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IMF warns Guyana about fast-tracking public investment

Last Updated on Friday, 3 June 2022, 23:28 by Denis Chabrol

The International Monetary Fund  (IMF) is warning Guyana against spending rapidly on public investment projects because this can have severe economic consequences.

“Staff urge caution in determining the pace of ramping up public investment. While pressing development challenges still face the country, a large surge in public investment could add inflationary pressure, affect competitiveness of the non-oil economy, lead to an eventual loss in FX (foreign exchange) reserves, and might not be sustainable over the medium-term,” the IMF’s staff said in their concluding statement.

In its latest review of Guyana’s economic performance, the IMF cautions Guyana in determining the pace of ramping up public investment. 

While acknowledging that pressing development challenges still face the country, the IMF at the same time says that it welcomes the emphasis on public investment and policies to sustain growth into the longer term. 

The review team is also urging Guyanese authorities to simultaneously strengthen the capacity to manage public investment.

In recent months, the government has been forging ahead with plans to build a section of the road from Linden to Lethem, the Amaila Falls Hydropower project, a new Demerara Harbour Bridge, the Corentyne River Bridge, and a US$1 billion gas to power project

The IMF also wants Guyana to set 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 Resource Fund to anchor fiscal policy in a sustainable way. 

According to that global financial institution, 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 IMF also recommend further analysis of the oil transfer rules, to ensure the long-term sustainability of the NRF and intergenerational equity.