IMF lauds Guyana’s fiscal policies to stabilise economy
…urges continued fiscal reforms, prudent management
The International Monetary Fund (IMF), following the conclusion of its 2022 Article IV Consultation with Guyana, has lauded the Government’s prudent management of the economy, against global financial shocks and other factors.
In a statement on its Article IV consultation with Guyana, which was released on Tuesday, the IMF stated that the Executive Directors agreed with the appraisal conducted by their staff, of a growing economy weathering global shocks. They also noted that the increasing oil production could help transform the economy, address development needs, and build substantial buffers to absorb these shocks.
“Nevertheless, considering the potential challenges related to volatility in global oil prices and effective management of natural resources, they highlighted the need for continued prudent policies and structural reforms, assisted by Fund technical assistance, to avoid build-up of macroeconomic vulnerabilities, ensure inclusive growth and intergenerational equity, as well as address structural weaknesses and climate challenges,” they said.
According to the IMF statement, the Executive Directors commended the Government’s efforts to maintain financial stability and promote financial inclusion, as well as the progress made in implementing the 2016 Financial Sector Assessment Programme (FSAP) recommendations, as well as the commitment to fully implement the Anti-Money Laundering/Countering the Financing of Terrorism (AML/CFT) framework.
There were other noteworthy things the IMF commended the Government for, such as the “significant decline in public debt and favourable debt dynamics going forward, the authorities’ commitment to maintain debt sustainability and stressed the importance of anchoring fiscal policy in a medium-term framework.”
They also welcomed the restraint the Government displayed in not using oil revenues before the passage of the recent amendments of the Natural Resource Fund Act. Since coming into office in August 2020, the People’s Progressive Party/Civic (PPP/C) Government did not touch the monies from the oil fund until they made the first withdrawal this year of $41.7 billion, to fund development projects in the 2022 budget. The bank encouraged the Government’s continued prudent management of oil revenues.
“Directors called for moderately ramping up public investment by constraining the annual non-oil overall fiscal balance to not exceed the expected oil transfers. They also encouraged the authorities to continue improving the targeting of social spending. Directors agreed with the authorities that exchange rate stability serves Guyana’s current needs best and emphasised the importance of taking measures to further develop and deepen financial and foreign exchange markets, as the oil production increases.”
“They saw merit in revising the monetary policy framework over the medium to long-term to ensure it is well suited for the economy’s needs, and that it allows more flexibility in the exchange rate to absorb shocks and help maintain competitiveness,” the IMF said.
The IMF went on to praise the Government’s efforts to strengthen anti-corruption frameworks and also the continued efforts to mitigate against climate change. Another call the IMF made was for the continuation of broad-based reforms to address structural weaknesses and diversify the economy, emphasising the significant human development and infrastructure needs.
Guyana’s increased focus on agriculture is testimony to the Government’s efforts to diversify the economy. The 2022 Mid-Year Report shows that out of the $32.6 Billion budgeted in the agriculture sector, $15.8 Billion was spent. This money was spent on a number of things, including constructing major infrastructure, procurement of equipment and capacity building.
In the rice sector, over $100 million has been spent to improve rice yields. Additionally, support in pest control has been provided to farmers, while the Agriculture Ministry also marked the milestone of the Value-Added Laboratory becoming operational in March 2022.
In the first half of the year, $651.9 million of the $1.3 billion budgeted for the year was spent in supporting other crops, which includes vegetables. The results of that support include the completion of 109 shade houses, four green houses and the expansion of various spices. The Government is projecting that by year end, 62 acres of turmeric and 633 acres of ginger will be in cultivation.
Meanwhile, the sum of $142.7 million out of $343.7 million was expended by the Fisheries Department during the review period. Through the Government’s interventions into aquaculture production, there was a 444.1 per cent increase in the first half of the year compared with the same period in 2021.
Additionally, at mid-year, brackish-water shrimp production increased by 292.6 per cent. This, according to the Mid-Year Report, was a direct result of Government’s expanded brackish-water shrimp production programme.
Government’s focus on agriculture is down to the vision of making Guyana the bread basket of the Caribbean and reducing the regional food import bill. Last year, President Ali had declared that his Government would be pursuing an aggressive campaign to dismantle regional barriers to agricultural trade and that in the next four years, with the assistance of more diversified crops, Guyana would aim to reduce Caricom’s food import bill by 25 per cent. (G3)