The LCDS will conserve our forests and offer climate services to further develop our economy
Directors of the International Monetary Fund (IMF) have endorsed Guyana’s Low Carbon Development Strategy, saying that its successful implementation with international support will improve Guyana’s long-term growth prospects and reduce poverty.
But it warned that downside risks include those linked to fiscal pressures arising from lagging productivity at the Guyana Sugar Corporation (GuySuCo), the need to strengthen the finances of the National Insurance Scheme (NIS), and a possible fall-off in aid commitments. The multilateral lending institution also said that Guyana’s outlook remains positive for this year, noting that road projects, construction of a large hydropower plant at Amaila Falls (AFHP), and implementation of the LCDS should sustain growth levels above the long-term trend of three per cent, at around five per cent over the medium- term, before tapering off in 2015 as one-off projects are completed.
A view of a section of Guyana's rainforests at Iwokrama
In its latest staff report on Guyana, the IMF said that despite external and domestic shocks, the local economy demonstrated resilience and registered a fifth consecutive year of robust growth in 2010. Real Gross Domestic Product (GDP) expanded by around 3.4 per cent, slightly more than in 2009, supported by expansion in the gold and services sectors, which offset lower output in the sugar sector. End-of-year inflation rose to 4.4 per cent, from 3.7 per cent in 2009, reflecting higher food prices.
“Although the external current account deficit is estimated to have widened to 11.4 per cent of GDP, a steady inflow of public external financing and foreign direct investment was sufficient to finance the deficit and strengthen foreign reserves to the equivalent of five months of imports,” the IMF said.
In 2010, the overall fiscal balance is estimated to have weakened by close to one percentage point of GDP, to 4.3 per cent of GDP, due to weak performance in public enterprises, not fully offset by a decline in investment and despite strong central government revenues. According to the IMF, public debt was broadly unchanged, at 61 per cent of GDP.
Meanwhile, bank prudential indicators have remained stable, with banks generally liquid and well capitalised. In September 2010, the authorities started making payouts to Colonial Life Insurance Company (Clico) policy holders, in line with their plans to minimise fiscal costs. During 2010, structural reforms focused on improving the policy framework and supporting long- term growth. In the area of fiscal policy, efforts to improve the Guyana Revenue Authority (GRA) continued. Its new functional organisation was consolidated, improving further the integrated tax information system (TRIPS), the profiling of taxpayers, and on- site inspections at the country’s ports of entry.
Long- term growth
In support of long- term growth, the authorities continued their modernisation plans in the sugar industry, with the reorientation of cane fields to accommodate mechanisation. In the financial sector, the authorities passed the Credit Bureau Act, and widened the regulatory perimeter by bringing the New Building Society under the jurisdiction of the Bank of Guyana.
In the meantime, the directors of the IMF board also commended the authorities for macroeconomic policies that have supported resilience in the face of external and domestic shocks. They noted that the development of forestry-based environmental services, private sector plans for the exploitation of Guyana’s natural resources, and large infrastructure investments are supporting Guyana’s medium-term growth prospects. Directors said they welcomed the authorities’ continued commitment to fiscal prudence, and recommended contingency measures to mitigate risks from volatile grant disbursements. In this regard, a few directors called on the donor community to fulfill its development assistance commitments.
Directors noted that further strengthening the fiscal position calls for far-reaching reforms in the National Insurance Scheme and key public enterprises. They also encouraged the authorities to monitor carefully the fiscal risks associated with the construction of a large hydropower plant, advising the adoption of international best practices for public/ private partnerships.
Directors agreed that Guyana’s exchange rate regime has served the country well; but going forward, some directors supported a gradual approach towards greater exchange rate flexibility, while others considered the current policy to be appropriate.
