The International Monetary Fund (IMF) says while Guyana stands to gain from the global carbon credit market on account of its large rainforests, and the implementation of the LCDS, there are downsides that may erode those gains if the country does not remain vigilant. So says the IMF in its latest Article IV Consultation on Guyana, released at the end of June this year.
It said the downside risks include those linked to a potential overheating in the economy, volatile commodity prices, fiscal pressures from weak public enterprises (GUYSUCO, GPL, and the National Insurance Scheme), and some aid volatility.
“…(Guyana’s) sustained large current account deficit may also become a source of risk,” the report said.
The IMF said Guyana’s focusing on a strategy for maintaining fiscal and debt sustainability over the medium term is critical, as well as its considering how the country  can best cope with the impact of its incipient oil and gas exploitation.
The Fund said that Guyana must have a framework to anchor prices and protect financial stability and that keeping inflation relatively low and maintaining vigilance over the financial system remain important features of macroeconomic policy to guarantee stability.
It said enhancing the performance of public enterprises, minimising exposure to risks in the context of upcoming public-private partnerships, having measures to lock in gains from natural resource development and expanding economic opportunities from the LCDS are all key to sustaining long-term growth and reducing poverty.
“The impact of the Amaila Falls project will need to be carefully monitored, during the construction as well as at the operational stages (2015 onward) to ensure that the economic benefits materialise as expected, especially on energy costs and GPL’s balance sheet,” the report said.
According to the report, Guyana’s authorities view fiscal consolidation as a priority in 2011 and over the medium term to protect debt sustainability. “Despite some easing in 2010, the 2011 budget and medium term plans envisage a tightening of the fiscal stance,” the IMF said.
On Guyana, IMF staff agreed that maintaining a strong fiscal stance was critical, given lingering underperformance in public enterprises and unstable grant inflows.
“Acknowledging slippage from the budget target in 2010, the authorities were committed to protecting debt sustainability and resuming consolidation along the lines agreed at the time of the last Article IV consultation, although at a slightly slower pace. They pointed to continued improvements in public financial management—especially revenue administration—as well as efforts to bolster the financial position of the National Insurance System (NIS) as key to attaining their fiscal targets,” the IMF said.

“In view of Guyana’s risk of moderate debt distress, staff cautioned that contingency plans be in place in the event that weaknesses in public enterprises, or shortfalls in aid commitments jeopardise attainment of the 2011 deficit target of 3.5 percent of GDP,” the report said.
The Bank said, “As a result of the ongoing reforms and vigilance, financial sector risks appear contained. In the banking sector, the nonperforming loan ratio fell to 6.0 percent in September 2010, from 8.3 percent at end-2009. Banks remain liquid and provisioning levels have improved, albeit from a relatively low base. Although loan concentration and related party lending to total loans remain a concern, these have declined marginally in 2010, to about 29.8 percent and 3.8 percent respectively from 35.5 percent and 4.5 percent,” the IMF said.