IDB predicts higher food import prices, increased forex demand, but “robust” economy

Last Updated on Thursday, 15 January 2026, 0:02 by Writer

The Inter-American Development Bank (IDB) on Wednesday said falling oil prices and higher import prices are among factors that can see a further rise in the cost of imported food and increased demand for foreign exchange.

“Growing policy uncertainty and ongoing tariff wars could fuel even higher import prices, particularly food imports, further increasing inflationary price pressures and worsening the terms of trade,” the IDB said in its December 2025 edition of Caribbean Economics Quarterly: “How Are External Forces Impacting Trade, Growth, and Investment in the Caribbean?”

On the aspect of Guyana’s ratio of export prices to its import prices and how that can impact on the average person’s quality of life and purchasing power of his or earnings, the IDB said Guyana’s terms of trade have worsened, “owing to persistent increases in import prices, which have been matched by a contraction in the price of oil.” Relying on the International Monetary Fund (IMF), the IDB says Guyana’s terms of trade index fell by 32.4 percent and 0.3 percent in 2023 and 2024, respectively, but remained steady at an index of 47 percent in September 2025.

Looking ahead in this regards, the IDB said Guyana’s inflation can worsen and put further pressure on the exchange rate . “As such, if this trend continues, there will be upward pressure on inflation (from higher import prices) and even higher demand for foreign currency. This will constrain the Central Bank’s efforts to contain inflation, stabilise the real effective exchange rate, and tame Dutch Disease,” the development bank says.

While lower oil prices are not generally good for Guyana’s profits, the IDB Quarterly says the decline in global oil price to about US$60 per barrel in 2026 is expected to be offset by three more oil wells coming on stream to double current oil production to about 1.5 million barrels per day by 2029. “If these developments materialise, Guyana could see a reduction in profit from oil, a reduction in government revenues, and a curtailment in planned investments.,” the IDB says.

The bank says as long as oil prices stay above US$28 per barrel, Guyana’s break-even price, the oil sector will remain profitable and attractive to investors.

The United States (US) has in recent years triggered a global tariff war with China, European Union, Brazil and other countries. Several have since been negotiated but still remain relatively high.

In the case of Guyana – except for oil and gold – the IDB publication says US tariffs can affect Guyana’s efforts to diversify its economy, especially within the agriculture and manufacturing sectors.

The Western Hemispheric development financial institution also cautioned that inflationary pressures are rising and can complicate monetary policy if they continue.

Saying that annual food prices in Guyana rose by 8.2 percent in August 2025, the bank added that they are expected to drive inflation to 3.6 percent, higher than the 2.9 percent inflation rate a year earlier.

The IDB says downside risks for Guyana’s economy may arise from the materialisation of Dutch Disease, reflected in the appreciation of the real effective exchange rate, a loss of non-oil sector competitiveness, slower growth, and inflation.

Recalling its 2025 Article IV report on Guyana, the IDB indicated that there are not yet clear signs of Dutch Disease. However, there are signals worth monitoring, including the increased concentration of the oil sector, higher and persistent government spending, the rise in inflation, an appreciating real effective exchange rate, and growth and labor trends in the non-oil sectors, such as such gold mining and agriculture.

The IDB, at the same time, says growth in Guyana will remain robust in the medium term, but upskilling its labor force poses an important challenge. “Guyana’s economy remains strong, underpinned by expectations of continued oil production and non-oil sector growth, with growth expected to average 14 percent between 2026 and 2030”.

The bank adds that the government is aware that it has to promote a major increase of human capital and has made provision for free tertiary education, such as funding thousands of scholarships and as well as supporting vocational training.

In addition, the government is encouraging re-migration, especially of teachers and nurses, IDB says.