IMF pleased with Guyana’s sound macroeconomic fundamentals

May 25, 2009 Letters

Dear Editor,

The global financial crisis has proved itself that no country is immune to its unexpected economic shocks, which are responsible for the fluctuations in national income, output and employment.

However, Guyana managed to maintain good macroeconomic fundamentals, with quite a stable inflation rate.

And, the International Monetary Fund (IMF) acknowledges this. The IMF report from the concluded Article IV consultation with Guyana lauds Government for the effective implementation of some policy initiatives and their ability to maintain macroeconomic stability, achieve real growth rate of 3.1 percent in 2008, following rates of 5.1 and 5.4 percent in 2006 and 2007, respectively, and stabilising inflation rate; the inflation rate for 2008 was 6.40% which was lower than the 14.05% rate in 2007 amid the global financial crisis.

The IMF Public Information Notice (PIN) No. 09/61 states that, “the fiscal deficit widened to 7.9 percent of GDP (6 percent target) due to measures adopted in early 2008 to reduce the impact of high fuel prices, most of which have since been eliminated. So far, the financial system has been relatively unaffected by the global turmoil.”

Guyana experienced the impact of the rise in world fuel and food prices at the beginning of 2008. Food prices in Guyana increased by 27.2%; and Government increased the tax threshold by 25% from $28,000 to $35,000 per month and removed the Value Added Tax (VAT) from a number of items. The IMF report commends Government for the successful implementation of VAT and progress in the area of fiscal reforms.

The IMF report states that, “the Guyana Revenue Authority introduced a Total Revenue Integrated Processing System allowing for better monitoring of taxes and risk profiling.”

The IMF report commends financial sector reforms, which include measures to improve compliance with Basle Core Principles and the preparation of legislation facilitating the creation of a credit bureau, on money transfer agencies, and on anti-money laundering and combating the financing of terrorism. The recently completed Berbice Bridge — a major public-private project — bodes well for increased private sector participation in the economy.

According to the IMF report, the Executive Directors noted that, by implementing prudent fiscal and monetary policies, the Guyanese authorities had maintained macroeconomic stability in 2008, despite external shocks and social pressures.

Sustaining these policies will be critical to reduce vulnerabilities associated with commodity price volatility and possible spillovers from the global crisis. Directors commended the authorities’ commitment to further entrench macroeconomic stability, strengthen the financial system, and implement structural reforms.

The IMF recognises the economic achievements of Guyana, and so Government remains committed to stabilise price levels and exchange rates, make certain that fiscal deficit is controlled, reduce unemployment, and keep an eye on the cost of borrowing money.

Marissa Lowden

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