Caribbean & Central America - October 2022
GUYANA: Government makes most of oil boom to ease cost of living
Guyana’s GDP is forecast by the International Monetary Fund (IMF) to grow by 57.8% in 2022, and the government is making the most of this enviable oil-boom driven performance to ease the cost-of-living crisis without incurring any serious fiscal damage. On 1 October, the government announced that it was moving to reduce the price of petrol by 20% and the price of diesel by 15%. Announcing the move, the finance ministry was not shy in making a political point out of its economic good fortune, saying: “Since resuming office in August 2020, the PPP/C [People’s Progressive Party/Civic] government has implemented a suite of measures to ease the cost-of-living pressures and to improve disposable incomes, in an ongoing effort to address these head-on and to mitigate the effects of rising prices globally on all Guyanese citizens.”
The extent of Guyana’s good fortune was emphasised in the latest IMF Article IV Consultation, the preliminary results of which were released on 27 September. The IMF reports that oil GDP is expected to grow by over 100% in 2022 and then by an average annual rate of around 30% for the years 2023-26. Overall GDP, following its 57.8% advance this year, is then expected to grow by an average of 25% per annum for 2023-26. And the all-important GDP per capita, following an advance of 57.3% this year, will grow by an average of only just under 25% over the same period. All the while public-sector debt will continue to reduce from a high of 42.9% in 2021 to just 13.7% in 2026.
Guyana: Selected Economic Indicators
| Prel. | Proj. | ||||||
| 2021 | 2022 | 2023 | 2024 | 2025 | 2026 | 2027 | |
| Production and Prices | (Annual percent change) | ||||||
| Real GDP | 23.9 | 57.8 | 25.2 | 21.2 | 28.2 | 25.5 | 3.3 |
| Real Non-Oil GDP | 4.6 | 7.2 | 5 | 5.1 | 5.2 | 5.2 | 5.2 |
| Real Oil GDP | 56.9 | 116.1 | 36.8 | 28.3 | 36.5 | 31.1 | 2.9 |
| Real GDP per capita | 23.4 | 57.3 | 24.8 | 20.9 | 27.9 | 25.1 | 3 |
| Consumer prices (average) | 3.3 | 7.6 | 7.6 | 5 | 3.8 | 3.5 | 3.5 |
| Consumer prices (end of period) | 5.7 | 9.4 | 6 | 4.1 | 3.5 | 3.5 | 3.5 |
| Terms of trade | 13 | 20.9 | -5.5 | 0.7 | -0.3 | 0.3 | 1.3 |
Sources: Guyanese authorities; UNDP Human Development Report; World Bank; and IMF.
In its preliminary report on the Article IV Consultation, the IMF notes that Guyana’s commercially recoverable oil reserves are expected to reach over 11bn barrels, “one of the highest levels per capita in the world” (Guyana has a population of 789,000). For the IMF, the imperative now is to “address development needs and build substantial buffers to absorb shocks”. The lender urges “prudent policies and structural reforms” in order to avoid any build-up of “macroeconomic vulnerabilities” and in order to ensure “inclusive growth and intergenerational equity”.
This question of “inclusive growth” is something that is continuing to exercise the opposition A Partnership for National Unity-Alliance for Change (Apnu-AFC). Opposition leader Aubrey Norton made his point publicly and forcibly when refusing to shake President Irfaan Ali’s hand during the 1 August Emancipation Day celebrations. He said: “I do not shake hands with my oppressors”. Norton went on to accuse the government of starving opposition-supporting communities of resources and discriminating in the distribution of coronavirus (Covid-19) related cash grants, in the dispensation of justice, and by withdrawing financial support. Norton said of the PPP/C government: “Your hands are dirty. They have on them discrimination against us. Your hands have on them the protection of people who are killing people extrajudicially. For what reason must I touch hands? I will not.”A regularly heard complaint from the opposition is that the mostly East Indian supported PPP/C is shutting the opposition’s Afro-Guyanese supporters out of participation in the oil boom.
Meanwhile, the government is holding its line against pressure to renegotiate the Production Sharing Agreement (PSA) with US oil giant ExxonMobil. On 18 September, the ministry of natural resources issued a statement saying: “The government reiterates that the contract will remain fiscally unchanged for the country and investors’ benefit.” However, it did take the opportunity to emphasise that the existing PSA will not be applied to other blocks for production or exploration. It said: “This includes the upcoming competitive bidding round that the government intends to host in the last quarter of this year and other commercially viable discoveries that will be made in other oil blocks. The 2016 model or any previous PSA will not be applied to any other oil block where a discovery has been made.”