Guyana’s economy growing rapidly with unparalleled oil sector expansion

Sep 12, 2023 ExxonMobil, News, Oil & Gas

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Kaieteur News – Following its consultations with Guyanese authorities on the nation’s economic wellbeing, the International Monetary Fund (IMF) has concluded that Guyana’s economy will continue to grow very rapidly, supported by government’s modernization plans, including unparalleled oil sector expansion.

The IMF made the foregoing statement, among others, after its team held discussions during August 28 – September 11 for the 2023 Article IV Consultation. Notably, the Article IV Mission is held annually between the IMF and its members. It involves the collection of economic and financial information, and discusses same with country officials. The IMF said its team met with Vice-President, Bharrat Jagdeo; Finance Minister, Dr. Ashni Singh; Minister of Parliamentary Affairs and Governance, Gail Teixeira; Central Bank, Governor Dr. Gobind Ganga; other senior officials, as well as representatives from the private sector, banks, labour unions, and other stakeholders.

The IMF in its concluding mission statement said Guyana recorded real Gross Domestic Product (GDP) growth in 2022 at 62.3 percent. It said this was the highest in the world, adding that real GDP is expected to continue to grow extremely fast in 2023 to 38 percent.

The IMF also noted that oil production is ramping up with the coming on stream of a third oil field dubbed Payara, later this year.

The financial institution said growth in Guyana’s non-oil sector is supported by the implementation of a fast-paced public investment programme focused on providing transportation, housing, and flood management infrastructure, and raising human capital. It further noted that spillovers from oil and construction are supporting growth in the services and supplies sectors, while agriculture, mining and quarrying are also performing well.

The IMF also highlighted the authorities’ commitment to fiscal discipline, saying that it is welcomed and allows for a balanced growth path. It however recommended that over the medium-term, government adopts a comprehensive medium-term fiscal framework (MTFF), together with further modernizing the public investment management and public financial management (PIM and PFM) frameworks. The IMF explained that the MTFF would contain a clear medium-term fiscal anchor, a transition path, and an operational target. IMF Staff also recommend periodic expenditure reviews to ensure macroeconomic stability and preserve competitiveness by setting the pace of public investment to take into account absorption and institutional capacity constraints of the economy.

The IMF also commended authorities’ progress to strengthen the management of oil wealth and its fiscal transparency. In this regard, it recalled that the Natural Resource Fund, amended in 2021, enhanced transparency and accountability of the use of oil revenues. In 2022, it also noted that the governance of the NRF was strengthened with the appointment of three critical bodies: the NRF Board of Directors, the Public Accountability and Oversight Committee, and the Investment Committee.

Further, the IMF observed that the year 2022 was the first year when oil revenues were transferred from the NRF to the budget. The use of the funds is reported in the budget documents, and all receipts are published. That process continued with the 2023 budget.

At the same time, the IMF said the authorities made progress in reforming the regulatory framework for the oil sector. In this regard, it noted that the 1986 Petroleum Exploration and Production Act was modernized and approved by parliament in August 2023. The new Act enhances the regulation of exploration and production of oil, and further paves the way for developing the oil and gas industry. The IMF also took note of the fact that new model Production Sharing Agreements (PSA) have been designed to govern deepwater and shallow water blocks. These documents will be used following the auction of 14 new oil and gas blocks in November and will increase the government share of oil profits.

Overall, the IMF said, “The outlook for medium-term growth is better than ever before. Oil production will continue to expand rapidly as three new approved fields will come on stream between 2024-27 and a sixth field is expected to come on stream in the first half of 2028. Sustained real non-oil GDP growth of 5.5 percent is projected, as the government continues its ambitious plans to address developmental needs.”

The IMF was keen to note that Guyana’s favourable medium-term growth prospects are accompanied by upside and downside risks. On the upside, it said further oil discoveries would continue to improve growth prospects. On the downside, it warned that construction growth and strong public investment may support higher than expected short-term non-oil growth but could also lead to inflationary pressures, overheating of the economy, and the crowding out of credit to the private sector. It cautioned as well that adverse climate shocks, and volatile or lower than projected commodity prices, may also negatively impact the economy.

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• Bharrat Jagdeo, Gail Teixeira, International Monetary Fund (IMF), Minister of Parliamentary Affairs and Governance, Vice President

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