Govt. requests US$1.8M IDB loan to build strategy for economic transformation with oil wealth

Sep 07, 2021 News

Kaieteur News – The PPP/C Government has approached the Inter-American Development Bank (IDB) for a loan totalling US$1,817,764 to support the development, and implementation of a Medium-Term Development Strategy which will leverage on the country’s emerging oil and gas revenues. The strategy would be used to grow investment, increase employment and strengthen the economic resilience of the country.
According to the loan documents seen by Kaieteur News, the funding would be spent on five components.
Component I is called: Strengthening the technical capacity of the government to lead economic transformation in Guyana. It is expected to include a forum for infrastructure opportunities, targeted investor workshops to assist in structuring specific Public Private Partnership (PPP) projects, public consultation, and awareness building through strategic communications to investors, stakeholders and the general public. The government is proposing to use US$882,000 from the loan for this activity.
As for Component II, this is titled: The Economic Diversification and Mid-Term Development Strategy. This component will support several activities, such as the engagement of a strategic advisor on economic development, consultations with stakeholders to identify and select on potential, technical exchanges with countries that have successfully developed using growth pole strategies, provide consultancies to support the review of existing development strategies, facilitate consultations and provide insight into success stories on economic diversification. It was noted in the project document that US$279,000 has been budgeted for this purpose.
With respect to Component III, this is expected to focus on creating investment opportunities for the private sector, and will support the engagement of a strategic advisor for public-private partnerships to develop a PPP framework for Guyana, including proposed legal and regulatory recommendations. It was noted that US$369,000 has been budgeted for this activity.
The fourth component will see expenditure on awareness and diffusion, and will include a forum for infrastructure opportunities, targeted investor workshops to assist in structuring specific PPP projects identified under Component three, and ensure public consultation and awareness building through strategic communications to investors. This is expected to cost US$170,000.
Component Five caters for financing any contingencies that need to be tackled during project execution. Over US$117,000 was budgeted for this purpose.
As regards execution, it was stated that the Ministry of Finance will oversee all the coordination activities with the relevant stakeholders.
To justify the money being requested, it was noted in the document that the Stabroek Block oil discoveries have led to an increase in foreign companies setting up operations in Guyana, and out-competing local businesses, in particular Small and Medium scale Enterprises (SMEs). The IDB said there are already initiatives in progress to provide training and to build the capacity of SMEs in Guyana, and to integrate them into the upstream part of the oil value chain.
However, to facilitate a broader range of investment, and a more diversified, sustainable economy beyond oil and gas, in the long term, the IDB stressed that a more strategic approach to private sector development is required hence, the strategy that is going to be developed and implemented. It noted that the Guyana government has been carrying out actions to support economic diversification and productivity, as well as value added and export readiness.
It said too, that the government has started to take actions for building capacity at several levels to prepare for the expected impacts of the oil production, including managing of public spending by creating a long-term strategy and building administrative capacity.
With the ongoing work of the government as a strong premise, the IDB is therefore of the view that the loan, which is still being reviewed for approval, will ultimately support Guyana in creating an effective strategy for economic transformation with its oil wealth.

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