While acknowledging the country’s fiscal progress over the years, the International Monetary Fund (IMF) has called on Government to ensure that hydro power remains financially and economically viable as a means of more stable and reliable energy and to address the remaining gaps in the anti-money laundering regime.
This is according to the 2013 Article IV Consultations with Guyana, the report of which was released yesterday. It referred to the now stalled Amaila Falls Hydroelectric Project, whose investors pulled out in August citing lack of consensus.
“Acknowledging the potential benefits of a more stable and reliable source of energy, Directors encouraged the authorities to ensure that the large hydroelectric project under consideration remains financially and economically viable to curb fiscal risks,” the report said. “In this context, they saw merit in strengthening the project and debt management framework, and pursuing international best practices as regard public-private partnerships,” the report stated.
It said that a modestly tighter stance of monetary policy and continued exchange rate flexibility “would help safeguard international reserves, contain inflationary pressures, and reduce the current account deficit.”
It called on Guyana to continue its vigilance over its financial sector, although the risks appear generally limited.
“In light of rapid credit growth in recent years and high loan concentration, they advised frequent on-site inspections for larger banks and a better integrated supervision of financial business groups. It is urgent to address remaining gaps in the regime to combat money laundering and the financing of terrorism,” the report said.
It said Directors commended the authorities for the progress so far in poverty reduction. “However, they considered that further efforts are needed to ensure a more even distribution of the benefits from economic growth. In this regard, efforts to lower the cost of energy, address skill mismatches, and improve the business environment represent important policy initiatives,” it said.
It said too that steps to increase productivity in traditional sectors, such as agriculture and mining, should also be part of a strategy to foster more inclusive growth.
The report said that the current account deficit is expected to widen to 16.8 percent of GDP in 2013, driven by higher fuel imports, lower commodity prices, and lower remittances, which are projected to fall with slowing activity in major host countries.
“At the same time, with larger disbursements related to an ambitious public investment programme and resilient FDI, gross international reserves are projected to remain adequate at 3.6 months of imports,” the report said.
“Executive Directors welcomed Guyana’s strong growth over the past several years, underpinned by favourable commodity prices and robust foreign direct investment,” it said. “While the medium-term economic outlook remains positive, Directors encouraged the authorities to persevere in their commitment to sound policies and reforms to strengthen policy buffers, promote more inclusive growth, and further reduce poverty,” the report said.
It said that Directors underscored the importance of prudent fiscal consolidation anchored in a medium-term policy framework that safeguards debt sustainability, bolsters fiscal and external buffers, and addresses unmet development needs. “Priority should continue to be given to implementing reforms to boost the efficiency of public enterprises and replacing universal subsidies with better-targeted social assistance,” the IMF said.
