: 57.15.

### CSP Implementation and Pipeline
- Most interventions programmed in CDB’s 2013-17 Country Strategy Paper (CSP) for Guyana had been approved as of December 31, 2015 (e.g., Sea and River Defense Resilience Project: US$25 million; Sugar Mechanization Project: US$7.5 million).
- Other grants under the CSP totaled around $2.25 million as of December 31, 2015 (including BNTF 8).
- An uptick in approval activity anticipated from the latter half of 2016; project pipeline expanding and CSP being revised.

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### Statistical Issues (As of March 20, 2016)

### Assessment of Data Adequacy for Surveillance
- General: Data provided to the Fund is broadly adequate for surveillance purposes, although timeliness, reliability, and coverage of selected data can be improved. Selected data are only available during missions and upon request.
- Monetary statistics, exchange rates, interest rates, and financial prudential indicators: available with a lag from the Bank of Guyana (BOG) website.
- Ministry of Finance (MOF) provides macroeconomic and fiscal statistics in various publications on its website.
- Guyana subscribed to the General Data Dissemination System (GDDS) in 2011.

### National Accounts
- GDP rebased in 2010 with 2006 prices; resulted in a more than sixty percent increase compared to the old GDP (1988 prices).
- CARTAC missions helped strengthen production-side GDP compilation, rebasing, and medium-term projections.
- Further work suggested: compilation of expenditure-side GDP and quarterly GDP; increase coverage of surveys, particularly services sector.
- BOS adopted new household income and expenditure survey (HIES) since January 2010 and expanded CPI basket and revised weights; CPI coverage could be further broadened beyond Georgetown.
- Improvements needed in timeliness of labor market, gender and poverty statistics.

### Government Finance Statistics
- Technical assistance in 2014-15 on internal audit, tax administration, revenue forecasting, tariff classification, customs valuation, debt management, and medium-term fiscal projections.
- Need to improve definition and treatment of one-off nontax revenues in medium term projections.
- Authorities plan to continue improving tax administration and to build a framework for managing mineral revenues based on international best practices.
- Interest in technical assistance on developing a domestic long-term bond market.
- Fiscal statistics disseminated through MOF publications (Mid-Year Report, Budget Speech, etc.).

### Monetary Statistics
- BOG improved quality and institutional coverage of monetary statistics, now including BOG, other depositary corporations, and other financial corporations.
- BOG’s monetary statistics provide data for IFS Supplement based on standardized report forms.
- BOG publishes financial prudential indicators in its quarterly report and on its website regularly.

### Balance of Payments
- 2014 CARTAC mission identified data gaps and recommendations:
  - Develop register of large public and private enterprises for data collection on transactions and positions with nonresidents.
  - Improve data collection/compilation for services.
  - Include investment income from reserve assets.
  - Clarify classification of income accounts to ensure residency criteria.
  - Properly record debt forgiveness.
  - Survey direct investment enterprises.
- Mission initiated production of quarterly current and capital accounts according to BPM6 for March 2011 to September 2013, and experimental (partial) IIP statistics.
- BOG does not report the IIP due to lack of capacity; priority area for CARTAC technical assistance.

### Data Standards and Reporting
- Participant in GDDS since 2011.
- No data reported for publication in the Government Finance Statistics Yearbook.

### Table of Common Indicators Required for Surveillance (As of March 20, 2016) — selected entries
- Exchange Rates: Date of Latest Observation 30/09/13; Date Received 31/10/13; Frequency of Data D; Frequency of Reporting D; Frequency of Publication D.
- Consumer Price Index: Date of Latest Observation 12/15; Date Received 02/16; Frequency of Data M; Frequency of Reporting Half yearly; Frequency of Publication Monthly.
- Revenue, Expenditure, Balance and Composition of Financing – General Government: Date of Latest Observation 2015 Q4; Date Received 02/16; Frequency of Data Q; Frequency of Reporting Half yearly; Frequency of Publication Half yearly.
- GDP: Date of Latest Observation 2015; Date Received 02/16; Frequency of Data A; Frequency of Reporting A; Frequency of Publication A.
- International Investment Position: N/A for Date of Latest Observation; N/A for Date Received; Frequency of Data N/A; Frequency of Reporting N/A; Frequency of Publication N/A.

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### Debt Sustainability Analysis (DSA) — key findings
- Guyana’s risk of external debt distress remains moderate and debt service manageable.
- DSA update shows indicators of the risk of external debt distress remain under the relevant threshold despite some deterioration.
- Results: NPV of external debt to GDP reaches 28 percent of GDP over the medium term.
- Debt service would rise to 6 percent of revenue.
- Stress tests reveal vulnerability of public debt to extreme shocks.

