Following the passage of the Natural Resource Fund (NRF) legislation, the Guyana government has been able to authorise a US$607.6 million transfer to support the 2022 budget. The administration has said that the withdrawal would be used to invest heavily in capital expenditure while supporting the critical needs of the vulnerable population.
The government was keen to note that the strong oil windfall is therefore allowing the authorities to improve the standard of living of citizens as well as temporarily lower rates or remove taxes on selected items, including gas and diesel fuels, to mitigate the impact of rising inflation.
Its commentary which was included in the International Monetary Fund (IMF)’s latest economic review also noted other ways in which the government has used the oil revenues to ease the pressures facing the nation. With the significant rise in fertiliser prices, the authorities said they are supporting farmers to access fertilisers at a more affordable cost.
The administration said too that it is committed to strengthening the medium-term fiscal framework. It said the framework will be underpinned by prudent transfers from the NRF over the medium to longer term. Such actions, the government said, will put the country in an even more sustainable fiscal position and reduce the risk of macroeconomic imbalances.
While the IMF has lobbied for the oil funds to be used for the strategic closing of the budget deficit, the government said this will take some time to achieve. In fact, the government said it will take longer than the 2025 target put forward by IMF staff in the report, considering the significant investment in both physical and human capital needed to support Guyana’s development goals.
In the meantime, the government said the oil windfall will help boost fiscal buffers and significantly improve the public debt outlook.
Guyana currently exhibits one of the lowest debt-to-GDP ratios in the region, with all external debt indicators below the relevant vulnerability thresholds, according to the IMF staff’s Debt Sustainability Analysis.