The IMF-Guyana Affiliation

January 2, 2018 by · Leave a Comment 

The International Monetary Fund (IMF) has a most critical role in being one of the forecasters of economic growth or depression and helping to provide needed funds to its members to prevent a fiscal crisis or keep it at bay.

This organization consists of 188 countries. They all work to promote global financial cooperation, secure monetary stability, assist international trade, encourage high employment and sustainable economic growth and reduce poverty around the world.

But the IMF’s primary purpose is to ensure the stability of the international monetary system—the system of exchange rates and intercontinental expenditure that facilitates member states to conduct business with each other.

The Fund, as it is usually referred to, had its mandate updated in 2012 to include all macroeconomic and financial sector issues that bear on global stability. Created in 1945, the IMF conducts missions usually on an annual basis in its member states.

The consultations which are done during this period fall under Article IV of the IMF’s Articles of Agreement in the context of a request to use IMF resources (borrow from the IMF), as part of discussions of staff monitored agendas, or as part of the examination of monetary developments. Such missions have been conducted in Guyana, with the last report being in 2013.

However, one of the missions here in recent years led by Mr. Marcos Chamon lasted from February 24 to March 7 and provided a most insightful overview of Guyana’s economic standing. The team met with Finance Minister, Winston Jordan; Public Infrastructure Minister, David Patterson; Natural Resources Minister, Raphael Trotman; Central Bank Governor, Gobind Ganga and other senior officials.

The IMF team noted that Guyana’s economy remains resilient and continues to grow despite significant global headwinds. It recalled that in 2015, Guyana’s real Gross Domestic Product (GDP) grew at 3.0 percent, notwithstanding lower commodity export prices, holdups in financial plan executions and political indecision in the lead-up to general elections, which was held in May of that year. The members agreed that developments in the global economy remain a drag on growth, particularly for commodity exporters.

On the other hand, it stressed that growth is expected to increase due to gold production and public investment. It noted that the Guyana Government had projected a 4.4 percent growth in 2016, but based on its findings, a 4.0 percent growth rate should have been expected.

The Mission members noted that boosting private sector confidence is key for growth momentum and commended the authorities for maintaining macroeconomic stability. It was documented in their report that the steep decline in international oil prices narrowed the current account deficit.

They said that lower prices reduced the cost of fuel imports, which more than offset the impact of lower export costs. This led to a decline in the nation’s accounts by 4.6 percent of GDP in 2015 from 10.8 percent in 2014.

The team observed that reserves stood at 3.6 months of imports at the end of 2015 and was projected to increase over the medium-term, bolstered by foreign investment and donor support for public investment.

Meanwhile, the exchange rate, they noted, remained broadly stable due to offsetting positive and negative external shocks. But, in spite of the aforementioned, the IMF warned that Guyana remains vulnerable to movements in commodity prices due to a heavy reliance on oil that is imported, as well as the tunnel vision focus on a few products.

The mission noted that exchange rate flexibility would continue to make possible alterations to external developments and safeguard reserves. They noted that the fiscal balance improved in 2015, reflecting one-off factors.

The Mission members expressed that capital expenditure declined by almost 30 percent, demonstrating delays in the national investment programme. Going forward, it said that the deficit is expected to remain between five and six percent of GDP. The IMF staff said that the authorities have an ambitious investment strategy for environmentally sustainable and socially inclusive growth.

They asserted that improvements in transportation and telecommunication infrastructure and renewable power projects will enhance efficiency, mix distant municipalities, facilitate economic diversification and ease key impediments to growth. These investments, they stated, should stimulate economic activity, provide a powerful swell in competitiveness and make certain that the payback of growth is more broadly distributed.

The IMF team said that discussions with authorities centered on strategies to uphold economic sustainability while at the same time improving growth. They said that increasing current expenditure will crowd out space for public investment, despite significant donor support.

The mission suggested moderating the growth of wages along with reducing reliance on government support. In that regard, the improved financial performance of Guyana Power and Light (GPL) and the reforms proposed by the Commission of Inquiry for the Guyana Sugar Corporation are welcomed by the IMF.

The team stressed that the scope and pace of reform should take into account social implications. They said, too, that containing current expenditure would provide additional space for public investment while preserving debt sustainability.

It was found that the magnitude and sources of financing of the deficit have implications for growth. Statistics also indicate that domestic financing may crowd out credit to the private sector and raise interest rates.

The group said that Government’s exclusion of possible future hydrocarbon export income from their medium-term plans was also deemed to be commendable.

The IMF Mission commented that the monetary policy stance should remain accommodative. It said that lower prices for imported goods, including fuel, continue to restrain inflation.

The IMF team said that credit growth has moderated since 2015, mainly on account of reduced lending to businesses. Banks were found to be well capitalized, but heightened vigilance is warranted due to increases in nonperforming loans, they asserted.

It was noted that recent changes to credit reporting legislation are welcomed and the authorities are encouraged to continue to strengthen financial sector supervision. The mission suggested tightening provisioning requirements, limitations on related lending and loan classification rules.

A Financial Sector Assessment Program mission will also visit Guyana soon to provide a more granular analysis of the financial industry.

While recent steps towards strengthening the Anti-Money Laundering and Combating the Financing of Terrorism framework are welcomed, the Mission emphasized that the authorities should address remaining deficiencies promptly.

The IMF, in its analysis of the nation, spent considerable time on Guyana’s looming oil wealth.

Guyana halts large scale sugar production: Terrifying consequences ahead

January 2, 2018 by · Leave a Comment 

Sugar was first cultivated on a plantation-scale in Guyana in the 1630s, that is, nearly 400 years ago. This sweet sector was one of Guyana’s most rewarding sectors back then as it served as one of the strongest pillars of the economy. In fact, sugar was one of the reasons why Guyana was able to attract the interest of many international donors and investors, as the sector was deemed to be robust and profitable.

Today, this sector, which has an employment base of nearly 17,000 workers, is about to face a huge scale-down in production.

In the eyes of the A Partnership for National Unity + Alliance For Change (APNU+AFC) Coalition Administration, keeping sugar alive on a large scale would be tantamount to allowing a cancer to eat away daily at limited resources which could be used for the development of other sectors.

The Government’s decision to end sugar production has not been taken lightly by those within the sector, as well as the political opposition, the People’s Progressive Party (PPP). There have been protest actions this year which amounted to the loss of close to 30,000 hours of labour. This will no doubt affect the end of year production of the sector. But even in the face of this action, the Government is holding its ground.




The Sugar Industry is the only sector in Guyana that bled the nation of over $40 Billion in less than five years. This is even before the new administration came into power. Before the APNU+AFC took over, they promised that they would bring an end to this practice; the practice of bailing out a sector whose production costs and employment costs far exceed the revenue that it brings in. But even the new government was hard pressed to bail out the industry as well. In 2015, the Government noted that the Guyana Sugar Corporation (GuySuCo) was unable to make payments to its employees and needed cash fast to repair a number of estates. This resulted in the Government doling out $12 Billion in its first year in office. That amount was intended to help the sugar industry clear some of its debt but it only ended up clearing owed wages and salaries for that year. The following year saw a cash injection of $11 Billion. And for 2017, the administration had no choice but to grant the state-owned entity, GuySuCo, some $9 Billion to take care of fixed expenses. In three years, the Government has expended $32 Billion in this sector. This amounts to $72 Billion in less than 10 years, which would have been taken from the national purse to keep a dying industry alive. If large scale production is not cut back now, GuySuCo would need close to $10 Billion every year to stay afloat.




The situation gets worse when one considers the amount of debt that the sugar industry is drowning in. Statistics show that GuySuCo has failed to make a profit since 2005 and even suffered losses to the tune of $67.8 Billion by 2009.

By the time the PPP left office, GuySuCo’s debt burden was $80 Billion.

According to Dr. Clive Thomas, GuySuCo’s Chairman, the state-owned entity owes $1.7 Billion to the National Insurance Scheme (NIS); $7.6 Billion to the Guyana Revenue Authority; $226 Million to the Guyana Agricultural Workers Union (GAWU); $665 Million to the Pension Fund; $1 Billion to foreign creditors; $2.8 Billion to local banks; $829 Million for a Caribbean Development Bank (CDB) loan; and $29.3 Billion in loans for the Skeldon Sugar Factory. In order to clear some of the debt, GuySuCo’s top executives have agreed with the Government that it should engage in the sale of some of its lands. This process has already started.



