While Guyanese authorities can be commended for aggressively channeling a portion of its oil revenues to public infrastructure and social welfare development, the International Monetary Fund (IMF) has recommended that there be periodic reviews of such expenditure. The financial institution underscored that such an exercise would be critical to maintaining macroeconomic stability by setting a pace of public investment that takes into account absorption and institutional capacity constraints.
The IMF outlined the foregoing perspective in its Concluding Statement for its Article IV Mission in Guyana, held during the period August to September 2023. Such missions are intended to understand the economic well-being of IMF member states.
In its Concluding Statement, the IMF recommended that authorities take several measures to ensure oil spending is prudent while maintaining economic stability. Towards this end, it called for the development of a comprehensive Medium-term Fiscal Framework (MTFF). The financial institution said, “The MTFF would contain a clear medium-term fiscal anchor, a transition path, and an operational target…”
It should be noted that this very recommendation was captured in the IMF’s 2022 Article IV Report on Guyana. In that document, the IMF said the MTFF is necessary to ensure good governance, support inclusive growth and address challenges relating to climate change. It also noted the experience of other oil-producing countries which shows that the absence of such a framework resulted in major macroeconomic imbalances.
Though there is merit in such a framework, Guyana’s Vice President, Dr. Bharrat Jagdeo believes it would be redundant since expenditure reviews are already being done at regular intervals. At a recent press engagement, the official said the government is very mindful about the impact of its spending.
The official said, “We do this (reviews) almost on a daily basis. We don’t need a set period with long intervals to review expenditures because we are in a dynamic environment and therefore we constantly do this. Before we seek a supplementary provision for example, we do a periodic review of expenditure to see where we are and we then look at the government’s expenditure to see its impact on key variables such as the balance of payments, the fiscal deficit, on the exchange rate, all of these issues.”
The chief policymaker for the oil industry said the government is already looking at the next big wave of capital expenditure, reminding that the first wave consisted of rolling out plans for 12 hospitals, 100 kilometres of four-lane roads, and the imminent Gas-to-Energy Project.“Although we can finance it, we have been very cautious because the extent [to which] we do that we can push the overheating of the economy. So we do look at the impact of expenditure and so we accept the IMF recommendation but this is something we are doing already,” the Vice President concluded.