IDB warns Guyana’s economy vulnerable to external shocks

Aug 28, 2026 News

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…says 90% of energy demand comes from imported oil

(Kaieteur News) – The Inter-American Development Bank (IDB) has warned that Guyana’s economy remains vulnerable to external oil shocks, as the country still relies heavily on imported oil to meet its energy demand.

In its Caribbean Economics Quarterly: Volume 16, Issue 2 – Fiscal Resilience, Debt Reduction, and Domestic Resource Mobilization in the Caribbean, the IDB reported that although Guyana has transitioned to become a net oil exporter in 2019, the Guyanese economy can be negatively impacted due to 90% of its energy demand is produced from imported oil.

“The outlook for Guyana is still highly uncertain, given persistent geopolitical tensions that continue to push up international oil prices… electricity and fuel prices continue to be channels through which the Guyanese economy can be negatively impacted,” the Bank said.

Moreover, IDB outlined that as Guyana is now an oil producer, oil shocks can lead to Dutch disease risks, encouraged by an influx of oil revenues and excessive government spending.

To this end, it referenced the International Monetary Fund (IMF) forecast that Guyana’s GDP growth expansion in 2026 will be smaller than originally predicted but with manageable macro-fiscal risks.

Notably, the report highlighted that government is helping to mitigate much of the current oil price shock through maintenance of a zero-rate tax on fuel, the introduction of the $100,000 cash grant for citizens 18 and over, the maintenance of electricity subsidies and assistance to key sectors, including education.

However, the Bank said, “As a result, the government is expected to run a larger primary deficit than originally budgeted.”

Nevertheless, it pointed out that macro-fiscal risks are expected to remain largely contained, given Guyana’s withdrawal rules, which limit oil profit withdrawals from its Natural Resource Fund (NRF), the high concessionality of the debt portfolio, as well as a low debt service ratio and continued high GDP growth.

Moreover, the Bank stated, “It is also expected that inflation pressures in Guyana will increase.”

It referenced the IMF’s forecasts of further deviation of Guyana’s inflation rate from the U.S. price trend, indicating the possibility of extended real effective exchange rate appreciation.

“This is a key barometer for Dutch disease risks,” it warned, adding however that the appreciation of Guyana’s real effective exchange rate has been relatively subdued, growing at an annual rate of about 0.01 percent on average between 2019 and 2025, the same rate of growth as five years prior.

In this regard, the Bank said proactive and vigilant policy-making is highly advisable, despite the probability of larger-than-usual forecast errors and the possible unreliability of forward estimates.

Additionally, it underscored that the forecasts for this year could be unreliable because of the volatile geopolitical environment. “Nonetheless, increased unpredictability naturally points to the need for careful economic management, including coordinated fiscal and monetary policies, especially in a context such as that of Guyana, which is so exposed to external energy price risks,” it added.

IDB said that balancing fiscal and financial sector support for development and growth with monetary efforts to stabilise the exchange rate, while also targeting acceptable levels of inflation, is of even greater importance in the current environment.

Further it also recognised government’s efforts to reduce the country’s import dependence, particularly on food and crude oil, are consistent with these policy objectives. This publication recently reported, President Irfaan Ali saying that in order to guard against external shocks and position Guyana for greater economic benefits from its oil industry, Guyana must have an oil refinery, along with adequate fuel storage capacity to strengthen the country’s energy security.

Currently, oil is being produced offshore Guyana by American oil giant ExxonMobil Corporation through its subsidiary ExxonMobil Guyana Limited. To date, ExxonMobil is producing oil from the Liza One, Liza Two, Payara, its third project, and Yellowtail, its fourth project. A fifth Floating Production Storage and Offloading (FPSO) vessel, the Errea Wittu, recently arrived in Guyana and is slated to come online during the fourth quarter of this year, increasing the country’s daily oil production beyond one million barrels per day. However, while Guyana is now a major oil producer, the country remains heavily reliant on imported refined fuel to meet its energy demand.

Against this backdrop, Ali said that Guyana’s exposure to external shocks is one of the reasons he believes an oil refinery in the country is a necessity.

“We cannot have crude oil and don’t have security of supply, one and security brings with it stability and then give us some shield against shocks that are currently existing,” Ali noted, further disclosing that there are interests in the construction of an oil refinery in Guyana.

“We’re hoping that we can have investment in that refinery,” he added.

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• Debt Reduction, Fiscal Resilience, Guyana’s economy, Guyana’s GDP, International Monetary Fund

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