Public-Private Partnerships on
projects…IMF warns Guyana to follow
int’l best practices
-believes that Amaila hydro will work if restructured
-cautions on rapid credit growth
The International Monetary Fund (IMF) has urged Government to seriously consider improving how it goes about structuring its public-private partnerships (PPP) deals for large-scale projects.
The lending agency, which has over 180 countries as members, made the call in a statement from its annual review of Guyana’s economic health. That Article IV consultation by IMF’s Executive Board ended on December 9.
Acknowledging the potential benefits of a more stable and reliable source of
IMF has warned Government to rethink how it goes about structuring deals involving public/private partnerships.
energy, IMF said that its Directors are encouraging the authorities to ensure that the Amaila Falls hydroelectric project remains financially and economically viable to curb fiscal risks.
“In this context, they saw merit in strengthening the project and debt management framework, and pursuing international best practices as regard public-private partnerships.”
The developer, US-owned Sithe Global, pulled out this year after the National Assembly failed to reach agreement on a number of legislations critical to the project becoming a reality.
The Opposition said it remained unconvinced over the details of how the money, almost US$900M, will be spent. Two key legislations were not passed, forcing Sithe Global to announce its pullout.
According to the project structure, Government under a public/private partnership would have been directly investing over US$100M and guaranteeing a significant portion. The Opposition had argued that the PPP financing structure allowed Guyana little say in the management of the 165-megawatt project for Region Eight which Government had said would have solved Guyana’s long-term power woes. The project would have been managed for 20 years by Sithe Global before being handed over.
Government had also used a similar financing structure in the Berbice River Bridge and the Marriott Hotel. Both investments, using taxpayers’ dollars, were questioned by the Opposition which said that the country was sidelined in receiving much-needed financial returns from the projects.
IMF, meanwhile, welcomed Guyana’s strong growth over the past several years, which was underpinned by favorable commodity prices and robust foreign direct investment.
Inspect the banks
But the fund warned that while the medium-term economic outlook remains positive, the authorities in Guyana must persevere in their commitment to sound policies and reforms to strengthen policy buffers, promote more inclusive growth, and further reduce poverty.
It urged reforms to ensure public enterprises improve their efficiency.
President
Donald Ramotar
“Directors considered that a modestly tighter stance of monetary policy and continued exchange rate flexibility would help safeguard international reserves, contain inflationary pressures, and reduce the current account deficit.”
Regarding the country’s financial risks, the IMF directors recommended continued vigilance.
The fund zeroed in the rapid lending growth which could pose a problem if not monitored.
“In light of rapid credit growth in recent years and high loan concentration, they advised frequent on-site inspections for larger banks and a better integrated supervision of financial business groups. It is urgent to address remaining gaps in the regime to combat money laundering and the financing of terrorism.”
Commending Guyana for the progress so far in poverty reduction, IMF called for further efforts to ensure a more even distribution of the benefits from economic growth.
Increase production
“In this regard, efforts to lower the cost of energy, address skill mismatches, and improve the business environment represent important policy initiatives. Steps to increase productivity in traditional sectors, such as agriculture and mining, should also be part of a strategy to foster more inclusive growth.
Directors also encouraged further improvements in data provision and dissemination.”
According to the IMF statement, during the last decade, Guyana’s strong macroeconomic performance has contributed to a reduction in public debt levels and sustained poverty reduction. “The economy has experienced seven years of uninterrupted growth averaging about four percent annually.”
IMF is projecting a 4.8 percent in 2013, around what Government is also forecasting.
Minister of Finance,
Ashni Singh
“Twelve-month inflation is expected to remain low at around 3.5 percent by year-end. The revised 2013 budget envisages an overall fiscal deficit of 5.2 percent of GDP, largely related to worsening performance of public enterprises which are projected to return a deficit of 0.4 percent of GDP compared to a surplus of 1.3 percent in 2012.”
IMF said that higher VAT receipts are projected to raise central government’s non-grant revenue by 0.9 percent of GDP.
“The current account deficit is expected to widen to 16.8 percent of GDP in 2013, driven by higher fuel imports, lower commodity prices, and lower remittances, which are projected to fall with slowing activity in major host countries.
At the same time, with larger disbursements related to an ambitious public investment program and resilient FDI, gross international reserves are projected to remain adequate at 3.6 months of imports.”
