Archive for December 6th, 2018

1. Introduction

The attached table and these notes represent an attempt to quantify the possible effects of oil revenues on the central government finances over the period 2019-2023, using as a base the IMF’s estimates set out in its 2018 Country Report on Guyana.[1] They are circulated as a contribution to public discussion on the fiscal effects of oil revenues.

2. Assumptions

• Non-oil GDP is projected to grow by an average of 4½ -5 percent a year between 2019 and 2023.
• Over the same period the country’s population increases by about 1 percent a year, reaching 820,000 by 2023, which would have implications for budgetary expenditures on transfers as well as for estimates of per capita income.
• Oil revenue projections are in line with the IMF fiscal estimates in Table 3a of the 2018 Country Report. These revenues are estimated to be equivalent to about 15 percent of the value of oil exports shown in Table 2 of the Country Report.
• 40 percent of oil revenues will be saved in a Natural Resource Fund (NRF).
• Wages and other goods and services are projected to grow by 8 percent per year between 2020-2023. Transfers are projected to increase by about 10 percent annually.
• These projections for spending on wages, other goods and services, and transfers are higher than those projected by the IMF.
• Oil Financed Projects during 2020-2023 are projected to be 60 percent of Oil Revenues. Total capital expenditure is calculated as the total of External PSIP, local PSIP, and Oil Financed Projects. It is projected to increase from nearly 8 percent of GDP in 2018 to 12 percent of GDP in 2023.

3. Highlights of the table[2]

• Oil revenues will rise sharply from G$36 billion in 2020 to G$161 billion in 2023, equivalent to just over 60 percent of tax revenue.
• The amount of resources in the NRF will total US$483 million by 2023.
• There will be scope for increased spending on transfers, including to the poor and aged and other social programs.
• Capital expenditure will expand sharply, reaching almost G$200 billion by 2023, or 12 percent of GDP.
• The overall deficit is projected to decline from 5.4 percent of GDP in 2018 to 2.5 percent of GDP in 2023.
• The country’s gross debt stock will fall from 56 percent of GDP in 2018 to 44 percent in 2023.
• Net Domestic Financing is calculated as the difference between the total financing need and Net External Financing. Reflecting the sharp increase in oil revenues between 2020 and 2023, net domestic financing, after peaking at about G$46 billion in in 2019, would decline in subsequent years to about G$20 billion in 2023
• GDP per person will double from US$4,705 in 2018 to about US$9,500 in 2023.

• [1] https://www.imf.org/en/Publications/CR/Issues/2018/07/16/Guyana-2018-Article-IV-Consultation-Press-Release-and-Staff-Report-46083
• [2] These projections will have to be revised later in light of changes in production and price estimates, as well as changes in government policies.

Guyana: A Fiscal Framework Incorporating Oil Revenues—2018-2023

Guyana Economic Analysis Group, November 2018