IMF pleased with Guyana

The Guyana economy expanded by more than three per cent last year spurred by the recovery in the agricultural sector and continued strong gold production and robust activity in the non-tradable sector, the International Monetary Fund (IMF) has said.

The Washington-based financial institution said that the CARICOM country had been able to weather "the impact of the global crisis well by regional and global standards" and that economic activity expanded by 3.3 per cent in 2009 compared with to two per cent the previous years.

Inflation fell to 3.6 from 6.4 per cent in 2009, reflecting the softening in world commodity prices, the IMF said.

Guyana's current-account deficit narrowed, from 8.5 per cent of GDP to 5.0 per cent, and the international-reserve position strengthened significantly.

Gross reserves rose to US$623 million at year end.

The reserves were built from "strong official inflows, including concessional loans and grants, and the fund's special drawing rights allocation and steady short-term capital inflows by commercial banks attracted to higher domestic interest rates," said the IMF

It said that the nominal exchange rate remained stable, and the impact of the crisis on the financial sector has been limited so far, although expansion in private-sector credit has moderated to about six per cent in 2009, down from nearly 22 per cent in the previous year, reflecting both a deceleration in private-sector credit demand, as well as tighter lending standards by the banking sector.

The Washington-based lending institution said that the macroeconomic policies of the Guyana government have remained prudent, noting that monetary policy tightened somewhat in 2009, supporting the decline in inflation and external stability.

The fiscal deficit for the non-financial public sector declined to 3.3 per cent of GDP from 4.7 per cent of 2008 "on the back of higher-than expected revenues that supported the full execution of priority spending, including on infrastructure," said the fund.

Structural reform

Guyana's public debt fell from from 93.1 per cent of GDP as at end of 2006 to 56.8 per cent of GDP in 2009, "assisted by debt-relief operations and fiscal consolidation efforts," the IMF said, noting that structural reform has continued to focus on further reducing vulnerabilities and entrenching long-term growth.

The IMF, in praising the Bharrat Jagdeo government's economic policies, said that the strong fiscal consolidation in 2009 provides space for a more gradual tightening over the near term to support infrastructure investment and growth.

"A cautious fiscal stance remains nevertheless warranted given remaining vulnerabilities," it said.

- CMC