IMF Executive Board Concludes Article IV Consultation with Guyana
IMF News, July 13, 2018
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- Published: July 13, 2018
Overview
- Press Release No. 18/293; July 13, 2018.
- On June 15, 2018, the Executive Board of the International Monetary Fund (IMF) concluded the Article IV consultation with Guyana and considered and endorsed the staff appraisal without a meeting.
- Economic growth slowed to 2.1 percent in 2017 from 3.4 percent in 2016, driven by lower than expected mining output and weak performance in the sugar sector, while non-mining growth rebounded to 4.1 percent in 2017.
2017 Macroeconomic Developments
- Growth and inflation:
- Real GDP growth: 2.1 percent in 2017 (3.4 percent in 2016).
- Non-mining growth: 4.1 percent in 2017.
- Inflation (end-2017): 1.5 percent; core inflation close to zero.
- External sector:
- Current account: deficit of 6.7 percent of GDP in 2017, down from a surplus of 0.4 percent in 2016.
- Gross reserve cover: 3.2 months of imports at end-2017.
- Financial account improved due to FDI, particularly in the oil and gas sector, and higher loan disbursements to the public sector.
- Fiscal and public debt:
- Central government deficit: around 4.5 percent of GDP in 2017.
- Tax revenue to GDP ratio increased by 1.2 percentage points in 2017.
- Non-tax revenue ratio declined by 0.4 percentage points in 2017.
- Public debt: 52.2 percent of GDP at end-2017.
- Financial sector:
- Credit to the private sector grew 2.1 percent in 2017.
- Banking system: profitable with adequate capital buffers.
- Non-performing loans (NPLs): 12.2 percent of total loans at end-2017 (down from 12.9 percent at end-2016).
Medium-term Outlook and Projections
- Oil and growth:
- Oil production expected to commence in 2020; additional discoveries improve medium- and long-term outlook.
- Real GDP growth projected: 3.4 percent in 2018 (driven by construction and rice sectors, and a recovery in gold mining).
- Current account projections:
- Current account deficit projected to narrow to 6.1 percent of GDP in 2018 and to 4.3 percent of GDP in 2019.
- Financing largely by FDI inflows and donor-supported investment.
- Fiscal projections:
- Central government deficit projected at 5.4 percent of GDP in 2018 and 5.1 percent of GDP in 2019 due to sugar sector restructuring and increased infrastructure-related capital expenditure.
- Public debt projected to rise in the short term before declining with the onset of oil production.
Executive Board Assessment and Policy Recommendations
- Overall assessment:
- Guyana’s macroeconomic outlook remains favorable; growth expected to accelerate ahead of oil production in 2020.
- Extractive industries and public investment will be key drivers of medium-term growth.
- Short-term financing and buffers:
- Short-term financing needs should be carefully managed.
- Authorities’ restraint towards borrowing in anticipation of future oil revenue is commended.
- Recommendation to rely as much as possible on Multilateral Development Banks, including non-concessional operations.
- Develop domestic capital markets to provide a stable source of financing and meet needs of domestic long-term institutional investors.
- Private external borrowing should continue to be avoided.
- Central bank financing should not be used; staff welcomed authorities’ intention to close overdraft balances at the central bank in the near-term.
- Saving one-off gains from the tax amnesty would reduce financing needs and help preserve external buffers.
- Fiscal policy and oil management:
- Improve quality and efficiency of government expenditure before scaling up public investment with oil revenues; address shortcomings identified by the PIMA.
- Review current expenditures to ensure maximum welfare and inclusion benefits.
- Establish a transparent rules-based fiscal framework for managing oil wealth consistent with resource fund deposit/withdrawal rules, for allocation of annual oil revenue to stabilization, domestic capital expenditure, and intergenerational savings.
- Consider fiscal responsibility legislation to reinforce consistency between fund rules and a fiscal rule.
- Monetary and exchange rate policy:
- Monetary policy should gradually revert towards a neutral stance as recovery gains pace and inflationary pressures arise.
- The exchange rate should play a more active role in cushioning external shocks.
- Build an adequate buffer stock of savings from oil revenues to cope with external shocks over the long-term.
- Financial sector reforms:
- Significant progress on 2016 FSAP recommendations, but further progress needed:
- Ensure internal consistency of supervisory function from routine supervision to intervention and resolution.
- Eliminate reduced provisioning requirements for “well-secured” portions of NPLs.
- Refine definition of “related parties” to align with international standards.