The Government’s decision to scale back on the production of sugar by year end is not only influenced by GuySuCo’s debt as well as its financial impact on the national coffers. It is also influenced by the poor state of the sugar estates in Guyana.

During the 1970’s, Guyana had 11 sugar plantations. These were stationed at Leonora, Uitvlugt, Wales, Diamond, Enmore, La Bonne Intention, Ogle, Albion, Blairmont, Rose Hall and Skeldon. With a number of factors influencing sugar production over the years, this was reduced to six.

Today, the Government has moved to merge the Wales Estate with Uitvlugt Estate. This decision was taken since an evaluation report showed that Wales was operating at less than 60 percent capacity, coupled with its deteriorating drainage and irrigation systems.

Albion Estate will also be merged with one at Rose Hall. This brings the total to three: Blairmont in West Bank Berbice, Albion-Rose Hall in East Berbice and the Uitvlugt-Wales in West Demerara.

The declining production figures of the aforementioned estates along with their dilapidating state is what moved the previous administration to commission the establishment of a state of the art sugar estate. The Skeldon sugar estate was built to the tune of US$200 Million. It was, and still is, one of Guyana’s most costly projects. The estate was built by the Chinese. It was expected to rescue the sugar industry.

Instead, the Skeldon Sugar Estate became the sugar sector’s worse nightmare. Bit by bit, the world class facility started to fall apart, until it was deemed unsafe for employees and left Government with no choice but to shut shop earlier this year. The Government has pumped more than $20 Billion into trying to repair this one estate. And it is still saddled with repaying the loans which supported its establishment. The current administration is now in the process of selling this lost cause.




The Government’s move to bring an end to large-scale sugar production is also in keeping with a commitment it made to the International Monetary Fund (IMF). The IMF is a global donor agency which also monitors the financial health of its members.

The IMF warned that it would be in keeping with prudent financial management practices for Guyana to rid itself of continuous bailouts to the sugar sector unless its intention is to nurture an economy that is riddled with debt and lopsided in growth.

Since this cautionary statement, the Government has been, on an annual basis, reducing its bailout to the sector. While the industry enjoyed a $9 Billion cash injection for 2017, it will only receive $6 Billion for 2018 and no more.




While the IMF did warn the Government to take certain fiscal measures when it comes to sugar, it did warn that this should also be done in consideration of the social implications that would result.

The Government has not done a single study on how its move would affect the sugar workers. What it has done was launch a Commission of Inquiry into the sugar sector, and it continues to follow the recommendations which speak to cutting losses.

It is yet to tell the nation what are its plans to support over 10,000 workers and their families which will be displaced for the Christmas season and months to follow.

Is China really that bad for us?

January 2, 2018 by · Leave a Comment 

With its sheer economic size and military muscle, China has proven that she is not a push over. She’s confident, quite the entertainer, diplomatic and generous in the eyes of some nations. But to others, she has acquired an image of being a bully; a ruthless dictator who wants it all, one who wants things done her way or else…

It is often argued that the Caribbean has seen both faces of this powerhouse. And the individual experiences leave some nations torn between deciding what the true intentions of China in the Caribbean are.

In Guyana, the experience has been mixed. On the diplomatic level, the Governments of our time have lauded China for its investments in Guyana. But in other instances, China has been criticized for being silent on the fact that a number of its companies have engaged in corrupt acts in Guyana. In fact, China appears to be less concerned with its companies, some of which the Government is part owner of, which are involved in the endemic corruption here.

But the side of the coin that you choose to see is up to you –the reader.

The Inter-American Development Bank (IDB) believes that before judgment is passed on the People’s Republic of China, one must justly consider its place in the Caribbean.




Since China emerged in 2009 as the world’s largest exporter of goods and the fourth largest exporter of services, the percentage of total imports sourced from China has increased dramatically. Low-cost Chinese manufacturers have penetrated almost all markets. Import of Chinese products in the Caribbean region has mushroomed and many countries report China as one of its top five sources of imports.

On the flip side, to fuel its rapid industrialization, China has increased imports of raw materials and emerged as a significant export destination for commodity producers in Latin America, but to a much lesser extent in the Caribbean.

In rank order to 2010 data, the IDB said that Cuba, Dominican Republic, Guyana, Dominica, Barbados, Haiti, Suriname, Trinidad and Tobago, and Jamaica were exporting to China albeit at low percentages of total exports. Over time, the trade balance between the region and China has tended to deteriorate, with China selling or exporting more to the Caribbean than buying or importing from the region.

The IDB said that this indicates that the Caribbean region has much to do to promote exports to China. During the period covered, the Caribbean region has had a positive balance in only two of the years.

According to the IDB, the Caribbean countries that have benefitted from the increased demand for primary goods are Cuba (metalliferous ores and metal scrap), Jamaica (aluminum oxide), Trinidad and Tobago (oil and gas), Suriname (minerals, timber), and Guyana (minerals, timber).

The four leading products exported to China from the Caribbean states with available data are alumina (65 percent), timber (9 percent), nonferrous metal waste (7 percent), and crude minerals (4 percent) for the period 2006–2008 (Economic Commission for Latin America and the Caribbean; United Nations Commodity Trade Database.).

The rest of the Caribbean is dependent on services—tourism, financial services, and call and data processing centers—which have not seen such a dramatic up-tick in their exports. In general, merchandise imports from China have exceeded merchandise exports to China, creating a regional trade deficit with China.




Compared with other parts of the world, the Caribbean has not been as favoured in attracting Chinese foreign direct investments in absolute terms because the majority of its economies are small, tourism-dependent markets and not resource rich, but some have done better in relative terms.

According to the IDB, most of China’s outflows of investments and granting of loans have been concentrated in resource-rich developing countries.

Over the past eight years, China has lent US$100 Billion in total to Latin American and Caribbean governments and companies, but half of the loans went to Venezuela, followed by Argentina, Brazil, and Ecuador in rank order. China extends financing principally through the China Development Bank and the Chinese Export Import Bank.

By 2010, the two Chinese banks had loaned more money to Latin America and the Caribbean than the World Bank, the Inter-American Development Bank, and the US Ex-Im Bank combined. Most of the Chinese funding, however, was concentrated in a few countries and did not displace these historically dominant financial institutions on per country basis, except in the cases of Venezuela and Argentina.

Excluding the BVI and the Caymans, the leading Caribbean destinations for the time period covered in rank order were Cuba, Guyana, Trinidad and Tobago, Suriname, and Jamaica. The other Caribbean states garnered less than US$10 Million.

In more recent times, the largest Chinese investment has been the Baha Mar Resort in The Bahamas via a US$2.4 Billion loan from the China Export-Import Bank (Hotel News Now 2011). The developer of the project filed for bankruptcy protection on June 29, 2015 (Gleason & Fitzgerald, 2015).



The rise of China undoubtedly represents significant positive opportunities for the independent states of the Caribbean. First, China represents an attractive export destination (rising purchasing power, large market size), especially for commodity producers.

The five commodity producers in the sub-region—Belize, Cuba, Guyana, Suriname, Trinidad and Tobago—have already benefitted handsomely from the commodity super cycle that China fueled up in 2011–2012. The commodity boom is waning and commodity prices are expected to continue to decline over the medium term.

Nonetheless, if Chinese authorities can manage to maintain growth rates between 5 and 7 percent and complete structural reforms while avoiding financial and environmental crises, China will continue to be a growth locomotive for its trading partners. Second, China represents a new source market for tourists. In 2014, an estimated 117 million outbound Chinese tourists spent approximately US$498 Billion.

Leading destinations were Hong Kong, Macau, the United States, and France (Plowright, 2015). The number of Chinese tourists is expected to double by 2020. Main constraints on Chinese tourism outside of Asia are the cost of long-haul travel and the limited amount of vacation time the typical Chinese worker earns in the year (Credit Lyonnais Securities Asia, 2014).

