The most recent report released by the International Monetary Fund (IMF) after a visit here by a high-level team from that institution has once again vindicated the position of various stakeholders that the economy is in tatters and the coalition Government must act with haste if it were to lessen the impact its policy decisions, taken over the past months, would have on the masses.
The IMF, in its 2017 Concluding Statement detailing its findings on Guyana’s economic outlook, as part of its annual consultations under Article IV of the Articles of Agreement governing borrowing, noted that Guyana’s Gross Domestic Product (GDP) growth was uneven, buoyed by the new gold mines, while the non-mining sector saw a contraction.
The economic indicators are not very promising, and experts are predicting that the situation will even get worse if the necessary corrective actions are not taken immediately. So far, we have seen very little effort by the Government to stimulate growth in the economy. Instead, it has chosen to increase the burden on major sectors with a slew of tax measures and other policies that constrict their potential for growth.
The IMF statement referred to above has confirmed that the Government slavishly followed the recommendations of the Caribbean Regional Technical Assistance Centre (CARTAC) on extending the Value Added Tax (VAT) regime to crucial sectors, without regard to the social impact on citizens. In fact, we are witnessing almost daily the implementation of certain policies that hurt businesses and increase hardship on the average citizen.
Additionally, in the last year, there have been no major announcements regarding Foreign Direct Investments in Guyana, or any major job creation initiatives. The IMF has projected real economic growth of 3.5 per cent driven by an increase in public investment and a recovery in rice production. However, as stated before, most of the major sectors are declining, including rice, which recently saw one of the major players closing its doors after being in operation for 25 years.
Additionally, the increased borrowing by the Government has been a major point of concern, particularly over the last few months. The IMF has said that the debt-to-GDP ratio is projected to reach 61 per cent of GDP by 2019 and has recommended fiscal adjustments. However, Government continues to “bank on oil money”, as local authorities have informed the IMF that once oil production starts, the debt-to-GDP ratio will decrease.
The IMF has also noted the recent “increase in exchange rate flexibility”; however, Government has failed to acknowledge that there is a problem and advance measures to address the issue.
Most importantly, on the issue of the impending closure of more sugar estates, the IMF has reiterated previous calls from various stakeholders for careful decisions to be made about the future of the industry. Considering the fact that no economic and social impact assessments were carried out, the Government is being accused of basing its decisions regarding the future of the industry purely on politics. In this regard, the IMF has warned the Government to be “mindful of the large social impact” and the need “to protect those affected” by the process of change in the industry. Everyone knows that no matter how the authorities try to spin the issue, the resulting impact on individuals and communities would be quite significant and, perhaps, it would take decades before they fully recovered.
We had said before that the Government and GuySuCo’s management should have engaged in serious consultations with all stakeholders and do the necessary impact assessments before making such decisions. After all, this is people’s livelihoods that will be affected and they deserve to be fully engaged on what matters to them.
It could be recalled that in 2016, the IMF staff had urged the authorities to adopt a restructuring plan for the sector that will improve cost efficiency, productivity, and alternative revenue streams, drawing upon the reforms proposed by the Commission of Inquiry. At the time, the delegation had said that the scope and pace of reform should take into account social implications. This aspect was certainly ignored by the powers that be. We urge the Government to stop being in denial regarding the current crisis facing the country and rethink its policies in the interest of everyone.