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Press Release: IMF Executive Board Completes Guyana's Third Review Under a PRGF Arrangement and Approves US$14.1 Million Disbursement
January 25, 2005
The IMF Executive Board of the International Monetary Fund (IMF) has completed the third review of Guyana's economic performance under its SDR 54.55 million (about US$83.2 million) Poverty Reduction and Growth Facility (PRGF) arrangement, (see Press Releases No.02/42, Press Release No.03/152, and Press Release No. 04/160). Completion of the review makes a further SDR 9.27 million (about US$14.1 million) immediately available to Guyana under the arrangement.
The Executive Board approved Guyana's request for waivers on the non-observance of two end-September quantitative performance criteria, and three end-November structural performance criteria, as well as the continuous performance criterion on contracting of nonconcessional external debt. The Board has also approved the authorities' request to extend the arrangement to September 2006, and to rephase the remaining disbursements, including the one made available now, in four equal installments in the amount of SDR 9.27 (about US$14.1 million) each.
Following the Executive Board's discussion of Guyana on January 24, 2005, Takatoshi Kato, Deputy Managing Director and Acting Chair, stated:
"The Fund extends its sympathy to the people of Guyana for the losses suffered from the recent devastating floods.
"Guyana has made welcome progress in implementing its medium-term economic program. While economic growth has been weak in the face of a difficult domestic and external environment, macroeconomic stability has been achieved. Inflation is low, the exchange rate is stable, and the external debt is lower following the HIPC Initiative completion point. Nevertheless, there have been significant delays in moving ahead in a number of structural areas. Closer cooperation with the Fund will help ensure that program implementation remains on track.
"Although economic growth is expected to strengthen in the medium term, the economic outlook is subject to considerable risk associated with high world oil prices, the envisaged liberalization in EU sugar prices, and the forthcoming presidential elections. Managing these risks so as to boost economic growth to levels that will make a significant dent on poverty, while safeguarding medium-term external debt sustainability, will require steadfast implementation of the authorities' fiscal and structural reform program and the continued support of the international community.
"It will be especially important to place the public finances on a sustainable path by strengthening tax collections and containing public spending. Crucial measures in this regard will be the implementation of the value added tax by July 2006, establishment of strict limits on the wage bill, and careful selection of public sector investment projects to ensure their financial viability and consistency with the debt strategy. Consistent with the government's commitment to improving fiscal transparency and accountability, the authorities would be well advised to avoid the use of the Infrastructure Development Fund as a vehicle for extra-budgetary transactions.
"Achieving the program's growth and poverty reduction objectives requires the improvement of the investment climate. Overcoming existing structural impediments to private investment will involve improved governance, reduced financial intermediation costs, and measures to facilitate private sector development. Steps to streamline regulations for business registration, licensing, custom clearance, land title issuance, and the establishment of commercial courts will be critical. Directors look forward to the upcoming PRSP progress report with the objective to enhance the discussion and ownership of the program, strengthen monitoring of social expenditures, and help to attain the poverty reduction objectives," Mr. Kato stated.
The PRGF is the IMF's concessional facility for low-income countries. PRGF-supported programs are based on country-owned poverty reduction strategies adopted in a participatory process involving civil society and development partners, and articulated in a Poverty Reduction Strategy Paper, or PRSP. This is intended to ensure that each PRGF-supported program is consistent with a comprehensive framework for macroeconomic, structural, and social policies, to foster growth and reduce poverty. PRGF loans carry an annual interest rate of 0.5 percent, and are repayable over 10 years with a 5 ½-year grace period on principal payments.
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