With Guyana poised to benefit from an astounding oil windfall from the ExxonMobil-operated Stabroek Block, the country finds itself well positioned on the pathway for a balanced budget by 2025, the Inter-American Development Bank (IDB) said in a recent report.
In an August 11, 2023 project profile prepared by the bank for a US$30 million loan for Guyana’s Ministry of Human Services and Social Security, it was noted that the booming oil industry has allowed for the progressive improvement of the nation’s economic prospects. “…Gross Domestic Product (GDP) grew by 43.5% in 2020, 19.9% in 2021 and 62.3% in 2022. In [2022], there were significant spillovers to the non-oil economy, which grew by 11.5%,” the IDB said.
Although public debt is increasing, the IDB said faster GDP growth is contributing to falling levels of debt to GDP. The financial institution said this is expected to decline from 51.1% of GDP in 2020 to 29.8% in 2023, reaching 8.9% in 2028.
Guyana has almost no debt, generating Asian levels investment – AMI | OilNOW
As of March 2023, Guyana’s Central Bank noted that the stock of external debt increased to US$1.6 billion on account of an increase in multilateral debt stock during the first quarter. Be that as it may, Central Bank was keen to note that external debt service which accounted for 1.7% of export earnings increased by 27.9%, on account of higher principal repayments to bilateral creditors and higher interest payments to multilateral creditors.
Noting the importance of the oil revenues, the IDB said this has been able to help authorities reduce the fiscal deficit to 5.2% in 2022, adding “the country is projected to progress to a balanced budget by 2025.” (This describes a case where revenues are greater than or equal to expenses).
Looking at other future prospects, the IDB said oil production is expected to drive GDP growth in the medium-term, with an average annual growth rate of 37% between 2022 and 2026. That particular forecast was also made by the International Monetary Fund (IMF) in its World Economic Report published in April 2023.
IMF significantly increases Guyana’s growth forecast for 2023, 2024 | OilNOW
Despite Guyana’s favourable macroeconomic context, the IDB cautioned that poverty remains high. It cited in this regard, data from the Guyana Labour Force Survey in 2021 which showed that 42.3% of the population lived under the poverty line of US$5.50 per day (adjusted for purchasing power).
Guyanese authorities have assured that a portion of the oil windfall is being directed to citizens through strategic social welfare programmes, adding that more effort in this respect is being streamlined for implementation over the next two years.