- Reduce reliance on overdraft lending.
- Clarify upstream and downstream ownership of institutions.
- Raise minimum capital adequacy requirement to 12 percent.
- Reduce banks’ large exposure limits.
- Competitiveness and inclusion:
- Prioritize enhancing competitiveness and supporting inclusive growth by lowering cost of doing business, addressing infrastructure bottlenecks, reducing energy costs, and cutting red tape.
- Increase female labor force participation and bridge gaps with the Hinterland to boost growth and widen benefits.
- Statistics and national accounts:
- Include oil exploration and production in the national accounts when rebased, and in the balance of payments statistics.
- Strengthen external sector statistics and compile an international investment position.
Key Social and Economic Indicators (selected figures preserved exactly as in source)
- I. Social Indicators
- Population, 2018 (thousands): 782
- Life expectancy at birth (years), 2015: 66.5
- Population not using an improved water source (%), 2015: 1.7
- Under-five mortality rate (per 1,000 live births), 2016: 32.4
- Gini index, 1998: 44.6
- Population living below the poverty line (%), 2000-06: 35
- HDI rank, 2015: 127
- II. Economic Indicators — Selected projections and levels
- Real GDP (annual percent change): 2014: 3.9; 2015: 3.1; 2016: 3.4; 2017: 2.1; 2018: 4.8; 2019: (not provided in table for 2019 under Real GDP)
- Real GDP per capita (annual percent change): 2014: 3.5; 2015: 2.7; 2016: 2.5; 2017: 0.1; 2018: 1.4; 2019: 4.5
- Consumer prices (average): 2014: 0.7; 2015: -0.9; 2016: 0.8; 2017: 2.0; 2018: 1.3; 2019: 2.9
- Consumer prices (end of period): 2014: 1.2; 2015: -1.8; 2016: 1.5; 2017: 2.2; 2018: 3.0
- Central government revenue (percent of GDP): 2014: 22.9; 2015: 24.6; 2016: 24.5; 2017: 26.0; 2018: 26.7; 2019: 27.6
- Central government expenditure (percent of GDP): 2014: 29.1; 2015: 27.0; 2016: 30.0; 2017: 32.1; 2018: 33.6; 2019: 34.1
- Central government overall balance (after grants) (percent of GDP): 2014: -5.5; 2015: -1.4; 2016: -4.4; 2017: -4.5; 2018: -5.4; 2019: -5.1
- Total public sector gross debt (percent of GDP): 2014: 51.9; 2015: 50.1; 2016: 50.7; 2017: 52.2; 2018: 57.0; 2019: 57.2
- External public debt (percent of GDP): 2014: 39.5; 2015: 35.7; 2016: 33.2; 2017: 35.5; 2018: 36.0; 2019: 32.8
- Domestic public debt (percent of GDP): 2014: 12.3; 2015: 14.4; 2016: 17.6; 2017: 16.7; 2018: 21.0; 2019: 24.4
- Broad money (annual percentage change, end of period): 2014: 3.3; 2015: 3.7; 2016: 5.4; 2017: -0.7; 2018: 10.7; 2019: 7.0
- Domestic credit of the banking system — public sector (net) (annual percentage change, end of period): 2014: 13.6; 2015: 34.4; 2016: 23.6; 2017: 0.4; 2018: 26.4; 2019: 22.3
- Current account balance (in millions of U.S. dollars): 2014: -291.5; 2015: -163.0; 2016: 13.2; 2017: -237.2; 2018: -220.2; 2019: -168.5
- Current account balance (percent of GDP): -9.5 (year not explicitly labeled in table); -6.7; -6.1; -4.3 (matching projections)
- Gross official reserves (in millions of U.S. dollars): 2014: 665.6; 2015: 598.5; 2016: 596.7; 2017: 584.6; 2018: 612.1; 2019: 631.6
- Nominal GDP (G$ billion): 2014: 635.4; 2015: 660.2; 2016: 723.6; 2017: 748.7; 2018: 780.0; 2019: 834.7
- Per capita GDP, US$: 2014: 4,030; 2015: 4,168; 2016: 4,531; 2017: 4,578; 2018: 4,649; 2019: 4,939
- Guyana dollar/U.S. dollar (period average): 2014: 206.4; 2015: 206.5; 2016: 210.3
Source: Press Release No. 18/293, IMF Executive Board conclusions on the 2018 Article IV Consultation with Guyana (July 13, 2018).