To date, the typical Chinese tourist has tended to economize on food and accommodation and splurge on the purchase of luxury goods. However, shifts in tastes and expenditure patterns are emerging. For the most recent data available, it seems that among the higher income Chinese households, they are spending more on entertainment and experiences.

In the eyes of the IDB, an opportunity clearly exists for Caribbean tourism-dependent economies to target this higher income bracket, those who may be seeking different experiences and opportunities to explore far-flung and exotic cultures.

For the Caribbean to capture more of the Chinese market, the IDB believes that many changes and investments would have to be made—streamlined or visa exemptions for Chinese nationals, more five-star hotel properties, better personal and property security, more offering of Chinese cuisine, hiring of Mandarin and Cantonese speakers as staff and tour operators, sensitizing staff and tour operators to Chinese cultural proclivities and differences, developing marketing materials and signage in Mandarin language, offering more price-competitive shopping experiences, and establishing more airlift connections.

The IDB also believes that it represents an alternative and flexible source of loan finance and foreign direct investments. Already, state-owned development banks in China have surpassed the World Bank in lending, and outbound foreign direct investments from China to the rest of the world have multiplied. Chinese financing, however, tends to have strings attached. Loans from state-owned banks tend to support the penetration of Chinese multinational corporations abroad.

According to the IDB, what distinguishes Chinese loans and grant capital is that it is not accompanied with “policy conditionality” as is the case sometimes with the more established international finance institutions such as the International Monetary Fund, the World Bank, and regional development banks as well as bilateral donor organizations.

For the IDB, China is a pragmatic partner in foreign relations, willing to engage with a wide spectrum of regimes, irrespective of quality of governance, political conditions, financial conditions, or state of development. Most importantly, China is also open to accepting repayments in physical commodities, especially oil, which broadens access to countries that may be illiquid or have a history of loan defaults and thus have no access to traditional capital markets.




Beneficiary countries need to ensure that they have clear strategic development goals, adequate negotiation capacity and robust institutional safeguards when considering financing and investment transactions from any bilateral source.

In engaging China, Caribbean states should clearly seek to enhance bargaining positions; but they must, at the same time, be aware of potential trade-offs. In bilateral bargaining, the burden is on each party to negotiate well, but differential institutional capacities and asymmetric information may weaken bargaining positions and impede optimal outcomes.

Below are a few examples of how practical realities in the region today may constrain optimal negotiations and how Caribbean partners and stakeholders may be susceptible because they are likely to be the weaker party in the negotiations; a priori, the party desirous of an injection of financial capital, which is in scarce supply, but offering a resource or an opportunity for which there are many other substitutes or competitors.

According to the IDB, Chinese multinational companies have been criticized in several countries for having “low local content,” that is, not hiring local labour, using only minimal amounts of locally sourced materials in turnkey operations (e.g., building of roads, ports, stadiums, hotels, hospitals, dams) or failing to honour tax holiday contracts by incorporating value added activities in extractive businesses.

As a result, the development impact may be reduced, especially in the case where the local unemployment rate is high and qualified local talent is displaced or underused.

The argument used to defend low local content is that local firms in the Caribbean generally have low capacity to deliver complex and large-scale projects on time. The low content proposition, however, reduces the spending multiplier effect and does little to build know-how or add value to local resources.

Since China has significant over capacity in steel and cement industries and surplus labour, these “tied deals” would seem to serve Chinese interests. Thus, there is a tradeoff between rapid completion with a minimum of local input into the project, and slower implementation with higher local input. The former option has the downside of reducing; a priori, the multiplier effect of the investment.

On another point, the IDB notes that the institutional capacity of the host country should ideally be strong in monitoring and enforcing compliance with assorted labour, environmental, and consumer safety standards vis-à-vis any foreign investor, but less than perfect capacity is a fact of life and low capacity is a hallmark of underdevelopment.

Therefore, host countries have to be extra cautious in engaging with companies that either come from home environments with non-uniform application of best standards or who are still on a learning curve and adjusting to internationally recognized best practices. Some Chinese firms have been accused of being more lax in complying with environmental regulations, and given that the majority of Chinese investments are in environmentally sensitive sectors such as energy, mining, and dam and road construction in developing countries, this may pose a reason for concern and make the case for extra efforts to improve enforcement capacity on the part of the host country.

Nonetheless, in 2013, the Government of China, in an attempt to improve standards, issued new environmental guidelines for Chinese firms operating abroad; calling upon them to abide by local regulations, to develop integrated risk management and mitigation systems with reporting mechanisms, to support community development, and to communicate with stakeholders about sustainability issues. Information on implementation of these new guidelines is not readily available.

Furthermore, the IDB notes that transparency, accountability, and full appropriation of benefits are overarching goals in any bilateral relationship. When these elements are missing, the distribution of benefits may be skewed or fail to be realized. When foreign partners are prone to non-transparency in business practices, this may reinforce the power of corrupt local elites, especially in country settings with compromised procurement systems, weak systems of oversights and audits, inadequate enforcement of anti-corruption laws and a weak press that could serve as deterrents or countervailing sources of power in the host country.

According to Transparency International, Chinese companies tend to publish little about country-to-country operations (revenue, taxes paid, capital expenditures), reveal little about organizational and signed contractual arrangements, such as corporate holdings, interlocking board memberships, political contributions, effective prices for goods and services rendered) and they tend to not report on audits and internal anti-corruption mechanisms.

Moreover, Chinese companies and banks have also shown flexibility in repayments. For example, in the case of Venezuela, much of that country’s US$20 Billion outstanding debt to China is structured to be paid in oil. However, the terms, conditions and effective costs are unknown to the Venezuelan public and international observers. Therefore, it is difficult to objectively access money for value propositions or to conduct cost/benefit and other types of economic and financial analysis.

The two leading Chinese financiers of development projects in developing countries tend to not publish or list on their websites Environmental Impact Assessments for their major projects in either Chinese or English. These tendencies could pose another challenge for host countries with weak institutions and again point to the need to strengthen their capacity as quickly as possible and aspire for full transparency and accountability.




In summary, the growing economic ties between the People’s Republic of China and Caribbean states may appear to be symbiotic but deliberate precautions and steps have to been taken to ensure mutual benefit, otherwise benefits may be one-sided or limited.

Economic Focus: Guyana’s Foreign Exchange Market

September 25, 2017 by · Leave a Comment 

Foreign exchange is a vital process in any country’s fiscal landscape.
Imagine for a minute that you have a business operating in Guyana, but you need to purchase some important manufacturing materials in the USA. To carry out that transaction with the USA, you would need to purchase US dollars. It makes the process easier while promoting trade at an international level.
The situation is similar at the national level. When countries need to purchase imports that are needed, it is required that they have different currencies in their system in order to effect their purchases from different parts of the world.
In Guyana’s case, for example, the Government would need foreign currency to pay for industrial supplies that are needed on a vast scale for the mining and agriculture sector. Depending on where the purchases have to be made, it would need to have different currencies to make the process easier.
With the aforementioned in mind, it is crucial for the business sector and the Government at large to pay attention to the behaviour of the foreign exchange market, as fluctuations can disrupt the flow of trade and commerce.
While some local financial analysts have detected that there were fluctuations in the exchange rate, specifically a decline in the availability of US dollars, the effect on businesses has been minimal.
Managing the Foreign Exchange Market in Guyana in order to ensure its stability is the Bank of Guyana.
According to its latest statistical report, the total volume of foreign exchange transactions increased by 11.8 percent to US$6,926.2 Million. It said that there was a net purchase of US$77.6 Million.
The Bank noted that the market was impacted by increases in transactions in most of its segments. Money transfer transactions were valued at US$186.9 Million or 27.7 percent below 2015 levels. Furthermore, higher net purchases caused the Guyana dollar to remain stable against the United States dollar at GYD$206.50.
Total foreign currency transactions increased by 11.8 percent to US$6,926.2 Million in 2016 from US$6,194.2 Million in 2015. Purchases and sales in the market were US$3,501.9 Million and US$3,424.3 Million respectively. Net purchases were US$77.6 Million in 2016 compared with net purchases of US$93.0 Million in 2015.
The licensed bank and non-bank cambios, which accounted for 44.4 percent of the total volumes, recorded a 9.2 percent increase in turnover to US$3,108.6 Million. The combined transactions of the six bank cambios were US$3,002.4 Million, an increase of US$253.9 Million or 9.2 percent over the 2015 level.
Interbank transactions totaled US$25.1 Million, a decrease of US$50.8 Million or 66.9 percent from the US$75.9 Million for the preceding year. The thirteen non-bank cambios’ transactions amounted to US$106.2 Million, an increase of US$8.6 Million or 8.8 percent. Non-bank cambios’ market share remained negligible at 3.5 percent. Hard currency transactions conducted at the Bank of Guyana totaled US$922.8 Million, an increase of US$107.1 Million or 13.1 percent over the previous year. Purchases and sales were US$460.3 Million and US$462.5 Million respectively.
This represented an increase in receipts of US$87.5 Million or 23.5 percent. The Bank also recorded an increase in net hard currency outflows of US$19.6 Million or 4.4 percent. Fuel imports constituted 56.6 percent of total payments.
The Bank sold US$28.2 Million to commercial banks, an increase of US$22 Million over the 2015 level. The Banks’ share of all transactions declined marginally to 13.3 percent from 13.2 percent in 2015.
The balances on approved foreign currency accounts increased by 19.1 percent to US$2,683.4 Million. The major category of activities included nonresident transactions, mining and dredging, insurance/finance, fishery, rice and shipping. The debits and credits to these accounts totaled US$1,339.3 Million and US$1,344.1 Million respectively, compared with the previous year’s amounts of US$1,123.7 Million and US$1,130.0 Million respectively. The Bank approved applications for eleven new foreign currency accounts in 2016.

