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Guyana: A Revised Fiscal Framework, 2020-2023

Following-up on the publication on this website of the fiscal framework incorporating oil revenue—2018-2023, the attached table and these explanatory notes represent an attempt to quantify the effects of the fall in oil prices on Guyana’s fiscal profile between 2020-2023.

Legislation was passed that establishes a National Resources Fund (NRF) as an offshore saving fund. It was agreed that all petroleum revenue allocated to the Guyana Government should flow into the NRF and a fiscal transfer rule should determine the fiscally sustainable transfer from the NRF to the annual budget. In the medium-term, the rule envisages a transfer of around half of current oil revenue receipts to the budget.

Published Date: July 2020
Author:Keith Dublin, Michael DaCosta, and Sherwyn Williams

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Bank Risk Management in Guyana: A Summary

The risk management (RM) environment for banks in Guyana resembles closely the situation described in the literature on developing countries. Features in this group, such as inadequate differentiation among risks, zero rating of sovereign loans, and a false sense of comfort derived from high risk-weighted capital ratios, resonate in Guyana. Also common is the influence of macroeconomic factors (fiscal policy, fluctuations in commodity prices and the terms of trade, and a lack of economic diversification) on risk, as well as asymmetries due to inadequate borrower information, and delays and other difficulties in enforcing collateral claims. Other features of the Guyana environment are that (i) the country is only now shifting to Basel II; (ii) liquidity and market risks are not significant, nor is model risk or third party risk; (iii) Value-at-Risk (VaR) is not used commonly in domestic banks, and banks generally do not aggregate risks into a single measure of overall risk appetite; (iv) enterprise risk management (ERM) is conducted only in the foreign banks; and (v) there is little risk transfer activity through hedging.

Published Date: April 2020
Author: Michael DaCosta

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The Guyana Economy Before Oil

This report looks at the state of the Guyana economy at the end of 2018, the last year before the start of oil production. The picture that emerges is one of higher growth than in most other Caribbean countries. The authorities have taken a number of measures to improve the business climate, however, the country’s potential remains stymied by skills shortages and a business environment that constrains investment. In addition, life expectancy, infant mortality, and overall human development indicators compare unfavorably with those of the rest of the Caribbean. With an operating budgetary surplus, low level of debt, and forthcoming oil revenues that will be sustained, there is sufficient fiscal space for higher public investment to improve social conditions. At the same time, structural weaknesses, such as the large size of the public sector and inefficient public enterprises and local governments that absorb a disproportionate amount of resources, have to be addressed. In the financial sector, banks are liquid and broadly profitable, but many face risks, such as low-interest rates on assets, poor loan quality, weak provisioning, legal delays in settling delinquent loans, and relations with related parties. Other risks that require greater attention are those of cyber-crime and climate change.

Published Date: December 2019
Authors: Michael DaCosta, Keith Dublin and Sherwyn Williams

 

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