*Source: IMF staff report and World Bank consultation materials as contained in the provided content unit.*

### 1.      Debt relief, PetroCaribe debt write-offs and fiscal consolidation efforts have helped

### 1.      Debt relief, PetroCaribe debt write-offs and fiscal consolidation efforts have helped

### Debt reduction and composition
- Total public sector debt declined from 96 percent of GDP in 2006 to 48.6 percent in 2015.
- Under the Multilateral Debt Relief Initiative (MDRI), the Fund, the World Bank, and the IDB provided debt relief amounting to US$611 million in 2006–07.
- Paris Club bilateral creditors and some non-Paris Club creditors granted debt relief as part of the 2004 Paris Club agreement.
- Negotiations with other non-Paris Club creditors are protracted; the debt in question amounts to around 15 percent of total debt or 7 percent of GDP.
- Part of the debt owed to Venezuela under the PetroCaribe agreement has been written off against Guyana’s rice exports.
- The non-financial public sector (NFPS) deficit declined from 8.6 percent of GDP in 2005 to 0.2 percent of GDP in 2015.
- Over the last six years, total gross public debt declined by about 19 percent of GDP.
- Debt-to-GDP ratio declined from 67 percent in 2009 to 48.6 percent in 2015.
- External debt declined from 46 percent of GDP to 36 percent; domestic debt declined from 21 percent of GDP to 12 percent.
- Main external creditors: Inter-American Development Bank, Caribbean Development Bank, International Development Association.
- Debt has a long maturity profile and low average interest rates.

### PetroCaribe and related arrangements
- Venezuela provided concessional loans under PetroCaribe to finance Guyana’s oil imports; the arrangement has stopped.
- Large portion of PetroCaribe disbursements were deposited in a Central Bank of Guyana account as a ‘sinking fund,’ which on a net debt basis has a smaller impact and increases gross reserves available to service external debt.
- Guyana repaid part of its PetroCaribe debt with rice exports and the accumulated savings under the financing arrangement.

### External debt thresholds and policy performance
- Guyana’s three-year average CPIA remained stable at 3.3, corresponding to a medium policy performance rating.
- Corresponding debt thresholds:
  - PV of debt-to-GDP ratio: 40 percent
  - PV of debt-to-exports ratio: 150 percent
  - PV of debt-to-revenue ratio: 250 percent
  - Debt service-to-exports and debt service-to-revenue ratios: 20 percent each

### Macroeconomic background and baseline assumptions
- Real GDP growth decelerated to 3 percent in 2015; projected to increase to 4 percent in 2016.
- Inflation projections: averaging 2 percent during the medium term and 3.5 percent on average during the long term.
- External current account deficit expected to widen to about 7percent of GDP on average in 2017–21 and remain approximately at that level in the long term.
- Gross international reserves projected to fall below the standard threshold (3 months of imports) in the long term without policy adjustment.
- NFPS deficit for 2015: 0.2 percent of GDP; expected to rise to 5.2 percent of GDP on average during 2016–21.
- Public debt stood at 48.6 percent of GDP in 2015.

### Baseline scenario projections and assumptions
- Medium-term growth: authorities’ plans and sectoral improvements will sustain growth of about 3.8 percent on average in 2017–2021 and through the medium term.
- Note: projection excludes the discovery of oil by Exxon Mobil, which could begin production as early as 2020; not accounted for as it is currently at an exploratory stage.
- Baseline fiscal consolidation expected to be insufficient; overall NFPS deficit projected to remain high at about 4.7 percent of GDP on average over the projection period.
- Gross public debt projected to increase to 60 percent and 75 percent of GDP by 2021 and 2036, respectively.
- Baseline does not assume any additional debt reduction through rice exports to Venezuela in 2016 and beyond.
- Primary deficit projected to decline from 3.8 percent in 2021 to 2.3 percent in 2036.

### Comparison with 2013 DSA
- Current DSA shows deterioration in long-run debt sustainability relative to the 2013 DSA, driven by a looser fiscal stance in the baseline.
- Public debt-to-GDP ratio in the current DSA reaches 75 percent by 2033 compared to 48.4 percent in the 2013 DSA, despite a significantly lower initial debt stock (about 10 percentage points of GDP).
- 2013 DSA assumed an average surplus of 1 percent during 2013-33; current DSA assumes continuation of current fiscal stance with an average fiscal deficit of 4.8 percent in the long-term.

