Using oil as an agent of development remains Guyana’s medium-term challenge - IDB

Using oil as an agent of development remains Guyana’s medium-term challenge – IDB

Apr 26, 2019 News

Guyana faces development challenges on several fronts, including the government’s institutional capacity and weaknesses in infrastructure, health and education. In the midst of this testing environment, Guyana is transitioning to becoming an oil producer, beginning in 2020, which is expected to have significant economic and fiscal impacts.
It is based on this premise that the Inter-American Development Bank (IDB) states that Guyana’s main challenge in the medium-term will be to translate the government’s newfound sources of income into an agent for economic transformation and development.
In one of its latest reports, the Bank said, “Guyana’s infrastructure stock is inadequate to support delivery of public services or facilitate private sector growth. The country’s transportation infrastructure (roads, airports and seaports) requires substantial improvements to support the growth of the private sector. The energy sector also hinders private sector development.”
The financial institution continued, “Guyanese firms report high energy costs as a major obstacle to business operations (Compete Caribbean, 2014). In fact, in the World Bank’s 2019 Doing Business report, Guyana’s rank dropped from 126th to 134th, mainly due to a significant decline in the score for electricity. In water and sanitation, despite limitations in the quality of water, sanitation, and drainage, the United Nations (2015) reports that 98 percent of the population has access to improved drinking water sources and 84 percent has access to improved sanitation facilities.”
The IDB added, “Guyana also underperforms relative to countries in the region on telecommunications as measured by United Nations technology indices.”
PROJECTIONS
Since 2015, 13 oil discoveries have been made in the Stabroek Block with estimated recoverable resources of more than 5 billion oil-equivalent barrels. According to the International Monetary Fund’s World Economic Outlook (2018), Guyana’s economy is expected to grow at an average annual rate of 19 percent between 2019 and 2023.
Similarly, the IDB has said that the value of exports is expected to grow by 37 percent per year and that of imports by 14 percent over the same period.
The bank said that Government revenues are projected to increase 15 percent per year. Government oil revenues, moreover, are expected to exceed US$3 billion in 2028, in an economy with a current GDP of US$3.6 billion.
Further to this, the IDB said that infrastructure investment averaged 3.4 percent of GDP between 2011 and 2015, below the Latin America and the Caribbean (LAC) average of 3.7 percent. It said, too, that Government investment in Guyana, as measured by net acquisition of nonfinancial assets as a percentage of GDP, is below the 10-year average of 8.5 percent, but has been increasing since 2015 and is expected to reach 8.7 percent in 2019 and 13 percent of GDP in 2022.

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