Guyana in line for new three-year IMF scheme
Financial institutions to send joint mission By Gitanjali Singh
Stabroek News
January 26, 2002

The World Bank, International Monetary Fund (IMF) and Inter-American Development Bank (IDB) have agreed to mount a joint mission to Guyana to settle outstanding issues which would allow the clinching of another three-year Poverty Reduction and Growth Facility (PRGF) and more debt relief.

President Bharrat Jagdeo, just back from his trip to Washington where he met top executives of these institutions, yesterday indicated that his meetings with the international financial institutions (IFIs) went "extremely well." He said he had requested an early board date for Guyana's case for enhanced debt relief.

He disclosed that he was working to get a board date before May, when Guyana's first bilateral debt payment for the year was due and wanted the negotiation process to be wrapped up quickly.

"Although the timetable is tight, I think it is doable," Jagdeo told reporters at the news briefing yesterday.

Securing a new three-year programme with the World Bank and IMF is crucial for Guyana to be able to take its case to these institutions' boards for enhanced debt relief. The Poverty Reduction Strategy Paper is another key aspect of the process to allow Guyana to be declared at completion point to gain access to some $4.7 billion more in annual debt relief.

Jagdeo went to Washington recently to secure a commitment from the IFIs on a new three-year programme for Guyana, after staff members of the institutions failed to reach agreement with the government on aspects of the proposed programme in December. He also spoke with the IDB about the pipeline of projects for Guyana and signed two loan agreements with the bank while there.

The President indicated that minor adjustments would have to be made to the 2002 budget as a result of the discussions with the international financial institutions, but indicated that the broad parameters were decided by the government since November last year. He said he did not see the lack of a signed PRGF with the IMF and Bank as a hindrance to the national budget presentation which would occur well before the statutory deadline of March 31. He added that before he left for Washington, the expectation was that budget would be presented by February 15, but this might not be possible now. He added that there was no major issue which would delay the process but there were minor ones that the government needed to consult the institutions on, such as the level of government subsidies for water and the bauxite company.

He emphasised that it was crucial for Guyana to go to the institutions' boards early on a new PRGF as it would mean greater access to grants to close the fiscal deficit in the budget.

The basis for the enhanced debt relief, the President indicated, would include restructuring of the sugar industry; restructuring and privatising the bauxite industry; executing further financial sector reforms; tax reforms, tabling procurement legislation in parliament; strengthening the public sector investment programme; electricity and telecommunication reform; putting in place legislation for programme budgeting and proceeding with public service reform.

In the case of the public sector investment programme, the President said there was need for strengthening prioritisation and current and capital projects coordination. He also noted the need for affordable and accessible electricity and telephone services.

He signalled that introducing value-added tax (VAT) had to be looked at in the context of the Free Trade Areas of Americas as there was need for a transitional period which would be adequate to ensure that no revenue was lost. He said that more discussions would have to take place on introducing VAT in Guyana to replace the consumption tax.

The President reported that he briefed the executive directors of the World Bank on Guyana's economic situation and said he was able to respond to some persistent issues, such as why Guyana had a large ratio of capital expenditure relative to its GDP. He said he had to point out the nature of the country -- with its people spread over a wide expanse of land -- and the need to invest heavily to service communities. He pointed out to the directors that in this rebuilding phase of the economy, this ratio will be high but it will decline eventually.

He spoke of the challenges to forming a cohesive society in Guyana as well as greater access to the poverty reduction strategy credit (PRSC) facility, which will follow the PRGF. He revealed that now almost all of the resources from the World Bank would be consolidated in one loan -- the PRSC -- to ease administration and this would give more flexibility to HIPC countries.

James Wolfensohn, president of the World Bank, Jagdeo said, was also very generous and supportive and had given a commitment to expedite the PRSC and to work on allowing Guyana greater access to such resources. Jagdeo is also asking for a larger allocation under IDA resources for structural adjustment.

The President said that in terms of Guyana's programme with the World Bank, it ranked in the upper quintile for performance.

Jagdeo also met the IDB's top executives and sealed two loan agreements, one for the Mahaica-Rosignol Road Project and a poverty reduction project. He reported that Guyana had used up its first two-year allocation under the current four-year cycle and was allocated an additional US$20 million under the bank's fund for special operations from resources which were available to other countries under the project. This was because of Guyana's good implementation record.

Meanwhile, the joint IMF/Bank mission is expected in Guyana some time in February.