The Exchange Rates
The weighted mid-rate, based on the rates of the three largest banks’ turnover, remained stable at GYD$206.50 at the end of 2016. The un-weighted mid-rate using the same method depreciated by 0.12 percent to GYD$205.75 compared with GYD$205.50 in 2015. The commercial banks and non-bank cambios’ average buying and selling rates were higher during the review period. The commercial banks’ cambios’ average buying and selling rates were GYD$207.21 and GYD$209.74 compared to GYD$206.67 and GYD$209.49 respectively in 2015. The non-bank cambios’ average buying and selling rates were GYD$206.40 and GYD$208.04 from GYD$205.42 and GYD$208.68 respectively.
The disparity between the buying rates of the bank and non-bank cambios contracted from GYD$1.25 to GYD$0.81 in 2016. The difference in the selling rates was higher at GYD$1.70 from GYD$0.81 in 2015. The average market spread was GYD$2.08 compared with GYD$3.04 in 2015. The bank and non-bank spreads were lower at GYD$2.53 and GYD$1.64 from GYD$2.83 and GYD$3.26 respectively in the previous year. In the cambio market, the majority of foreign currency transactions involved the United States dollar accounting for 96.1 percent of the total trades. The Canadian Dollar, Pound Sterling and Euro each held 1.6 percent, 1.5 percent, and 0.8 percent respectively of the market shares.

CARICOM Currencies
The CARICOM currencies traded on the market increased to US$24.4 Million or 20.8 percent in 2016. The main currencies transacted on the market were the Barbados dollar, Trinidad & Tobago dollar and the Eastern Caribbean dollar. The Barbados dollar comprised US$12.0 Million or 49.2 percent of the overall regional volume. The Trinidad & Tobago dollar and Eastern Caribbean dollar accounted for US$8.9 Million or 36.5 percent and US$3.5 Million or 14.3 percent respectively. The exchanges rates of the Barbados and Eastern Caribbean dollars remained fixed against the US dollar. The Trinidad & Tobago currency depreciated against the US dollar by 5.1 percent to TT$6.75, while the Jamaican dollar depreciated by 6.7 percent to J$127.98.

Money Transfer Activities
The Bank licensed five new agencies for a total number of certified agents of 223. Of the ten Administrative Regions in Guyana, Region Four held 38.9 percent of the total registered agents, Region Six held 20.5 percent, Region Three held 14.8 percent, and Region Ten totaled 5.7 percent. The remaining six Regions accounted for 30.1 percent. The aggregated value of transfers by money transfer entities amounted to US$186.9 Million, 27.6 percent over the last year. Inbound and outbound transactions were US$134.5 Million and US$52.4 Million respectively. The highest volume of transfers occurred in the months of April, July and December 2016.

Outlook for 2017
The exchange rate of the Guyana dollar to the US dollar is expected to remain relatively stable due to a net supply of foreign exchange to the market as a result of an improved balance of payment position. The Bank is projecting purchases of US$406.4 Million from the Guyana Gold Board and GUYSUCO. Sales to accommodate imports and debt servicing are projected at US$603.9 Million. Foreign exchange flows to the market are expected to adequately cover imports and support a stable exchange rate.

Statistics and data provided by Central Bank and Ministry of Finance


(Article taken from the Guyana Inc. Magazine Issue 27)

Guyana and the Global Community

September 25, 2017 by · Leave a Comment 

Like the daily news, what goes on in the global economy is important to your country’s sustenance and thus will affect how comfortable your life will be today, tomorrow and the next five years from now.
The global economy includes some of the world’s largest importers and exporters of essentials needed on the international trade market. And small, poor, developing countries like Guyana, must always be on the lookout for how prices are shifting and how it can bring in revenue by providing some of what it has to offer on the world market.
Even with the abundance of certain products and raw materials, if the demands by leaders of the World Market like Russia, China and the United States are on a decline, it will mean less money for a country like Guyana.
Take, for example, Guyana’s Forestry Sector. Some five years ago, Guyana’s forestry industry was booming. It was considered one of the most successful and lucrative ventures any local or foreign investor could be a part of.
One of the biggest world leaders that demonstrated a serious interest in Guyana’s forestry sector was China. Guyana’s lush yet exotic species of woods was more than enough to lure some of the biggest logging companies in China, one of which was BaiShanLin Forest Development Inc.
Statistics from the Ministry of Finance show that in 2014 Guyana recorded a massive increase in production volumes which was found to be at 530,000 m3. This represented an increase of 21 percent over production figures in 2013 which was 437,000 m3. Additionally, exports of forest produce in 2014 saw Guyana bringing in revenue to the tune of US$54M. Even this was a stark increase by 38 percent over the 2013 value of US$38M.
However, by the turn of 2015, a number of developments in the forestry sector led to a sharp decline in export and production figures. One of the major causes has been the decline in the need for Guyana’s logs in China.
As of February last, forestry production amounted to 21,900 cubic metres compared with 25,319 cubic metres in February 2016. This resulted in production reaching 37,074 cubic metres, year-to-date, compared to 51,052 cubic metres in 2016.
The aforementioned simply goes to show the impact global leaders can have on the economy of nations like Guyana.
With this in mind, it becomes even more important to be mindful of the economic health of nations within the global economy, so that Guyana’s authorities can also begin to do better forecasting about budgeting and finding other avenues to stimulate income for the nation.
Below are a few snapshot points for how Guyana has fared thus far with certain products it needs and exports in the international market.
Global prices for Guyana’s major traded commodities saw modest increases in February 2017 except for sugar and rice.
Compared to February 2016, prices rose for all the commodities, except logs and rice, which declined by 4.1 and 4.4 percent respectively.
Of the commodities, aluminum increased the greatest by 3.9 percent. This was largely driven by China’s Air Pollution Control regulations implemented to reduce the production of the country’s coal-reliant aluminum, which is among the most carbon intensive in the world and very polluting. These regulations are putting downward pressure on prices which has continued to rise 21.5 percent year-to-date.
In February 2017, crude oil was priced at US$55.49 per bbl., indicating a modest increase of 1.1 percent. This was due to the Organization of the Petroleum Exporting Countries’ (OPEC) production being almost unchanged from January, as a slight improvement in compliance was offset by production recovery in Nigeria, which was exempt from the quota.
The free market global price for sugar declined by 0.2 percent in February to US$0.45. Compared to February 2016, however, the price has increased by 52.8 percent.
For rice, there were decreases in both the 1 and 12 month price change, with a decline of 2.7 percent and 4.4 percent respectively.
The international gold price rose by 3.5 percent in February. Gold prices have been trending upwards amid geopolitical anxiety and strengthening of the US dollar.
Data, statistics provided by the Ministry of Finance, Bureau of Standards

