The Executive Board of the IMF has lauded the authorities here for a second consecutive year of real GDP growth but said that adherence to the fiscal strategy will require a lowering of expenditure at GPL, GuySuCo and the NIS.
The International Monetary Fund (IMF) yesterday released its Public Information Notice (PIN) on its 2007 Article IV consultation on Guyana.
It said that directors also encouraged the Government to supplement the ongoing sugar modernisation programme with administrative reforms, and welcomed the Government’s efforts to diversity the sugar product and its export markets. “They also supported the authorities’ efforts to deepen customs reform, strengthen the rule of law and the judiciary, and further reduce the perception of corruption,” the PIN said.
Directors emphasised that progress in the key structural reforms and infrastructure upgrading is crucial to enhance external competitiveness, improve the business climate and attract private investment.
“They stressed the importance of rehabilitating the electricity infrastructure and welcomed the increase in electricity tariffs as well as measures to mitigate the impact on the poor,” the PIN said. A Committee looking at the reform of the NIS has completed its work and its report – which details a number of recommendations including raising the pensionable age from 60 to 65 – is with Cabinet for consideration.
Directors welcomed efforts to further improve tax policy, efficiency and tax administration, enhance the quality and efficiency of public expenditure, strengthen governance and upgrade the government’s debt management capacity, the document said.
“Directors stressed the importance of further fiscal consolidation, prudent monetary policy, and additional structural reforms to strengthen the financial system, the business environment, and Guyana’s external competitiveness”, the PIN said.
The IMF Directors also encouraged the Government of Guyana to reach agreement on creditors that have yet to provide debt relief under the Heavily Indebted Poor Countries Initiative (HIPC).
The IMF said that economic performance for 2007 was strong for a second consecutive year although inflation increased.
The PIN said that real GDP growth is estimated to have been about 5 ½ per cent – a record for the last decade – and is projected to remain robust at 4 ½ per cent this year.
According to the IMF, the drivers of the recovery have been investment and consumption, supported by external financing and grants, Foreign Direct Investment (FDI), remittances and domestic credit.
“Inflation is estimated to have risen to about 14 per cent at the end – 2007 (compared with 4 ½ per cent at the end of 2006) mainly reflecting high food and fuel prices as well as the initial adjustments following VAT implementation, and is projected to decline to about 6 ½ per cent in 2008,” the PIN said.
The document said that Directors commended the Guyanese authorities for a second consecutive year of strong real GDP growth. It said too that they welcomed the authorities’ commitment to sound macro-economic and structural policies, as evidenced by the perseverance with adjustment and reform and cautious use of external financing.
They have considered this commitment crucial to diversify the economy, reduce its vulnerability to commodity price and other external shocks, and achieve the Millennium Development Goals (MDG).
The Directors said that they welcomed the forthcoming Poverty Reduction Strategy Paper, which they said will guide the Government’s medium term expenditure plans. They noted that macro-economic stability and growth are key to ameliorating poverty and called for well-targeted assistance to the poor to achieve faster progress towards the MDGs.
It was also felt by the Directors that a gradual move to a more flexible exchange rate could help buffer the economy from exogenous shocks. Also advised by the Directors was the upgrading of the Bank of Guyana’s monetary policy framework “by improving liquidity management, making treasury bills negotiable, and promoting the development of the inter-bank market.”
