Press ahead with overhaul of sugar industry

Mar 26, 2014 News

…but be mindful of social impact – IMF

The International Monetary Fund (IMF) is encouraging the Government of Guyana to press ahead with the overhaul of the sugar industry.
But while the administration is making steps in this regard, the IMF cautioned that the government should be mindful of the large social impact. It said, too, that the government should provide a safety net to protect those affected by that process.
The aforementioned was noted by IMF Staffers who were in Guyana during March 6 to 17 to hold discussions for the 2017 Article IV Consultation.
The staff team from the Fund was led by Mr. Marcos Chamon. Ms. Srobona Mitra, the Financial Sector Assessment Programme (FSAP) Mission Chief, also joined the concluding meeting.
The team met with Finance Minister Winston Jordan, Natural Resources Minister Raphael Trotman, Public Infrastructure Minister David Patterson, Central Bank Governor Dr. Gobind Ganga, other senior officials, representatives from the private sector, the opposition party, labor unions, and other stakeholders.
The visit by the IMF delegation was in keeping with its Article IV Mission.
Under Article IV of the IMF’s Articles of Agreement, the IMF usually holds bilateral discussions with members every year. During those consultations, the mission reviews the overall economic developments in the country, as well as its policy measures aimed at maintaining economic stability, ensuring a sustainable external balance and further liberalizing foreign trade.
Upon the completion of the IMF mission consultations, the IMF Executive Board discusses the staff report and issues an assessment of the country’s economic situation and the adequacy of its economic policy measures, based on a comprehensive analysis of the overall economic situation and a wider fiscal policy strategy of the member country.
Since 2016, the IMF had expressed concern about the state of affairs regarding Guyana’s sugar industry.
In fact, the IMF in its 2016 report, noted with some degree of concern that transfers to the Guyana Sugar Corporation (GuySuCo) were equivalent to 1.8 percent of GDP in 2015 and was budgeted to be about 1.3 percent of the GDP for last year.
The IMF Staff urged the authorities to adopt a restructuring plan for the sector that will improve cost efficiency, productivity, and alternative revenues streams, drawing upon the reforms proposed by the Commission of Inquiry. The international delegation said that the scope and pace of reform should take into account social implications.
In this regard, it appears that the Government is making “some” headway.
Finance Minister, Winston Jordan, opined that based on the allocation for sugar in the 2017 budget, government has indeed started the process of reducing the billion dollar bailouts to the sector.
He said, “When we started in 2015, we started with $12B; then 2016 we had $11B going towards the sector; and for 2017 we have $9B. So there is a process of reduction that is taking place and I dare say that for as long as GuySuCo exists, in whatever shape or form, there will have to be a process of transfers until it can be brought into a better state. It is what we call too big to fail…”
The Finance Minister said that the sector is one which has too much history for it to simply be abandoned. He said that it is a considerable part of the economy, both in terms of the Gross Domestic Product and employment. Even in the area of foreign exchange earnings, the Finance Minister said that the sugar industry plays a part in that.
The economist noted that while sugar is too big to fail and transfers would continue in some form, future allocations would have to be targeted to a substantial improvement in the state of the company.
In this regard, he expounded, “The transfers can’t continue to go down a black hole as Prime Minister Moses Nagamootoo has said on several occasions. Indeed, any structural adjustment of the kind that has to take place in GuySuCo is going to be extremely painful. All that we can do is ease the pain and hope that the measures that will be put in place will yield early fruits.”

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