IMF warns against exorbitant spending before 2020 oil

IMF warns against exorbitant spending before 2020 oil

Guyana’s economy has been on an economic decline over the past five years, with a less than one per cent growth over last year’s 3.3 per cent, oil is being seen as the boon but will require a transparent, rules-based system in managing the expected oil wealth.

These are among the crucial findings of the Internal Monetary Fund (IMF), following its latest round of consultations on Guyana.

That consultation was concluded in May last with the International Financial Institution (IFI) releasing its findings this past week.

The IMF has since warned the country against any excessive borrowing or an exorbitant increase in public spending ahead of the signalled start of commercial production in 2020 by ExxonMobil and its partners offshore Guyana in the Stabroek bloc.

According to the IMF, its Directors following the consultations welcomed Guyana’s continued economic growth, “the improvement in its external position, and its positive mediumterm outlook, which is supported by the expected start of oil production in 2020.”

The Directors also welcomed the authorities’ plans to establish a comprehensive framework for managing oil wealth, and stressed the importance of having a transparent and rulesbased framework in place before oil production starts.

It was pointed out that most “Directors supported recommendations for a moderate fiscal consolidation to slow debt accumulation and safeguard against adverse shocks before the onset of oil production.”

This essentially meant that the Directors have cautioned against Guyana looking to take on large debts ahead of oil production.
According to the IMF, “a few Directors considered a more gradual consolidation appropriate in light of the country’s development needs.”

More generally, Directors recommended moderating the growth of current expenditures and moving ahead with the reform of public enterprises, notably the sugar and electricity companies, while providing a safety net for those affected by these reforms – essentially another warning to not significantly accelerate spending ahead of oil production.

IMF Account
Speaking generally to the state of the Guyana economy, the IMF in presenting its account noted that real economic activity expanded by a miserly .2 per cent over the previous year up to 3.3 per cent in 2016.

The coalition Government’s delays in public investment weighed down on activity in addition to subdued agricultural commodity prices and adverse weather help to contribute to the performance while large increases in gold output helped support growth.

Consumer prices were said to increase by 1.5 per cent in the 12 months ending in December 2016.
The overall non-financial Public Sector deficit widened to 2.9 per cent of Gross Domestic Product (GDP) last year from 0.2 per cent in 2015.

“Despite slower-than-expected economic growth, fiscal revenue increased owing to improvements in tax administration and higher mining royalties.”

While total expenditure increased by 2.8 percentage points of GDP, the increase was lower than budgeted due to delays in capital expenditure in the Government’s public investment programme.

According to the IMF findings, the macroeconomic outlook reveals a positive increase for 2017, where growth is projected at 3.5 per cent in 2017 up by .02 per cent from 3.3 per cent the previous year.

This growth is projected to be supported by an increase in public investment by Government to make up for the previous year shortfalls, continued expansion in the extractive sector, and a recovery in rice production.

Inflation for the year is expected to remain at around 2.6 per cent by year-end while the national deficit is projected to widen to 7.2 per cent of GDP in 2017, due in part to the delayed capital spending from 2016 – again on the part of Government.

Original Post

IMF warns against exorbitant spending before 2020 oil


Speaking generally to the state of the Guyana economy, the IMF in presenting its account noted that real economic activity expanded by a miserly .2 per cent over the previous year up to 3.3 per cent in 2016.

Continued downward development trend by the PNC/AFC.

Demerara_Guy posted:

IMF warns against exorbitant spending before 2020 oil


Speaking generally to the state of the Guyana economy, the IMF in presenting its account noted that real economic activity expanded by a miserly .2 per cent over the previous year up to 3.3 per cent in 2016.

Continued downward development trend by the PNC/AFC.

They behave like drunk Irishmen.

Demerara_Guy posted:

IMF warns against exorbitant spending before 2020 oil


Speaking generally to the state of the Guyana economy, the IMF in presenting its account noted that real economic activity expanded by a miserly .2 per cent over the previous year up to 3.3 per cent in 2016.

Continued downward development trend by the PNC/AFC.

The IMF referenced an economy which has been under stress for 5 years. You do know that the PPP lost power only 2 years ago.  

In fact Guyana's economy began to slow as gold prices drop, this having impact on the construction and retail sectors.

In 23 years the PPP left and economy which was structurally the same as they found it. No new industries and no further value added processing of its commodities.  So no wonder vulnerability to commodity price changes is a feature of the Guyanese economy.

The Economy was excellent when the PPP left office.   The Sugar Industry was badly managed and that is why the economy was failing.  It doesn't seem to me that The PNC is doing any better.  Can oil save the country from collapsing again under the PNC? If they already spend the royalties which they don't have,it certainly will. Good luck to GOG.

caribny posted:
Demerara_Guy posted:

IMF warns against exorbitant spending before 2020 oil


Speaking generally to the state of the Guyana economy, the IMF in presenting its account noted that real economic activity expanded by a miserly .2 per cent over the previous year up to 3.3 per cent in 2016.

Continued downward development trend by the PNC/AFC.

The IMF referenced an economy which has been under stress for 5 years. You do know that the PPP lost power only 2 years ago.  

In fact Guyana's economy began to slow as gold prices drop, this having impact on the construction and retail sectors.

In 23 years the PPP left and economy which was structurally the same as they found it. No new industries and no further value added processing of its commodities.  So no wonder vulnerability to commodity price changes is a feature of the Guyanese economy.

Guyana Economic Statistics and Indicators

Year of data: 2015

Full Dataset: From Year 1980 to 2021
Date of Last Update: 30th June 2016

http://www.economywatch.com/ec.../Guyana/#yearListing

The Guyanese economy exhibited moderate economic growth in recent years and is based largely on agriculture and extractive industries. The economy is heavily dependent upon the export of six commodities - sugar, gold, bauxite, shrimp, timber, and rice - which represent nearly 60% of the country's GDP and are highly susceptible to adverse weather conditions and fluctuations in commodity prices. Guyana's entrance into the Caricom Single Market and Economy (CSME) in January 2006 has broadened the country's export market, primarily in the raw materials sector. Guyana has experienced positive growth almost every year over the past decade. Inflation has been kept under control. Recent years have seen the government's stock of debt reduced significantly - with external debt now less than half of what it was in the early 1990s. Chronic problems include a shortage of skilled labor and a deficient infrastructure. Despite recent improvements, the government is still juggling a sizable external debt against the urgent need for expanded public investment.

In March 2007, the Inter-American Development Bank, Guyana's principal donor, canceled Guyana's nearly $470 million debt, equivalent to 21% of GDP, which along with other Highly Indebted Poor Country (HIPC) debt forgiveness brought the debt-to-GDP ratio down from 183% in 2006 to 60% in 2013. Guyana had become heavily indebted as a result of the inward-looking, state-led development model pursued in the 1970s and 1980s.

Much of Guyana's growth in recent years has come from a surge in gold production in response to global prices, although downward trends in gold prices may threaten future growth. In 2013, production of sugar dropped to a 23-year low.

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1

[[QUOTE]]

Guyana has experienced positive growth almost every year over the past decade.

[[UNQUOTE]]

PPP/C in government -- period about 2005 to 2015

2.

[[QUOTE]]

Recent years have seen the government's stock of debt reduced significantly - with external debt now less than half of what it was in the early 1990s.

[[UNQUOTE]]

PNC/Burnham's years -- 1964 to 1992.

 

3.

[[QUOTE]]

Guyana had become heavily indebted as a result of the inward-looking, state-led development model pursued in the 1970s and 1980s.

[[UNQUOTE]]

Burnham/PNC years in the government.

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