Global Developments
at a Glance
The latest U.S. economic data has been solid, revealing slow but stable growth of the U.S economy. The ISM manufacturing index rose from 56.0 to 57.7 percent in February, indicating that factory activity was picking up, which could also mean GDP growth could accelerate in the first quarter.
In February, The Guardian International Edition warned that Trump’s presidency poses threats to global economy, despite the predicted possible boost to economic growth from his planned infrastructure spending, tax and red tape cuts. Key risks include possible disruptions to trade relations, limits on migration; that affects the amount of money foreign workers in the U.S send home, and “confrontational exchanges” between policy makers that could spark swings in currencies and other markets.
For Europe, Brexit may offer an opportunity for the European Union. The European Union believes it stands a better chance of striking a free trade deal with India after the United Kingdom leaves the Union. This follows the United Kingdom post-Brexit trade deal with India being threatened by Prime Minister Theresa May’s visa crackdown.
Headline inflation rates have recovered in advanced economies with the bottoming out of commodity prices, but core inflation rates have remained broadly unchanged and generally below inflation targets.
Additionally, inflation picked up in China as capacity cuts and higher commodity prices have pushed producer price inflation to positive territory after more than four years of deflation.
Keeping up with the developing world will require a number of economic shifts and changes in the way business is done in Guyana. One transformational move that is going to be needed is diversification. For example, it has been over 50 years, and Guyana’s economy remains standing on six traditional sectors (sugar, rice, bauxite, timber, gold and manufacturing) for its upkeep. The performance, to date, in most of these sectors, shows clearly that the time has come for diversification as they have indeed grown weary.
In the sugar industry, for example, the signs are clear that Guyana must move towards the scaling down of production for international exportation and place its emphasis on supplying the domestic demands.
Guyana can certainly take a page out of the books of countries like Belize, which has diversified its sugar industry in many ways, such as large scale ethanol production and the refinement of white sugar among other products.
These changes, which are needed to keep up with the global community, will not happen overnight. But the efforts, however, must be made now, lest the nation is left behind in the dark ages.


(Article taken from  the Guyana Inc. Magazine Issue 27)

Lies, Damned Lies and Statistics… The hidden facts about the gold sector

September 25, 2017 by · Leave a Comment 

Spanning some 83,000 square kilometers, Guyana continues to standout within the South American and Caribbean regions as one of the gold-rich envies of the world.
Already, the sector has been showing unprecedented production and has even buttressed the nation in the soil of economic growth for over two consecutive years.
In fact, national statistics show an upward trend in the declaration of gold in the sector.
According to Guyana’s Bureau of Statistics, the latest data on gold production showed that there was a total declaration of 63,089 ounces for February alone, a massive increase from 58,485 ounces which was attained during the same month last year.
While investors are indeed in their right to be enthralled by this booming sector and its rich potential, there are some worrying factors which statistics do hide. In this piece, we shall highlight just a few.

Natural Resources sectors across the world are notorious for attracting elements of corruption, and in Guyana’s case, the situation is no different. Guyana’s authorities and the relevant officials within the sector have been grappling with the various forms of corruption taking place, with the most worrying being smuggling.
Guyana’s mining sector abounds with a large number of small and medium scale producers. But the desire to have a higher price for their valuable yellow metal leads to miners being lured over Guyana’s borders into neighbouring markets like Suriname, Venezuela and Brazil. Most do this to also avoid paying the required seven percent royalties to the state.
There have also been instances of collusion to defraud the state between miners and officials who are expected to monitor the system. Additionally, there are reported incidents in the local media of gold being smuggled by the millions to foreign borders. Unfortunately, the investigations into these incidents remain at a standstill. But corrupt acts within the sector are just one of the many problems affecting this sector.
Due to the large scale of mining in Guyana’s interior region, one of the biggest problems facing the authorities of the day is the lack of adequate manpower to patrol the sector. This has resulted in a constant flouting of mining regulations. Guyana’s Forestry Commission, Guyana’s Miners Association and even the Government have bemoaned the fact that resources to properly patrol and keep those within the sector in line are limited. To date, Guyana is still unaware of how much it has been losing in this sector, in terms of revenue, to other neighbouring states.

Non-compliance by miners to regulations remains one of the biggest challenges facing mining administrations. The fact that mining activity in Guyana is geographically scattered over vast, mostly uninhabited, heavily-forested territory creates its own set of difficulties. Efforts to increase compliance levels may be beneficial if the causes of non-compliance among small miners are differentiated. These distinctions are important in designing education and enforcement tactics. Non-compliance can be due to or facilitated by four conditions:
— total or considerable ignorance of the laws;
–total or considerable disregard for the laws, even though the miner is aware of the laws;
–total or considerable ignorance of the harmful effects to oneself, to others, and to the environment when the unlawful action is practiced; and
— total or considerable disregard for the harmful effects to oneself, to others, and to the environment when the unlawful action is practiced, even though the miner is aware of the consequences.
The limiting factor to the Guyana Geology and Mines Commission (GGMC)’s ability to enforce regulations is its manpower and financial resources. Despite its best intentions, too few officers are on the ground, a situation that has led to sporadic enforcement of the present regulations. With the imminent enactment of more complex mining and environmental regulations, the inadequacy of GGMC’s capacity as a monitoring and enforcement agency must be dealt with urgently.
In the last decade, the industry has introduced new technologies and methods that have ravaged the environment more than previously. Missile dredging, hydraulicking, large earth-moving equipment, and the reported liberal use of mercury by Brazilian miners have placed greater strain on the environment and on regulatory agencies.

The most reputable global organisations, such as the International Monetary Fund (IMF) and the World Bank, have projected a downward decline in growth, not only for the global economy, but for the Caribbean Region as well. As such, Guyana has been caught in the fray.
As mentioned earlier, the outstanding performance of the gold sector is what has supported the economy’s continued positive growth rate from 2015 to now. The gloomy nature of the economy’s performance in 2016 saw government forecasting a 2.6 percent growth rate. Gold, however, saved the day and pushed the growth rate up, thereby leaving government to revise the growth rate upward to 3.3 percent. In fact, gold’s performance is even responsible for Government projecting a rather bold 3.8 percent growth rate for 2017.
Once again, this is testimony that the gold sector, in particular, is doing a fantastic job. But if we were to remove the production figures of the gold sector, what picture would be before us regarding the health of Guyana’s other traditional revenue earners?
The production figures of the nation’s other traditional revenue earners such as rice, sugar, timber and bauxite all showed startling declines from 2015 to now with no improvement possible in the near future.
On the surface, one might think that the economy, with its 3.8 percent projected growth rate, is in the clear or is in good standing, but if you are to remove the current production figures of the gold sector, you would be left with a worrying picture. In fact, the nation’s growth rate would not be projected to show an increase but rather a decrease for 2017.
Even though the gold sector has been performing at an outstanding level each month, the Government has not been blindsided by this. It has assured citizens, and even the nation’s investors in this sector, that it is certainly determined to address issues within the industry.
Towards this end, the Government has announced that it will be looking to reform a number of the laws guiding the sector so as to remove loopholes for abuse. Also completed is a policy paper and a strategic plan of action to strengthen the monitoring and enforcement arms of the industry.
It has also been noted that, of the range of environmental problems in mining, the investigation and implementation of corrective measures to deal with turbid waters have clearly been given priority by the Government. This is according to the Ministry of Natural Resources and the Guyana Geology and Mines Commission.
In a detailed report, it was noted that clear deadlines were set by which the issues affecting the sector must be resolved.


(Article taken from the Guyana Inc Magazine Issue 27)

IMPORT – EXPORT ANALYSIS… Has Guyana landed in an unfavourable balance?

