Tuesday, September 27, 2022

IMF says oil production ramp up makes Guyana’s prospects more favourable than ever before

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The International Monetary Fund (IMF) noted on Friday that Guyana’s medium-term prospects are “more favorable than ever before,” given its increasing oil production and the fact that it holds the potential to greatly transform the nation’s economy.

This was specifically noted in its Concluding Statement which describes the preliminary findings of IMF staff at the end of an official staff visit (or ‘mission’), in most cases to a member country. These visits are undertaken as part of consultations under Article IV of the IMF’s Articles of Agreement, in the context of discussions of staff monitored programmes or as part of other staff monitoring of economic developments.

The Fund said oil production is expected to increase significantly with the coming on stream of two large oil fields in the Stabroek Block during 2022-26. These include the Payara and Yellowtail Projects.

Furthermore, the financial institution indicated that Guyana’s commercially recoverable petroleum reserves is estimated to be well over 11 billion oil-equivalent barrels, the third largest in Latin America and Caribbean, and one of the highest levels of oil reserves per capita in the world. The fund said, “This could help Guyana build up substantial fiscal and external buffers to absorb shocks while addressing infrastructure gaps and human development needs.”

The IMF warned however that increased dependence on oil revenues will expose the economy to volatility in global oil prices. It said too that a slowing global economy and the repercussions from the war in Ukraine could also adversely affect non-oil exports.

On the other hand, the Fund said higher global oil prices and additional gas and oil discoveries could significantly improve Guyana’s long-term economic prospects.

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The Fund said its staff members strongly support the authorities’ goals to transform the economy, address development needs in an inclusive way, and protect the long-term economic well-being of the country. It said too that its staff members strongly support the authorities’ efforts to reduce electricity costs, improve transport infrastructure, diversify the economy, improve access to and quality of social services, and advance more broadly towards the Sustainable Development Goals.

Significantly, the IMF commended the authorities’ efforts outlined in the Low Carbon Development Strategy 2030 to maintain the country’s forest coverage and address climate change challenges by shifting towards renewable energy sources, while entering the international carbon credits market.

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It also welcomed the recent amendments to the National Resources Fund Act. It said the recent amendments to the 2019 Natural Resource Fund (NRF) Act set clear ceilings on withdrawals from the Fund for budgetary spending and promote transparency in the management and use of oil resources.

The IMF Executive Board is expected to discuss Guyana’s Article IV consultation on August 31st, 2022.

OilNOW understands that a staff team from the International Monetary Fund led by Ms. Alina Carare (incoming mission head) and Meredith McIntyre (outgoing mission head) held virtual discussions during May 18-June 1 for the 2022 Article IV Consultation.

The team met with Senior Finance Minister Dr. Ashni Singh, Minister of Parliamentary Affairs and Governance Gail Teixeira, Central Bank Governor Gobind Ganga, other senior officials, representatives from the private sector, banks, the opposition party, labour unions, and other stakeholders, including Guyana’s international development partners.

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