State of the economy
…due to few exports and oil imports
With Guyana’s balance of payments deficit on the rise, the International Monetary Fund (IMF) is warning of the need for the Government to be prepared for external shocks on the financial market.
This is contained in the report from the IMF Executive Board following the conclusion of its Article IV consultations. The report was released a few days ago. According to IMF, Guyana’s vulnerability is due to the reliance placed on so few exports.
“The exchange rate should play a more active role in cushioning external shocks going forward. Guyana remains vulnerable to external shocks given the concentration of its exports in a few commodities and its reliance on imported oil in the short term,” the group stated.
As it is, facilitating a robust commercial sector is crucial to enhancing not only traditional exports but opening up new export opportunities. According to the IMF, this should be a primary goal of the government.
“Enhancing competitiveness and supporting inclusive growth should remain a high priority. Greater efforts are needed to lower the cost of doing business by addressing infrastructure-related bottlenecks, reducing energy costs, and cutting red tape.”
“Increasing female labour force participation and bridging the gaps with the hinterland can boost growth and help spread its benefits more widely,” the IMF team also advised the Government.
Balance of payments
The balance of payments is statistical data on a country’s fiscal transactions, including imports and exports. To therefore record a deficit, Guyana would have had to spend more on imports, among other things, than it earned from exports.
According to the 2017 macro-economic report, Guyana’s overall balance of payment in the 2017 fiscal year showed a deficit of US$69.5 million. This is a hike when compared to US$53.3 million the previous year.
On the one hand, the current account shows a deficit of US$287.4 million for the year 2017. But in the previous fiscal year, the report notes, this was just US$12.4 million. The report admits that this is because of a negative balance on the merchandise trade account.
“The further weakening was due to the negative balance on the merchandise trade account. Merchandise exports were slightly lower than projected, mainly on account of lower export earnings of gold and other exports in the last two months of the year.”
When Finance Minister Winston Jordan presented the 2018 Budget last year, he had announced that merchandise imports were estimated to grow by 9.6 per cent. This had been attributed to increased imports of mining machinery, chemicals, fuel, and lubricants. According to the report, imports exceeded the Government’s projections.
“Imports were slightly more than the US$1.59 billion projected at the time of the presentation of the 2018 Budget. As a result, the merchandise trade deficit of US$196.2 million was considerably higher than the projected deficit of US$147.2 million.”
“Notwithstanding, the deficit on the services account was lower than estimated. The improvement in the services account more than offset the weaker balances on both the non-factor services and unrequited transfers accounts,” the report states.