September 25, 2017 by · Leave a Comment 

Exports and imports are crucial pillars in the structure of an economy. These two categories can tell you many things about the well-being of a country.
For example, if a country is exporting more than it imports, this signals that the economy is robust, self-sufficient and healthy. Where more exports are going out of a country, it means more foreign currency is going into the nation’s pockets while also signaling an increase in employment to ensure the surplus in exports.
But when an economy is importing more than it exports, it can mean that more money is leaving the nation’s reserves to pay for these imports and this can lead to the devaluation of the dollar. It also puts a strain on the economy, especially if these imports are largely for things which do not promote productivity in booming sectors, such as equipment and machines for the gold industry.
Therefore, imports, as important as they are, could signal that the economy is in an unfavourable balance. So where does Guyana stand?
According to statistics, Guyana ran a merchandise trade deficit (when imports exceed exports) of US$15.6 Million in February 2017. This represents a greater deficit of US$9.4 Million relative to February 2016. In February 2016, the deficit was US$6.2 Million.
Domestic exports (exports of locally produced goods) fell by US$2.7 Million to US$97.5 Million in February 2017, a decrease of 2.7 percent compared to February 2016. Exports in February 2016 were US$100.2 Million.
Imports, on the contrary, increased by US$6.8 Million or 6.4 percent in February 2017 to US$113.1 Million relative to February 2016. In February 2016, imports were US$106.4 Million.

Gold exports rose by US$3.3 Million or 5.2 percent to US$66.1 Million in February 2017 over February 2016 gold exports of US$62.8 Million. Relative to February 2016, exports from the Guyana Gold Board and Guyana Goldfields increased by 117.7 percent and 16.5 percent respectively, and decreased by 44.6 percent and 29.4 percent for Troy Resources and other dealers respectively.
Exportation of diamonds, fish, fish by-products and bottled rum and spirits also increased in February 2017 compared to February 2016. Diamond exports grew the strongest by US$2.4 Million or 289 percent to US$3.3 Million, whereas fish and its by-products and bottled rum and spirits grew by 55.5 percent and 2.6 percent respectively.
Bauxite, shrimp and prawns, on the other hand, decreased by 10.7 percent, 12.8 percent and 41.8 percent respectively.

Of the three categories of imports, only intermediate imports increased in February 2017 by US$1.7 Million or 29.8 percent relative to February 2016. The increase was largely driven by the growth in importation of chemicals of US$7.9 Million or 273.3 percent.
Consumption and capital imports decreased by 5.5 percent and 26 percent respectively. For consumption imports, all of the goods except food for final consumption and motor cars decreased. For capital goods, only mining machinery recorded an increase of 51.2 percent in February 2017 relative to February 2016.

For the time being, the Guyana Government has projected the growth rate (the percentage at which the nation’s revenues, sectorial production and exports grow) to be a 3.8 target. This is ambitious, some might argue, as last year it was projected that the economy would grow to 3.4 percent but barely made it to 3.3 percent.
The booming mining and quarrying and services sectors seem to have Guyana on target to reach the 3.8 percent growth rate. However, recent activities have led some skeptics to strongly conclude that it would have to be revised downwards. At the end of the half year, the figure was reduced .

The State of Revenue Earners
In February 2017, 3,669 tonnes of sugar was produced compared with 5,151 tonnes in February 2016. Production was affected by rainfall, strike actions which resulted in some workers being off the job, and suspended production at one estate.
Rice production for February 2017 reached 1,558.8 tonnes, compared to zero tonnes in February 2016. No production takes place in January and February since sowing normally takes place in these months. Production for 2017 is expected to increase by 10.3 percent; with the first crop already on target.
Forestry production for February 2017 amounted to 21,900 cubic metres compared with 25,319 cubic metres in February 2016.
Bauxite production for February 2017 was 103,606 tonnes compared to 136,377 tonnes in February 2016. Year-to-date production is 229,441 tonnes compared to 280,901 tonnes produced in 2016, a decline of 18.3 percent. Low production in the first two months was due to low demand. Nevertheless, this industry is expected to expand in 2017 as both demand and prices are expected to rise.
Gold production for February 2017 totaled 63,089 ounces compared to 58,485 ounces achieved in February 2016. This brings the year-to-date total to 108,048 ounces compared to 94,432 in 2016. The main driver of growth for 2017 is the small and medium sized producers whose declarations rose significantly, compared to a fall in declarations for the two foreign companies. Rising gold prices is partly responsible for the higher declarations from the small and medium sized miners.
A quick glance at the aforementioned reveals that four of the five industries are not performing well. If this trend continues, it is likely that the growth rate of the economy for 2017 will not meet the target set out by the Government.


(Article taken from the Guyana Inc. Magazine Issue 27)

Money Talk: How have we been serving our debts?

September 25, 2017 by · Leave a Comment 

Like most countries, Guyana generally finds itself in the position of borrowing money from other nations or regional and/or international organizations. This borrowing occurs when a nation has found itself in a state of having scarce financial resources which are not enough to meet its annual needs.
These can be in the form of needing new schools constructed and other important infrastructure.
But when the money is borrowed from either regional or international nations or lending agencies, it has to be repaid within a certain time frame that is agreed upon by both parties.
The nation also has to be very watchful of not borrowing too much, lest it lands into a position of having more than half of its annual revenue being absorbed by debt, which must be repaid.
Managing the nation’s debt portfolio for decades is the Bank of Guyana.
According to its latest statistical bulletin, “The outstanding stock of government’s domestic bonded debt, which consisted of treasury bills, bonds, debentures and the CARICOM loan, increased by 10.9 percent to GYD$90,572 Million, due mainly to higher issuance of treasury bills to sterilise excess liquidity in the financial system.”
In addition, a non-negotiable debenture was issued to the National Insurance Scheme (NIS), valued at GYD$4,882 Million, to assist with offsetting its investment loss in CLICO.
Furthermore, the total outstanding stock of treasury bills rose by 5.2 percent to GYD$81,468 Million, mainly as a result of higher issuance of the 182-day treasury bills during the review period.
Central Bank, in its report, said that the volume of outstanding 182-day and 364-day bills increased by GYD$6,898 Million and GYD$20 Million to GYD$7,152 Million and GYD$68,319 Million respectively.
“Conversely, the volume of 91-day bills fell by GYD$2,887 Million to GYD$5,998 Million. The maturity structure of treasury bills revealed that the share of 364-day bills represented 75.4 percent of the outstanding stock. The share of the 182-day bill was higher at 7.9 percent while the share of the 91- day bill was lower at 6.6 percent.”

Domestic Debt Service
According to Central Bank, Guyana’s total domestic interest charges rose by 9.8 percent to GYD$1,885 Million. It said that higher interest payments on treasury bills were attributed to greater redemption of the 91-day and 364-day bills compounded with higher yields during the review period.
The Bank also went on to state that interest costs on treasury bills redeemed increased by 10.1 percent to GYD$1,795 Million, resulting primarily from a 11.4 percent or GYD$164 Million increase in interest charges on the volume of 364-day bills redeemed during the year.

Outlook for Domestic Debt for 2017
According to Central Bank, total domestic debt stock is projected to decline marginally as a result of a reduction in the debt outstanding for the non-negotiable debenture to NIS, while domestic debt service payments are projected to increase at the end of 2017.
Bank officials said that debt service payments are expected to increase by 17.8 percent to GYD$2,200 Million at the end of 2017, resulting from a 455.4 percent expansion in interest payments for the 182-day treasury bills.
Additionally, the Bank said that debt service payments for debentures are estimated to grow considerably by 445.1 percent at the end of 2017, due mainly to principal and interest payments for the NIS Non-Negotiable Debenture.

