Guyana’s spending on basic services below regional average – IDB

– as 2017 to 2021 country strategy approved; Guyana to access US$86.1M

By Jarryl Bryan

Guyana’s 2017 to 2021 country strategy has been approved by the Inter-American Development Bank (IDB), opening access to some US$86.1 million in concessional financing. Guyana has a limited window of opportunity; however, as the Bank warned that with oil production, Guyana’s access to such financing will be a thing of the past.
The matter is particularly urgent, as the IDB noted in its report that despite favourable macro-economic growth, this has not been translated into better living

standards for Guyanese. According to the group in its country strategy report, Guyana spends less than the regional average on services for the ordinary public.
“Although recent data on income distribution and the incidence of poverty are unavailable, all other indicators suggest that growth has not been pro-poor, or inclusive. Despite its continuous increase since 1990, per capita income remains among the lowest in the English-speaking Caribbean, at US$7520 (Purchasing Power Parity) as of 2015.”
“The country’s Human Development Index score has not improved significantly when compared with Latin America and the Caribbean and has been consistently lower than the regional average since the 1990s. Today, the HDI score stands at 0.64 compared with 0.75 for LAC (Latin America, Caribbean).”
The IDB made a comparison with Guyana’s regional peers, noting that in health, the country spends US$222 per capita compared to an LAC average of US$694. In the case of education, expenditure totalled 3.6 per cent of GDP compared to an LAC average of 5.2 per cent.

The strategy
According to the IDB, the strategy itself has been designed to fit in with Guyana’s existing portfolio commitments. In addition, it will respond to Government priorities in the new Green State Development Strategy, as they develop.
“Activities will focus on four main areas. Establishing a modern national strategy and planning framework for undergirding the new Green State Development Strategy, including efforts to promote Guyana’s economic diversification efforts and pursue modern industrial policies.”
The Bank noted that it would also help in “strengthening fiscal policies and the framework for managing Guyana’s natural resource revenues; Facilitating Private Sector development to support the delivery of better services, mainly through enhancing Guyana’s business environment; and delivering critical infrastructure to facilitate Guyana’s human and Private Sector development.”
The IDB noted that as Guyana transitions to oil and gas production by 2020, the reduced access to concessional financing makes the next four years particularly important for the IDB’s partnership with Guyana.
“Several risks will need to be swiftly addressed including the continued vulnerability to commodity price shocks, and the adequate creation of new Government structures to manage a hitherto unknown sector. The IDB will work with the Government of Guyana to achieve the good life for all, as it undergoes this historic economic transformation,” the IDB stated.

Concessional financing
Guyana’s access to concessional financing was already under strain from the announcement, in 2016, of Guyana’s re-classification by the World Bank from a lower to an upper middle-income country. This had come following the oil discoveries in the Stabroek Block.
While it was agreed that the upgrade was a positive indicator, concerns had also been expressed that Guyana would lose some of the concessionary terms and agreements it enjoys internationally.
According to the Finance Ministry’s Public Debt Report, it turns out that as Guyana graduates and the economy continues to grow, the development will be a proverbial Trojan Horse as there will be a transition to floating interest rate loans. Floating interest loans are adjustable and thus, do not afford the same protection a fixed rate arrangement would.
“Already, Guyana is beginning to experience an increase in the prevalence of ‘blended loans’ where one portion of the loan is granted on a fixed interest rate basis and the other portion of the same loan is granted on a floating interest rate basis,” the report states.
Earlier this year, Government signed four new loan agreements with the IDB to secure US millions in developmental resources to finance key initiatives within the Legal Affairs, Agriculture, Business and Public Health Ministries.
The agreements were signed by Finance Minister Winston Jordan and President of the IDB, Luis Alberto Moreno, at the Headquarters of the IDB in Washington, DC.
These loans were to support Government’s developmental agenda of promoting investment; improving connectivity throughout Guyana; diversifying the economy; and providing citizens with quality healthcare and social services.