Press Release: IMF Approves Three-Year Arrangement Under the ESAF for Guyana

IMF News, July 15, 1998

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The IMF approved a three-year loan under the Enhanced Structural Adjustment Facility (ESAF) equivalent to SDR 53.76 million (about US$71 million) to support Guyana’s economic program for 1998–2001.
The first annual loan is SDR 17.92 million (about US$24 million), available in two equal semiannual installments, the first of them shortly.

Liberalization, privatization, structural reforms, and financial system strengthening achieved important progress in recent years.
Economic outcomes 1991–96:
- Average real GDP growth of 7 percent a year during 1991–96.
- Inflation decline from about 100 percent in 1991 to 4½ percent in 1996.
- Relatively stable exchange rate and strengthened balance of payments and international reserves.
1997 setback:
- Economic performance faltered in 1997 due to political disturbances surrounding the December elections, adverse effects of the El Niño weather phenomenon on agriculture, and deterioration in external terms of trade.
In December 1997 the IMF Executive Board determined Guyana qualified for assistance under the Initiative for Heavily Indebted Poor Countries (HIPC).

Program objectives for 1998–2001:
- Achieve average real GDP growth of about 4 percent a year.
- Reduce inflation to about 3.6 percent (period average).
- Narrow the external current account deficit while maintaining gross international reserves at the equivalent of 4–5 months of imports.
Main program elements:
- Reduction in the fiscal deficit.
- Tightening of credit policy.
- More flexible exchange rate policy.
- Continuation of structural reforms.
1998–99 specific assumptions and targets:
- Correct the 1997 growth slippage; assume slowdown in real GDP growth to about 3 percent in 1998 reflecting slow recovery in agricultural output.
- Period-average inflation of about 4.6 percent in 1998.
- Strengthen external position with accumulation of gross international reserves to maintain import cover at about 4½ months.
Fiscal measures to achieve objectives:
- Reduce overall public sector deficit from about 9 percent of GDP in 1997 to 2 percent of GDP in 1998.
- New revenue measures: sharp upward adjustment of fees and charges for government services; increase in taxes on tobacco and related products; strengthening tax administration.
- Central government expenditure reduced by 1½ percent of GDP through lower interest payments and cuts in capital expenditures in nonpriority areas.
- Credit policy remains restrained, consistent with inflation and balance of payments objectives.

Focus: reduce the role of the public sector and create an environment conducive to private sector development.
1998–99 priorities:
- Financial sector reform and improving the business environment.
- Restructuring public enterprises.
- Civil service reform.
Financial sector reforms include:
- Modernization of central bank operations — including reorganization, recapitalization, and increased autonomy — to improve capacity for monetary management.
Civil service reform emphasis:
- Rationalization and improvement of the remuneration structure to attract and retain skilled personnel.

The authorities emphasize maintaining appropriate social and environmental policies.
Social objectives and measures:
- Improve standards of living through increased emphasis on health and education and well-targeted poverty-reduction programs.
- Reforms developed with assistance from international financial institutions and other donors to raise enrollment rates in primary education.
- Reinvigorate primary health care through greater awareness campaigns and increased provision of essential drugs to low-income groups.
- Management of natural resources and improvement of urban areas are major concerns.

Remaining priorities:
- Further strengthen general administration of the central government.
- Increase public sector efficiency in service delivery.
- Expand social sector infrastructure to strengthen the foundation for lasting progress.

Guyana joined the IMF on September 26, 1966.
Guyana’s quota is SDR 67.2 million (about US$89 million).
Outstanding use of IMF financing currently totals SDR 30 million (about US$39 million).

Real GDP (percent change)
- 1996: 7.9
- 1997*: 6.2
- 1998**: 3.1
- 1999**: 4.4
- 2000**: 4.2
- 2001**: 4.9
Consumer prices (period average)
- 1996: 7.1
- 1997*: 3.6
- 1998**: 4.6
- 1999**: 4.5
- 2000**: 4.0
- 2001**: 3.5
Overall fiscal balance (deficit -) (percent of GDP)
- 1996: -3.2
- 1997*: -8.8
- 1998**: -2.0
- 1999**: -0.8
- 2000**: -0.1
- 2001**: 1.3
External current account balance, excluding official transfers (deficit -) (percent of GDP)
- 1996: -9.3
- 1997*: -14.5
- 1998**: -10.7
- 1999**: -10.4
- 2000**: -9.1
Gross official reserves (months of imports)
- 1996: 5.2
- 1997*: 4.7
- 1998**: 5.0

*Estimates. **Projections. Sources: Guyana authorities; and IMF staff estimates and projections.*

Press Release No. 98/29, July 15, 1998 — International Monetary Fund.