External Debt
The stock of outstanding public and publicly guaranteed external debt increased by 2.1 percent to US$1,167 Million from US$1,143 Million in 2015. This outturn amounted to 33.9 percent of GDP at purchaser price, which is below the solvency indicator threshold.
The increase in the outstanding stock reflected greater loan disbursements by the Export-Import Bank of China, as well as the Caribbean Development Bank for project financing.
Obligations to multilateral creditors, which accounted for 59.9 percent of the total outstanding debt, increased by US$7 Million to US$699 Million. Liabilities to the Inter-American Development Bank increased marginally by 0.7 percent to US$493 Million, reflecting a change in the debt stock of US$4 Million during 2016.
Indebtedness to the Caribbean Development Bank increased by 2.2 percent or U$3 Million to US$147 Million and obligations to the International Development Association expanded by 22.4 percent or US$5 Million to US$25 Million.
Conversely, commitments to other multilateral creditors decreased by 2.0 percent to US$34 Million. Total bilateral obligations, which represented 38.6 percent of total external debt, increased by 4.2 percent to US$451 Million.
Indebtedness to the Export-Import Bank of China increased by 17.2 percent or US$21 Million to US$146 Million. Obligations to Venezuela, under the previously terminated PetroCaribe initiative increased by 1.8 percent or US$2 Million to US$123 Million.
Liabilities to Trinidad & Tobago and the Export-Import Bank of India decreased by 24.7 percent and 8.0 percent to US$19 Million and US$18 Million in debt respectively.

External Debt Service
According to Central Bank, external debt service payments fell by 45.4 percent to US$54 Million from US$98 Million in 2015. This represented 3.7 percent of export earnings and 6.3 percent of current revenue, significantly below the threshold for liquidity indicators. Principal and interest payments amounted to US$36 Million and US$18 Million respectively.
Furthermore, Central Government’s debt service declined by 44.2 percent to US$50 Million from US$89 Million one year earlier, primarily due to the suspension in principal payments made to the Guyana Rice Development Board for rice and paddy previously supplied to Venezuela under the Debt Swap Agreement.
Similarly, debt service by the Bank of Guyana decreased to US$4 Million from US$9 Million at the end of 2015. The Bank of Guyana, as at November 2016, has fulfilled principal repayments to the International Monetary Fund (IMF) for the loan obtained in 2006 under the Poverty Reduction and Growth Trust.
Payments to multilateral creditors decreased by 6.2 percent to US$36 Million, and represented 67.4 percent of total external debt service. Conversely, payments to bilateral creditors accounted for 32.6 percent of external debt service payments, contracting by 70.7 percent or US$ 42 Million.

Outlook for 2017
Central Bank projects that total external debt service payments are projected to increase by 19.0 percent to US$64 Million during 2017, compared with US$54 Million in 2016, due mainly to the increase in principal and interest payments to bilateral creditors.
It said that principal payments are expected to increase by 14.7 percent to US$41 Million while interest payments are projected to increase by 26.5 percent to US$23 Million.
Payments to multilateral creditors are likely to rise by 0.9 percent to US$37 Million, while payments to bilateral creditors are expected to increase considerably by 56.2 percent to US$27 Million.
Central Government’s debt servicing is expected to amount to US$64 Million compared with the US$50 Million in 2016.
Debt service payments by the Bank of Guyana are estimated to decline significantly by 99.4 percent to US$0.02 Million at the end of 2017.

Information and statistical data provided by Central Bank


(Article taken from the Guyana Inc. Magazine Issue 27)

Changes in the Guyanese economy

September 25, 2017 by · Leave a Comment 

Within the last two years, there have been several changes to Guyana’s fiscal, social and political fabric for various reasons. Most of these changes have resulted in positive benefits for the nation’s regional and international image while securing encouraging reactions from the world over.
But in the domestic borders, these so-called “changes” have earned mixed responses from a concerned populace.

The sugar industry
The troubles plaguing Guyana’s sugar industry and Government’s response to it is a classic example of the mixed reactions one would see from within the nation’s borders compared to that of the international platform.
Sugar remains the largest employer of labour in Guyana, securing a workforce of some 17,000 employees.
But since the year 2000, there have been marked declines in the sugar productions. Solutions of every type were formulated by the former administration, the People’s Progressive Party Civic (PPP/C), to somewhat steer away from the inevitable – the scaling down of the sector. That administration brought experts from Cuba, Jamaica, India and China, among other territories, but they still couldn’t save the ailing sector. They even invested over US$200 million in constructing one factory—the Skeldon Sugar Factory—that was intended to rescue the industry. But that ended up being nothing but a hydrocele on the sector.
Compounding the issue as well, was the fact that some old factories were not being maintained as they should be. Then, Guyana lost its European Union (EU) market, which offered preferential prices for Guyana’s sugar. To top things off, employment costs and the cost to produce sugar in Guyana was astronomical when compared to Caribbean territories and ABC countries.
Even with all of these issues, the authorities still continued to feed the sector with billions upon billions of dollars in bailouts. This may have quelled the passions of sugar industry advocates in Guyana who believed that sugar is too big to fail and needs to be kept alive no matter the economic costs. But internationally, this was only hurting Guyana’s image.
Big donor agencies, such as the World Bank and the International Monetary Fund (IMF), opined that the bailouts were simply too big. They contended that such spending was distorting Guyana’s growth and development in other areas. They cautioned Guyana, on several occasions, that its treatment with the sugar industry would disfigure the moral, economic, political and social well-being of the nation.
Understandably, the authorities of the day could not risk the consequences of not heeding the advice of these powerful global organizations. As such, the authorities today made the bold decision to scale down the sugar industry.
Guyana is now moving in the direction of producing sugar on a small scale; a scale that will only cater for domestic consumption and other smaller markets within CARICOM.
The Government has chosen to make the international organizations happy. And one can even argue that the decision regarding the sector is justified in some respect. However, the locals are not happy with this. Scaling down the sector means putting thousands of workers on the breadline. Where will they go? How will they survive? This drastic change and its social and economic repercussions are yet to be addressed.

200 New Taxes
Another economic change that has left the nation split down the middle is the move by the Government to introduce new taxes. Since the Coalition Government – A Partnership for National Unity + Alliance For Change (APNU+AFC) – came into power, it is the first in Guyana’s history to introduce 200 new taxes.
This decision has earned them unsavory remarks by some and applauses by others.
Some sections of the populace see the Government’s introduction of new taxes, such as a 14 percent Value Added Tax (VAT) charge on water and electricity bills, as well as on private tuition and private health care, as a burden on the poor man. But others, regardless of the implications, believe that it is the best way to go.
In fact, recent statistics by the Ministry of Finance show that Central Government has actually increased by more than 30 percent of its projections. The Ministry of Finance, in its monthly report, revealed that tax revenues for January 2017 were GYD$11.9 Billion. It said that this figure is 40 percent more than the tax revenues earned for the same period in 2016. Total tax revenue for the entire 2017 was budgeted at GYD$162.7 Billion, or 8.67 percent over last year, given the astounding benefits of the new taxes.

The Fight against Corruption
Like many other territories, Guyana has been waging an aggressive fight against corruption, especially since the new administration took office in 2015. And while the efforts on the part of the relatively young government are still to be felt deeply and on a wider national scale, it has still managed to help boost Guyana’s image on the international platform.
One of the major accomplishments for Guyana, when it comes to the fight against corruption, is the establishment of a State Asset Recovery Unit (SARU). This is the first time Guyana would have such a department, which is specifically tasked with the responsibility of recovering state assets which were stolen by officials of the past regime. These would have to be recovered through civil proceedings in the court. The impressive, yet bold move is one that has attracted the praise and even technical assistance of partners in the United States and even organizations like the World Bank.
Another historic step that Guyana has taken on the pathway of anticorruption is that it has launched over 40 forensic audits to identify loopholes which existed under the previous administration for corruption of any form and to plug them all. This has started and performance audits and reports on some agencies have shown that there has been a massive reduction in abuse of resources and corruption and less room for the abuse of the system by some stakeholders.
One of the major areas of weaknesses in Guyana is the public procurement system. So weak was this area that Guyana was said to be losing over GYD$30 Billion annually, based on computations from the Auditor General’s yearly report on the accounts of the nation.
While there were some obstacles in the beginning, the Government has been successful in the establishment of a Public Procurement Commission which will monitor the system for any form of abuse and trickery by contractors. The Commission will also serve to eliminate Cabinet’s no-objection role in billion dollar contracts. The move is one which the nation had waited on for over 23 years.