### Assessment: Gross external debt
- External debt remains sustainable under the baseline; country faces a moderate risk of debt distress, but external debt ratios are vulnerable to shocks.
- PV of gross external debt-to-GDP ratio increases gradually to 28 percent in the long term (compared to 30 percent in the previous DSA).
- Improvement relative to 2013 DSA due mainly to lower projected disbursements in the long term.
- Debt service-to-exports and debt service-to-revenue ratios remain well below thresholds due to concessional nature of outstanding debt and new external borrowing in the near-term.
- Bound tests and alternative scenarios indicate vulnerability to large shocks:
  - PV of debt-to-GDP ratio breaches threshold in the event of a one-time 30 percent depreciation.
  - Stress tests suggest no breach of repayment-capacity thresholds, but debt service-to-exports and debt service-to-revenue ratios are higher compared to the previous DSA.
- Declining debt under the Historical scenario is driven by mechanical extrapolation of past debt forgiveness, which is unlikely to recur.

### Assessment: Gross public debt
- Risk of debt distress increases in 2020–21 and beyond.
- Nominal total debt-to-GDP ratio reaches the 60 percent threshold in 2021 and remains on an upward trajectory through 2036 absent fiscal consolidation.
- PV of the public sector debt-to-GDP ratio estimated to increase monotonically, reaching 61 percent of GDP in the long term.
- Fiscal consolidation is needed to place debt on a steadily downward path.
- Public debt is vulnerable to standard shocks; close monitoring of the Public Sector Investment Program (PSIP) is important to ensure projects are financially viable and increase productivity.
- PV of debt-to-GDP ratio is most vulnerable to shocks to GDP growth:
  - Assuming GDP growth at historical average minus one standard deviation, PV of debt-to-GDP ratio would increase to 47 percent in the medium term and 68 percent by 2036, which is 6 percentage points higher than the baseline.
- Debt service payments remain manageable overall because of high concessionality; however, in some scenarios debt service could increase to as much as 20 percent of revenues, significantly limiting resources for public investment and social spending.

### Policy implications and recommendations (implied by analysis)
- Pursue stronger fiscal consolidation to reverse projected upward trajectory of gross public debt.
- Continue borrowing on highly concessional terms to limit increases in external debt vulnerabilities.
- Monitor and ensure financial viability and productivity gains from PSIP projects to avoid exacerbating debt vulnerabilities.
- Maintain vigilance on exposure to terms of trade shocks and large exchange rate depreciations given export concentration and imported oil dependence.

*International Monetary Fund — Guyana staff report section on debt relief, PetroCaribe, fiscal consolidation, and debt sustainability*

### 14.      Guyana’s risk of debt distress remains moderate, but is rising. In the baseline

### 14. Guyana’s risk of debt distress remains moderate, but is rising. In the baseline

### Assessment of risk and main vulnerabilities
- Risk rating: moderate, but rising.
- Baseline: debt indicators remain well below respective thresholds over the projection period.
- Long-run projection: PV of external debt-to-GDP ratio increases to around 28 percent in the long run.
- Key vulnerabilities:
  - Concentration of exports on a few commodities (high terms-of-trade exposure).
  - Dependence on imported oil with large fiscal implications.
  - High sensitivity to shocks, notably:
    - New loans on less favorable terms.
    - One-time 30 percent depreciation.
- Concessionality: public borrowing is highly concessional, so debt service would remain manageable under baseline assumptions.
- Risks to public spending: under some scenarios and bound tests debt service could increase significantly, reducing resources for public investment and social spending.
- Policy implication: in light of plans to significantly increase expenditure, authorities should proceed with extreme caution and improve debt management.
- Financing concern: a significant increase in non-concessional debt, including domestic borrowing, may be needed to finance persistent deficits and would bring additional risks not captured in this LIC DSA that warrant close monitoring.
- Gross public debt: projected to reach 60 percent of GDP by 2021, a relatively high level that can bring heightened financing risks on the non-concessional component.

