The IMF says that Guyana’s economy continues to be resilient with impressive growth of 5% last year but it cautioned that the authorities need to accelerate reforms of the power company, GuySuCo and the NIS.
In a statement yesterday following its yearly review of the economy, the IMF also adverted to power subsidies, a heated topic in the wake of ongoing protests in Linden. The IMF said that the government should intensify fiscal consolidation by reassessing the high level of energy subsidies and “implementing more targeted social safety nets.” While the government has insisted that the power subsidy for Linden must be cut it has been argued by critics that it has not eased the burden of Lindeners by providing jobs or a social safety net.
The IMF’s mission visited from July 17, the day before three men participating in protests against the cut in power subsidy were killed in Linden.
Therese Turner-Jones, the IMF Mission Chief for Guyana was quoted in the statement as saying: “Despite a deteriorating external environment, including the deepening euro-zone crisis, Guyana’s economy continues to be resilient. In 2011, the economy recorded another year of impressive growth of more than 5 percent driven in part by high commodity prices, foreign direct investment, and domestic credit expansion to the private sector. Real Gross Domestic Product (GDP) is projected to grow by about 4 percent this year supported by increased activity in bauxite, gold, rice and the services sectors, which should offset any expected fall off in sugar production. While inflation remained low, staff noted a marginal drop in gross foreign reserves to about four months of imports at end-June 2012, as capital imports rose.”
She said IMF staff commended the authorities for “continued prudent macroeconomic management.” She added that infrastructure projects led by the planned construction of the hydro power plant at Amaila Falls (AFHP) along with private mining investments should sustain growth levels at around 5 percent. The Amaila Falls project is still up in the air as financing for the controversial venture has not yet been sealed.
She added, “Discussions with authorities centered on how to maintain fiscal and debt sustainability while reducing poverty through continued inclusive growth in the context of the Low Carbon Development Strategy. With growth expected to remain robust over the medium term, and given Guyana’s significant investment requirements, including in the AFHP project, policy buffers need to be strengthened. Fiscal consolidation should be intensified, including by reassessing the high level of energy subsidies and implementing more targeted social safety nets. In addition, staff encouraged the authorities to accelerate reform at the National Insurance Scheme (NIS), the Guyana Sugar Company (GuySuCo), and the Guyana Power and Light (GPL), and limit other potential contingent fiscal liabilities.”
Turner-Jones stated that while the banking system remains liquid and well capitalized, continued vigilance is needed, particularly in the backdrop of rapid credit growth. She said IMF staff welcomed the continued drop in nonperforming loans, and the plans for introducing a credit bureau. IMF staff, she said, urged the authorities to further strengthen their Anti-Money Laundering and Combating the Financing of Terrorism (AML/CFT) framework in line with the recommendations made by the Caribbean Financial Action Task Force (CFATF) in its July 2011 report.
The IMF Executive Board is expected to discuss Guyana’s Article IV consultation in September 2012.