In order for any country to move forward morally, socially, politically and economically, it must be able to first make an honest assessment of where the weaknesses are and admit them. After doing so, the next big and important step is to make a sincere effort to address those faults.
Guyana is not perfect in this regard. In fact, no country is, but what is praiseworthy is that the necessary steps are being taken to ensure that Guyana is not stuck in its old ways; efforts are being made to ensure that not only is this nation safe but it has a viable and conducive environment for the growth and development of all.
Be that as it may, there are still a number of challenges facing the nation which have to be addressed sooner rather than later. There are still some loopholes which have to be closed and there are still areas in the economy which are yet to be improved.


(Article taken from the Guyana Inc. Magazine Issue 27)

A Critical Look Into Guyana’s Forestry Sector

January 12, 2017 by · Leave a Comment 

With prime, lush forests covering approximately 18.39 hectares of its land mass, Guyana stands as one of the envies of the world. For decades, its forests have been a crucial arm in supporting the nation’s diverse economy, the sustenance of its people and the heart of its climate change efforts.
It has even attracted investors from all parts of the world who often come with an insatiable appetite for its exotic and valuable logs. But like most sectors, it has developed a few worrying problems of its own. These range from corruption, illegal logging; improper management of log exports and wanton misuse of the forests by foreign companies.
The aforementioned issues have led some forest experts to question whether oversight bodies, such as the Guyana Forestry Commission (GFC), are really doing their job.
It has been reported extensively in Guyana and further afield that while worrying issues abound, the GFC, among other authorities, continue to paint a “pretty picture” about the forest coverage as against the wanton felling of trees by foreign companies.
In an interview with the Guyana Inc Magazine, two internationally respected forests experts, John Palmer (JP) and Janette Bulkan (JB), share their opinion on the Guyana Forestry Commission, efforts by the Government to protect the forests and where Guyana stands with its international deals on safeguarding its forests.

Guyana Inc Magazine (GIM): Over the years, the Guyana Forestry Commission would have provided data and estimates to prove that Guyana’s deforestation rate remains low and that state forests remain protected. But how do you view the process by which the Commission obtained these figures? Is it one that you have confidence in? If not, how do you believe faith can be restored?
JP&JB: Even in the years before the availability of remotely sensed space imagery, the Guyana Forest Department supplied The Food and Agriculture Organization (FAO) with quite good estimates of the national area of standing forest. As such, Money from Norway through the Norwegian Climate and Forest Initiative (NICFI) was used to contract a company called Jaako Poyry from New Zealand in 2010 and later Indufor from Asia Pacific to collect and analyze medium-resolution and now high-resolution space-based imagery for country-wide estimates.
However, the analysts have not evidently used either GGMC maps of mining concessions or GFC maps of current logging blocks, thus the opportunity to focus on the obvious priority areas for deforestation and forest degradation appears to have been missed.
Likewise, it is not clear that the GFC uses the international definition of intact forest landscapes. The various arbitrary ratios and adjustments suggested or approved by Norway (NICFI) make difficult any international comparisons of Guyana data with the rest of the world.
It is not the accuracy or precision of the Indufor analysis which is important. What is important is how the data is used to inform and guide policy. So far as we can determine, the data is NOT used to inform or guide policy in Guyana, while practice has continued to be ‘business as usual’, as promised by former President Bharrat Jagdeo in 2009. They have been used by Norway in the arbitrary calculation of aid money support for implementation of the Jagdeo LCDS.
But all is not lost. There is still time for the new members of the GFC Board to request sight of the contracts with Indufor or the University of Durham for external assistance to the GFC Monitoring, Reporting and Verification system (MRVS).

GIM: Guyana is expected to bring two million hectares of forest under conservation. This was announced by President David Granger at the signing of the Paris climate change pact. How do you believe this will help in our quest to safeguard the forests?
JP&JB: This can be classified as an INDC meaning an Intend Nationally Determined Contribution. However, it is our view that the commitment appears to have been devised by Office of the President advisor(s). It is not clear how or why they developed this figure, or what State Forests they imagined could be assigned in this way.
It is important to note that all the forest of Guyana have not yet been allocated to logging companies, and much of the forest within logging concessions, is also the customary lands of Amerindians.
As the Government of Guyana has provided international assurance, and under the Low Carbon Development Strategy (LCDS), that Guyana implements the principle of Free, Prior and Informed Consent (FPIC) with regard to its indigenous peoples, it follows that no such commitment to assign one or two million hectares of forest should be made without the consent of the Amerindian communities.
In addition, you would recall that there is an unfinished legal commitment under the Independence Agreement of 1965 to provide land security to the Amerindian communities. Only about one quarter of the areas claimed by Amerindians as customary land in 1967 to 1969 have subsequently been placed under communal land title.
The Protected Areas Commission appears to be fully occupied with development of its Georgetown-based bureaucracy and management of the three gazetted areas – Kaieteur (61000 ha), Kanuku Mountains plus Shell Beach (730000 ha) national parks – totaling (791000 ha). The wilderness preserve of Iwokrama is about 180000 ha, under its own Act of Parliament 1996.
It is not clear if the Protected Areas Commission has the capacity to identify, survey and undertake other legally required steps to acquire and manage a further one million hectares of national park.
In conclusion, merely assigning National Parks to the INDCs is not the internationally expected ‘additionality’ beyond ‘business as usual’. Leaving the national parks without logging or mining is not the same as taking positive steps to reduce carbon emissions.

GIM: GFC officials have boasted that Guyana has one of the longest and most striking experiences pioneering the international development of payment-for-performance forest schemes. It said that this is demonstrated in the Government of Guyana and Kingdom of Norway, Low Carbon Development Strategy (LCDS) and its related REDD+ mechanisms of the United Nations Framework Convention on Climate Change. But how can one trust such an agreement given the industrial scale logging that is taking place? And if the agreement is intended to further the cause of protecting the global forests, then how does it not take reports on the abuse of Guyana’s forests into consideration? Also, how does Norway assess deforestation in Guyana?
JP&JB: PES schemes which mean Payments for Environmental Services conventionally require the service provider to demonstrate additionality. For example, suppose a local beverage company wants perennial supplies of clean water for its distilleries. Suppose that the water supply comes from a forest catchment. The catchment manager must actively ensure that road building and logging do not result in sedimentation or pollution of the water supply and do not impede the water flow. Such measures conventionally increase the cost of forest management with that cost being compensated by the payments by the distiller for access to the clean water.
Likewise, a REDD scheme requires active measures to reduce emissions from deforestation and forest degradation. But this is not what Guyana has done. Guyana has made no policy commitment and taken no measures to reduce deforestation or degradation from logging or mining.
The deal with Norway is a non-standard artificial deal involving a critical emission level far above the actual or foreseen rates. As the website REDD Monitor has pointed out several times, the Norway-Guyana deal is a disreputable piece of ‘hot air’. Why Norway became involved with Guyana is partly explained in the University of Oslo thesis by Heide Bade (2012); it involves internal political ambitions in Norway and is quite unrelated to conventional ideas of REDD+.
There was a stricture against increased logging in the original Joint Concept Note (JCN) associated with the Norway-Guyana MoU. This stricture imposed a financial penalty if the average annual wood production of the six years 2003-2008 was exceeded in any of the years of the MoU 2009-2015. In fact, the limit was exceeded in 2010, 2011, 2013, 2014 and 2015. The penalty was fiscally ineffective: the profit from the extra logs far exceeded (by about six times) the cost of the penalty. Of course, the people of Guyana suffered the penalty while the profit was enjoyed by some foreign companies.
The Norwegian cash comes from the aid budget, not from a commercial contract. That may explain the peculiar features of the deal between ambitious Minister Eric Solheim and ambitious former President Bharrat Jagdeo, which appear in no other PES scheme globally. This is why this scheme is actually worthless internationally, except for the technical aspects of RapidEye analysis.
We know that some Norwegian staff read the website REDD-Monitor so they are well aware of the uncontrolled logging and mining in Guyana. If we understand correctly, as long as Guyana does not breach the artificially high limit for deforestation specified in successive versions of the JCN, Norway does not worry about high levels of uncontrolled logging and mining.
The process for assessing deforestation in Guyana for the MoU is described each year in the GFC-Indufor report. This multi-hundred page technical document can be downloaded from the GFC website. There is no simple –language version, although we ask the Norwegians to make the report understandable for people in Guyana: except for one year, there has been no response from Oslo.

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