WASHINGTON, Sept 27, CMC – The International Monetary Fund (IMF) Tuesday said overall economic growth is projected to be 57.8 per cent this year for Guyana as the country continues to recover from the coronavirus (COVID-19) pandemic-induced recession in 2020, and protracted political transition, non-oil economic growth.

The IMF executive board, which has concluded its annual bilateral discussions with Guyana, said the country started the recovery process in 2021, despite being negatively impacted by floods.

“Inflation increased markedly since 2021 owing to the floods and supply-side disruptions, as well as continually rising fuel and food prices. Oil production has increased significantly. Oil GDP (gross domestic product) is expected to grow over 100 per cent in 2022, and by about 30 per cent on average per year during 2023-26.

The Washington-based financial institution said oil production has the potential to transform profoundly Guyana’s economy with “overall real GDP growth rate is projected to be 57.8 per cent in 2022.

“Guyana’s commercially recoverable petroleum reserves are expected to reach over 11 billion barrels, one of the highest levels per capita in the world. This could help Guyana build up substantial fiscal and external buffers to absorb shocks while addressing infrastructure gaps and human development needs,” the IMF said, noting that the main downside risks to the outlook include volatility in global oil prices, a slowing global economy, or rapid increases in investment which could lead to macroeconomic imbalances, while upside risks include higher global oil prices and additional gas and oil discoveries.

The IMF executive welcomed the broad-based economic recovery in 2021, and the unprecedented high real GDP growth, supported by a steep rise in oil production and accommodative policies. They said the increasing oil production could help transform the economy, address development needs, and build substantial buffers to absorb shocks.

“Nevertheless, considering the potential challenges related to volatility in global oil prices and effective management of natural resources, they highlighted the need for continued prudent policies and structural reforms, assisted by Fund technical assistance, to avoid build-up of macroeconomic vulnerabilities, ensure inclusive growth and intergenerational equity, as well as address structural weaknesses and climate challenges.”

The IMF also welcomed the significant decline in public debt and favourable debt dynamics going forward, with the authorities’ commitment to maintaining debt sustainability and stressed the importance of anchoring fiscal policy in a medium-term framework.

They welcomed the restraint in using oil revenues before the passage of the recent amendments of the Natural Resource Fund Act and encouraged continued prudent management of oil revenues. The IMF directors called for moderately ramping up public investment by constraining the annual non-oil overall fiscal balance to not exceed the expected oil transfers. They also encouraged the authorities to continue improving the targeting of social spending.

They agreed with the authorities that exchange rate stability serves Guyana’s current needs best and emphasised the importance of taking measures to further develop and deepen financial and foreign exchange markets, as the oil production increases.

They saw merit in revising the monetary policy framework over the medium to long-term to ensure it is well suited for the economy’s needs, and that it allows more flexibility in the exchange rate to absorb shocks and help maintain competitiveness.

The IMF executive directors commended the authorities’ efforts to maintain financial stability and promote financial inclusion and welcomed the progress in implementing the 2016 FSAP recommendations and the commitment to fully implement the recently strengthened AML/CFT framework, while encouraging further efforts in this area, in particular, to strengthen the regulation of digital payments.