Guyana is now the beneficiary of an approximately seven (7) billion dollars of Development Policy Credit (US$35M) following the signing of an agreement between Minister of Finance, Winston Jordan and World Bank Senior Country Director, Pierre Nadji Friday.
Minister Jordan said the loan will support the country’s finance sector.
The development policy credit provides financing on the basis of the actions which Guyana has already undertaken with regard to Financial and Fiscal Stability, including the passage of critical legislation to ensure same.
“The bills that we passed were complex pieces of Legislation but were very much needed to modernise the financial architecture in our country,” he noted.
In addition to the legislation already passed to ensure a stable financial sector, including amendments to the Credit Reporting and Insurance Acts, Minister Jordan said modern Stock Exchange and Public Debt Management legislation will complement them.
The minister added that “these pieces of legislation that we have just passed…in particular legislation in relation to the National Payment System…will see over a period of five years less dependence on cash as the almost sole means of transaction in the country.”
The World Bank Director, while commending the efforts of the government, noted that the credit seeks to stabilise Guyana’s financial sector and prepare the grounds for sound fiscal management.
He said the legislation was passed in time for the release of the credit, “this was really a significant effort on the part of the Government, so we are very pleased and looking forward to doing more of these and help the Guyanese people address the many challenges.”
It is also envisioned, Minister Jordan noted, that the amendments to the Bank of Guyana and Financial Institutions Acts will strengthen the Central Bank’s tools for dealing with the operations of commercial banks.
The World Bank has made available to Guyana $18 billion (US$90M) over the next two to three years and this loan is part of that facility, the Finance Minister disclosed.
He said the ministry and the World Bank are currently in the process of developing another facility specifically to deal with development in the Oil and Gas Sector.
The loan is also provided on the basis that Guyana maintains an adequate macroeconomic policy framework.
So far however, the country’s economic outlook has been anemic, with economic growth for 2017 slumping to 2.1 per cent.
Initially, Government had projected that Guyana’s economy would have grown by a 3.8 per cent for 2017. This projection was reduced to 3.1 per cent, and then again to 2.9 per cent, before reaching 2.1 per cent.
Opposition Leader Dr Bharrat Jagdeo had said that the economic growth figure is low by all standards, and is no way lending to the growth and development that is required in the country.
He also reminded that the Government had to revise the growth projection three times, and it calls into question its presentations to Parliament regarding the economy.
“So now that it is low, all of the ratios they spoke to us about in the last budget in November would have to be recalibrated. And so the size of our fiscal deficit would climb, our balance of payment in relation to GDP will climb, et cetera,” he explained while noting that it is not as simple as revising a number downwards, especially when that number is used as the denominator to calculate a range of macroeconomic issues and variables.
Moreover, Jagdeo a former President had said he was worried about large scale borrowing being undertaken by the incumbent APNU/AFC Administration, noting that under the then PNC Government such borrowing led to a bankrupt country.
According to the Opposition Leader, “this failed approach to national economic management was tried in the past. It led to a bankrupt country and resulted in devastating consequences for our people. I am sure everyone would recall that the external debt was over 900 per cent of GDP in 1992, which was reduced to 36 per cent of GDP in 2015.”
Jagdeo, in a released statement, said that his party, the People’s Progressive Party (PPP), had predicated that Government would go this route since “the massive growth in the size of the national budgets, primarily on consumption, could not be financed by the hefty increase in taxation; so this hopelessly misguided APNU government had to resort to large scale borrowing.”