Good news for the Government, bad news for the people – Jaipaul Sharma

Guyana’s upgrade to ‘Upper Middle Income’ economy…

After countless debates on Guyana’s economic growth, a recently released World Bank Classification report has revealed that the country’s economy jumped from being lower middle income to upper middle income from the period July 2015 to July 2016, and Junior Finance Minister Jaipaul Sharma has stated that while it is good news for the government, it is bad news for the people.

“It is good because it shows that the government has gained the confidence of the World Bank and indirectly the international community,” but pointed out that this would negatively impact how the country receives loans and concessions.
He stated that Guyana’s interest rate for borrowing will inevitably be higher: “It is good news for the government but bad news for the contractors because definitely the World Bank will say we do not qualify for certain categories of loans and other international bodies will follow suit,” he noted.
As of July 1, the World Bank signalled the change in Guyana’s classification, bringing the country up to par with China, Brazil, Jamaica and Venezuela, which recently fell from being a high income country.
According to the World Bank, countries are reassigned on July each year, based on the estimate of their Gross National Income (GNI) per capita for the previous calendar year.
Meanwhile, income grouping remain fixed for the entire fiscal year, even if GNI per capita estimates are being revised.
These countries are classified so that data users can aggregate, and group statistical data of interest, and for the presentation of key statistics. Its main classifications provided are by geographic region, by income group, and by the operational lending categories of the World Bank Group.
Economies are divided into four income groupings: low, lower-middle, upper-middle, and high, and their Income is measured using GNI per capita, in US dollars, converted from local currency using the World Bank Atlas method.
Lower-middle income economies are countries with a GNI per capita of between US$1026 and US$4035. Upper-middle income economies are the ones with between US$4036 and US$12,475, while high income economies are the ones with a GNI per capita of US$12,476 or more.
Sharma stated that the government will now be depending on taxpayers’ money to finance their projects. “…and the taxpayers will demand value for their money,” he added.
Sharma noted that the main criteria used by the World Bank to determine the economy’s income upgrade is the minimum wage, which is currently at the threshold of $50,000: “We fit the category of an upper middle income economy because when you convert that $50,000 to US and multiply it by 12 you would fit into that category.”
While reports are being pedalled that the sudden upgrade to upper-middle income is due to the discovery of oil offshore Guyana, Minister of State Joseph Harmon stated that the report might not have anything to do with the discovery since the country is not reaping any benefits as yet.
“Production hasn’t started, so it cannot be because we found oil. There has to be other factors that the Bank has noticed and took into account when making their assessment,” he said, noting that the Bank is very intense in its analysis while their reports are generally in-depth.
Recently, ExxonMobil made a massive discovery of oil and gas offshore Guyana in the Stabroek Block however the International Monetary Fund had suggested that production might begin until the next five years.
The discovery, along with the findings of the World Bank has placed Guyana on par with its oil-producing neighbour Venezuela, which was lately lashed with an economic crisis, riots, and food shortage. These factors may have been the reason for the country’s fall from being a high-income economy.
Nevertheless, Harmon stated that Guyana has to be mindful and remember that not everyone is enjoying the “sense of improvement”. So, he opined that the greatest challenge is to move the bulk of the people living in “unfavourable” conditions into a better situation, “so that they can be a part of that feel good” state of mind.
The majority of Guyana’s economic activity comes from agriculture and natural resources sectors. In 2015, the agriculture, forestry, fishing and mining industries accounted for 28 per cent of total Gross Domestic Product, while bauxite, sugar, rice, gold and timber made up 83 per cent of exports.