By Edward Layne
The recent International Monetary Fund (IMF) mission which visited Guyana for the Article IV Consultation has cautioned the APNU/AFC Government over the growing number of non-performing loans, the increase in public expenditure and the need for moderating the growth of public sector wages.
This warning came after an IMF mission, led by Marcos Chamon, was in Guyana between February 24 and March 7, 2016, for discussions with authorities on the 2016 Article IV Consultation.
The team met with Finance Minister Winston Jordan, Public Infrastructure Minister David Patterson, Natural Resources Minister Raphael Trotman, Central Bank Governor Gobind Ganga, Opposition Leader, Bharrat Jagdeo, representatives from the private sector, labour unions, and other stakeholders.
“Banks remain well capitalised, but heightened vigilance is warranted due to increases in nonperforming loans,” the IMF said in a statement on its website.
The IMF said it also welcomes the recent changes to credit reporting legislation and the authorities are encouraged to continue to strengthen financial sector supervision.
It said the mission suggested tightening, provisioning requirements; large exposure limits restrictions on related lending; and loan classification rules.
“In addition, the stress testing toolkit could be expanded to include shocks to loan collateral values and also take into account inter-linkages among economic sectors, borrowers, and financial entities,” it stated.
A Financial Sector Assessment Programme mission from the IMF will visit Guyana in May to provide “a more granular analysis of financial sector challenges” and assist with strengthening the prudential toolkit.
Shadow Opposition Finance Minister, Irfaan Ali in November 2015 warned that hundreds of Guyanese, many of them businessmen were on the verge of losing their properties as a result of inability to pay their mortgages, as the local economy continued to flounder.
Ali said based on data in his possession of his own investigations from many financial institutions, non-performing loans or loans where the borrower failed to pay instalment for three months, have increased by 69.7 per cent in 2015 and continues to skyrocket.
Meanwhile, the IMF warned that the increasing current expenditure of the government will crowd out space for public investment, despite significant donor support.
“The mission suggested moderating the growth of wages, as well as reforming public enterprises with a view to reduce their reliance on government support…Containing current expenditure would provide additional space for public investment while preserving debt sustainability,” the mission warned.
It said while the improved financial performance of Guyana Power and Light and the reforms proposed by the Commission of Inquiry for the Guyana Sugar Corporation are welcomed, the scope and pace of reform should take into account social implications.
The IMF said the Guyanese economy remains resilient and continues to grow despite significant global headwinds. The government of Guyana projects 4.4 per cent growth in 2016, but the IMF said it is likely to grow by 4.0 per cent.