### Baseline projections and key quantitative indicators (selected)
- PV of external PPG debt-to-GDP (baseline): 
  - 2016: 21
  - 2021: 22
  - 2026: 25
  - 2036: 28
- PV of external PPG debt-to-exports (baseline):
  - 2016: 46
  - 2021: 48
  - 2026: 56
  - 2036: 78
- PV of external PPG debt-to-revenue (baseline):
  - 2016: 79
  - 2021: 91
  - 2026: 104
  - 2036: 124
- Debt service-to-exports ratio (baseline): 2016: 3, 2021: 6, 2026: 7, 2036: 8 (in percent)
- Debt service-to-revenue ratio (baseline): 2016: 6, 2021: 6, 2026: 9, 2036: 12 (in percent)
- Public sector gross debt (selected projected PV and levels):
  - PV of public sector debt (percent of GDP): rises from 33.4 (historical entries) to about 60.2–62.0 in projections; gross public debt projected at 60 percent of GDP by 2021.
- Key macroeconomic assumptions (baseline series, selected):
  - Real GDP growth: 2016: 5.2, 2017: 3.8, 2018: 3.0, 2019: 4.4, 2020: 1.4, 2021: 4.0, 2022-36 average: 3.8
  - Nominal GDP (Billions of U.S. dollars): 2016: 3.0, 2017: 3.1, 2018: 3.2, 2019: 3.3, 2026: 4.0, 2036: 8.7
  - Grant element of new public sector borrowing (in percent): shown across projections with values including 45.1, 46.4, 52.9, 34.4, and repeated series of 34.4 in later years.

### Sensitivity analysis and bound tests — notable outcomes
- Alternative scenarios and bound tests show high vulnerability; selected outcomes (PV of debt-to-GDP, PV of debt-to-exports, PV of debt-to-revenue):
  - Alternative A1 (key variables at historical averages, 2016-2036) — PV debt-to-GDP: 2016: 21, 2021: 22, 2026: 23, 2036: 26.
  - Alternative A2 (new public sector loans on less favorable terms, 2016-2036) — PV debt-to-GDP: 2016: 21, 2021: 21, 2026: 32, 2036: 42.
  - Bound test B6 (one-time 30 percent nominal depreciation relative to the baseline in 2017) — PV debt-to-GDP: 2016: 21, 2021: 29, 2026: 35, 2036: 40.
  - Bound test B2 (export value growth at historical average minus one standard deviation in 2017-2018) — PV debt-to-exports shows large increases (e.g., 2016: 79 baseline to 2018: 92 and higher under shocks), indicating severe sensitivity to export shocks.
- Debt service impacts:
  - Under less favorable new borrowing (A2) and large depreciations, debt service-to-revenue and debt service-to-exports ratios rise materially in projection years, constraining fiscal space.
- Rate and terms assumptions in sensitivity:
  - A2 assumes interest rate on new borrowing is by 2 percentage points higher than in the baseline, while grace and maturity periods are the same as in the baseline.
  - B6 defines depreciation as percentage decline in dollar/local currency rate (one-time 30 percent).

### Policy recommendations and fiscal/structural measures (authorities’ stance and staff advice)
- Authorities’ fiscal stance:
  - Commit to prudent fiscal policies; primary balance improved to a 0.8 percent of GDP surplus in 2015 from a 4.8 percent of GDP deficit in 2014.
  - NFPS deficit improved from 5.7 percent of GDP in 2014 to 0.2 percent of GDP in 2015.
  - Fiscal deficit projected to remain between 5 and 6 percent of GDP over the medium term given ambitious development agenda.
  - Authorities emphasize improving debt management and intend to refrain from utilizing non-concessional external borrowing; plan to mobilize private sector funding via well-designed PPPs.
- Recommended cautions and actions:
  - Proceed with extreme caution on plans to significantly increase expenditure — ensure projects are financially viable and raise productivity.
  - Improve debt management and closely monitor non-concessional and domestic borrowing risks.
  - Strengthen revenue mobilization (e.g., GRA operational efficiency, tax legislation amendments) and prudent, targeted expenditure to preserve fiscal sustainability.
- Structural and financial sector reforms supportive of resilience:
  - Strengthen institutions, public enterprise restructuring (GuySuCo); reforms at Guyana Power and Light (GPL) including a $50 million wind farm PPA expected to lower costs.
  - Energy strategy work with IDB; prioritize mini-hydro stations for hinterland electrification.
  - Financial sector: FSAP underway; move toward Basel II and eventually Basel III; expand supervision perimeter; roll out deposit insurance; pass revised insurance act by end-2016.
  - AML/CFT actions: pass legislation and guidelines on terrorism financing; aim to rectify outstanding deficiencies by end-June 2016; restructure Financial Intelligence Unit; conduct National Risk Assessment Exercise.
  - Structural initiatives to boost productivity and inclusion: infrastructure investment, diversification, labor participation, education and health improvements, data systems strengthening (Bureau of Statistics).

*Source: IMF staff and Guyanese authorities’ inputs as presented in the document.*

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_Source: https://www.imf.org/-/media/websites/imf/imported-full-text-pdf/external/pubs/ft/scr/2016/_cr16216.pdf_