20220926-IMF-Guyana_2022_Article_IV_Consultation-Press_Release_Staff_Report_and_Statement_by_the_Executive_Director_for_Guyana_102页_1mb

GUYANA 2022 ARTICLE IV CONSULTATION SUMMARY

Core Content

The 2022 Article IV consultation with Guyana by the IMF concluded on September 27, 2022, following discussions that took place from May 18 to June 1, 2022. The consultation focused on the economic recovery post-pandemic, the impact of floods in 2021, and the transformative potential of oil production. The IMF staff report, press release, and statement by the Executive Director were released, highlighting Guyana's economic performance, risks, and policy recommendations.

Main Points

Economic Recovery and Growth

• Non-oil GDP rebounded in 2021, reaching 4.6% growth despite the effects of floods.
• Oil GDP saw a significant increase, contributing to an overall real GDP growth of 57.8% in 2022.
• Non-oil GDP growth is projected to average 5% per year from 2023 to 2026.
• Inflation rose sharply in 2022, reaching 9.4%, due to floods, supply-side disruptions, and rising fuel and food prices, but is expected to decline to 3.5% by 2027.

Oil Production and Reserves

• Oil production increased significantly, reaching 93.4 million barrels in 2022, with further expansion expected from new fields (Liza-2, Payara, Yellowtail).
• Guyana's commercially recoverable petroleum reserves are projected to exceed 11 billion barrels, one of the highest per capita in the world.
• Oil price has remained high, contributing to the fiscal and external accounts' improvement.

Fiscal and Debt Management

• Public debt to GDP ratio fell from 42.9% in 2021 to 13.5% in 2027, reflecting a favorable debt trajectory.
• The Natural Resource Fund (NRF) is expected to accumulate substantial reserves, reaching nearly US$20 billion by 2027.
• The overall fiscal balance (after grants) improved from -10.5% of non-oil GDP in 2021 to 0.0% in 2027.

Policy Recommendations

• Moderate increase in capital spending to address infrastructure and social development needs.
• Fiscal policy should be anchored in a medium-term framework to ensure sustainability.
• Exchange rate flexibility should be pursued over the medium to long term.
• Governance and anti-corruption reforms should be strengthened, especially in implementing EITI recommendations.
• Structural reforms are needed to support inclusive growth and enhance labor market and climate change policies.

Key Information

Economic Indicators

• Real GDP growth in 2021: 23.9%
• Real Non-Oil GDP growth in 2022: 7.2%
• Real Oil GDP growth in 2022: 116.1%
• Inflation in 2022: 9.4%
• Per capita GDP in 2022: US$18,744.6

Social Indicators

• Population in 2021: 789,000
• Life expectancy at birth in 2019: 70 years
• Under-five mortality rate in 2020: 28 per 1,000 live births
• Gini index in 1998: 45
• HDI rank in 2019: 122

External Sector

• Current account balance in 2022: 43.5% of GDP
• Gross official reserves in 2027: 3,172.5 million USD, covering 7.2 months of non-oil imports
• Oil exports and SDR allocation contributed to improved foreign exchange reserves.

Risks and Outlook

• Downside risks include global oil price volatility, slowing global economy, and rapid government spending leading to macroeconomic imbalances.
• Upside risks include higher oil prices and additional oil discoveries.
• The medium-term outlook is very favorable, with the potential for economic transformation through oil production.

Summary of Policy Discussions

Fiscal Policy

• The government should maintain a zero overall fiscal balance in the medium term.
• Public investment should be increased to address infrastructure and development needs.
• Social spending should be improved in targeting.

Monetary and Exchange Rate Policy

• Exchange rate stability is currently appropriate.
• Financial and foreign exchange markets should be further developed.
• A revised monetary policy framework is needed to enhance exchange rate flexibility.

Financial Sector Policy

• The financial sector is well capitalized, but profitability and liquidity have weakened.
• Credit-to-GDP measures and systemic risk matrix are used to monitor macro-financial risks.
• House price declined by about 0.2% in 2021.

Structural and Governance Reforms

• Broad-based reforms are needed to address structural weaknesses and support inclusive growth.
• Labor market reforms and climate change policies should be prioritized.
• Anti-corruption and AML/CFT frameworks need further strengthening.

Other Issues

• The government has made progress in implementing 2016 FSAP recommendations.
• Climate change resilience is being built through the Low Carbon Development Strategy.
• Public investment execution has been limited, with only about 10% of budgeted capital investment executed in the first four and a half months of 2022.

Conclusion

The IMF Executive Board welcomed the economic recovery and the potential for oil production to transform Guyana's economy. They emphasized the need for prudent fiscal management, structural reforms, and enhanced governance to ensure sustainable growth and economic stability. The debt sustainability and fiscal transparency were noted as key areas for continued improvement.