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IMF warns Guyana to pace public spending with oil money
…says dangers include increased cost of living
Kaieteur News – Days after Vice President, Dr. Bharrat Jagdeo dismissed the International Monetary Fund (IMF) as a financial institution only interested in balancing budgets and not development, the entity yesterday called on those in charge of public spending to curb the practice since it would not be sustainable in the long term.
Incoming Mission Head, Alina Carare
It would be poignant to note that Budget 2022 which was presented and since approved, represents the first year of expenditure using Guyana’s oil resources and saw the Estimates of Expenditure for the year ballooning by some 37 percent over the previous year, the majority of which is earmarked for spending on capital programmes.
According to the IMF however, it is recommending “a feasible and moderate increase in public investment while further strengthening the medium-term framework for fiscal policy.”
The recommendations have since been contained in the IMF’s Concluding Statement of the 2022 Article IV Mission, which serves to asses Guyana’s fiscal performance.
According to the IMF, it is urging “caution in determining the pace of ramping up public investment while pressing development challenges still face the country.” It said that “a large surge in public investment could add inflationary pressure, affect competitiveness of the non-oil economy, lead to an eventual loss in Foreign Exchange, and might not be sustainable over the medium-term.”
The IMF, as such, is calling on the local authorities to simultaneously strengthen the capacity to manage public investment, based on recommendations from the 2017 Public Investment Management Assessment (PIMA) report.
According to the Statement issued by the IMF, it is recommending setting annual budgets within a fiscal framework that, over the medium term, constrains the annual non-oil overall fiscal deficit (after grants) to not exceed the expected transfer from the Natural Resources Fund, to anchor fiscal policy in a sustainable way. “This rule will also ensure that fiscal spending, including capital spending, is increased at a measured pace, to address development needs without macroeconomic imbalances.”
The findings released by the IMF were concluded by a team led by Alina Carare (incoming mission head) and Meredith McIntyre (outgoing mission head) who held virtual discussions during May 18 and June 1, for the 2022 Article IV Consultation.
The team met with Finance Minister, Dr. Ashni Singh, Minister of Parliamentary Affairs and Governance, Gail Teixeira, Central Bank Governor, Dr. Gobin Ganga, other senior officials, representatives from the private sector, banks, the opposition party, labour unions, and other stakeholders, including Guyana’s international development partners.
According to the IMF report, while the Guyanese economy was negatively impacted by the pandemic, and 2021 floods, it has recovered well supported by the oil boom, and policy actions.
The IMF noted,that it remains ready to assist the authorities’ capacity development needs, including technical assistance on macroeconomic and fiscal management, development of financial market infrastructure, and strengthening of statistical capabilities.
The IMF Executive Board is expected to discuss Guyana’s Article IV consultation on August 31.
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