The International Monetary Fund (IMF) has released an assessment in which it ranks Guyana among the few countries in the Region least prepared to deal with the effects of the coronavirus pandemic, particularly the negative impact on the economy and tourism.
Guyana is in the red when it comes to coronavirus preparations
In the assessment, the IMF rated countries in the Americas from red (least prepared), to green (most prepared). Countries like the United States and Canada are in the green zone. However, Guyana, Guatemala, Belize and Honduras are not so lucky.
Neighbouring Brazil was considered more prepared than average while countries like Colombia were rated as less prepared. According to the IMF, the virus is likely to have an immediate economic impact in the Region, causing, among other things, financial restrictions, declining commodity prices, and reduced tourism.
“In the event of a local outbreak, service sector activity will likely be hit the hardest as a result of containment efforts and social distancing, with sectors such as tourism and hospitality, and transportation particularly affected,” the report noted.
Moreover, the IMF warned countries with weak public health infrastructure and limited fiscal space to ramp up public health services and support affected sectors and households would come under significant pressure.
It noted that owing to efforts to contain the virus’s spread, economic activity and manufacturing would be slowed. However, the IMF asserted that the economic impact of the pandemic would most likely vary due to regional and country-specific characteristics.
Negative effect on oil
The IMF also projected that the sharp decline in oil prices would negatively affect oil exporters, whose ranks Guyana only recently joined. Since the virus hit globally, it has had a serious impact not just on lives but on the global economy in general and oil in particular. Last week, Brent crude fell to US$34 per barrel.
This was a steep drop as only a day before the decline, oil was being traded at US$48. Brent crude was being traded at US$66 per barrel when Guyana first started oil production in December 2019. Rystad Energy, a Norway-based research company that has written extensively on Guyana’s oil sector, has projected that the situation would get worse.
According to Rystad in a recent missive, the spread of the coronavirus has dealt a blow to global demand for oil. It noted that in February of this year, the demand for crude dropped by 4.6 million barrels per day. China, where the virus originated, made up 2.9 million barrels of this cut to demand.
Measures
Among the measures the institution recommended are tax credits to businesses. It cited the case of Brazil, which announced an economic package to cushion the economic fallout of the virus.
“Countries are starting to take policy initiatives in this direction. For example, additional funds are being secured for health spending in many countries including Argentina, Brazil, Colombia, and Peru. Moreover, Brazil announced an emergency economic package on March 17 that is targeted for supporting the socially vulnerable, maintenance of employment, and combating the pandemic,” the IMF noted.
It added that in addition, targeted fiscal monetary and financial market measures will be key to mitigate the economic impact of the virus. It recommended that Governments should use wage subsidies and tax relief to help affected households and businesses to confront this temporary and sudden stop in production.
The multilateral financial institution urged that central banks increase monitoring and be ready to bail out financial institutions if the need arose. This, the IMF said, should particularly be done for institutions that lend to small and medium sized businesses that would be less prepared to stay afloat during the slowdown caused by the virus.
“Where policy space exists, broader monetary and fiscal stimulus can lift confidence and aggregate demand, but would most likely be more effective when business operations begin to normalise. Given the extensive cross-border economic linkages, the argument for a coordinated, global response to the epidemic is clear,” the IMF said.
The IMF also advised that in countries that have limited capacity to deliver health care, the international community ought to step in to help prevent a humanitarian crisis. This comes even as Guyana has approached the World Bank for a US$5 million loan to tackle the coronavirus, which has claimed one life and infected four others locally.
Guyana is in a tricky situation, however, having conducted elections nearly three weeks ago with a winner yet to be announced. The majority of observers who scrutinised the tabulation process has pronounced it to have not been credible and a current court case prohibits the Guyana Elections Commission (GECOM) from conducting a recount.
The international community has warned Guyana that it could be isolated and even sanctioned if a President is sworn in on the basis of the flawed results, resulting in an uneasy standoff between the international community and the Government.
