Last Updated on Friday, 11 March 2016, 12:57 by Jomo Paul
The International Monetary Fund (IMF) has issued a caution to the Guyana Government over growth in public sector wages and non-performing loans.
This is after a team from the international body met with Government Ministers Winston Jordan, Raphael Trotman, David Patterson and Central Bank Governor Dr Gobind Ganga.
In a release on the website, the IMF noted that Guyana’s economy has remained resilient and continues to grow despite significant global downturns in the economic sphere.
“Developments in the global economy remain a drag on growth, particularly for commodity exporters. Nevertheless, growth is projected to increase this year, supported by an increase in gold production and public investment,” the statement noted.
While Guyana’s government has project 4.4 percent growth in 2016, IMF projects 4.0 percent growth rate. This will be heavily dependent on growth in Guyana’s private sector.
The mission held discussions with government over the maintenance of fiscal growth and development during which the government was cautioned against wage increases.
It was noted that icreasing current expenditure will crowd out space for public investment, despite significant donor support.
“The mission suggested moderating the growth of wages, as well as reforming public enterprises with a view to reduce their reliance on government support.”
IMF said the scope and pace of reform should take into account social implications adding that containing current expenditure would provide additional space for public investment while preserving debt sustainability.
Further it was noted that while the banking sector remain well capitalized; heightened vigilance is warranted due to increases in nonperforming loans. “Recent changes to credit reporting legislation are welcome and the authorities are encouraged to continue to strengthen financial sector supervision. In particular, the mission suggested tightening: (i) provisioning requirements; (ii) large exposure limits: (iii) restrictions on related lending; and, (iv) loan classification rules.”
IMF also pointed out that Guyana remains vulnerable to movements in commodity prices due to dependence on imported oil and the concentration of exports on a few commodities.
The mission noted that exchange rate flexibility would continue to facilitate adjustment to external developments, mitigate their effect on growth, and safeguard reserves.