Guyana Country Brief

Development Progress | Challenges Ahead | World Bank Assistance | Project Achievements | Contacts

Guyana is a natural-resource-wealthy commodity-based small economy, covering an area of 215,000 square kilometers and with a population of about 763,000 inhabitants (2007 estimates), mainly of East Indian, African, mixed, and Amerindian descent. While 90 percent of the population lives along the low-lying coastal belt, pristine tropical forests cover over 85 percent of the country. The climate change agenda is therefore central to the development agenda, both in mitigating against impacts and in contributing to global solutions through avoiding deforestation.

Guyana ranked 107 out of 177 countries in the UNDP Human Development Index (2006) and has an estimated GNI per capita of US$1,111 in 2007.

Peaceful elections in 2006 returned President Jagdeo’s People’s Progress Party-Civic (PPP-C) to power. The PPP-C now controls 36 out of 65 seats in the National Assembly, increasing its 2001 majority by 3 seats. The election saw the emergence of a third party in the traditionally dichotomous political landscape.

1991-97 marked a period of impressive economic performance in Guyana. Rooted in a comprehensive program of market-oriented reforms and liberalization, average growth reached 7 percent and inflation declined rapidly to single digits, while fiscal and external imbalances were drastically reduced. But by 1998, the initial gains of reform and stabilization seemed exhausted. The recovery came to a sudden but persistent halt when the external and domestic political environment deteriorated sharply in the context of pre-existing and deep-rooted structural vulnerabilities. The economy was also plagued by weak private sector activity, “brain drain,” sizeable fiscal and external imbalances, and setbacks in structural reforms. While financial stability was broadly maintained, growth averaged a meager ¼ percent from 1998 to 2005.

Macroeconomic developments in 2006 were the most favorable in nearly a decade. Real GDP is estimated to have increased by 5.1 percent and inflation remained low, with the end-December inflation at 4.2 percent. Growth is expected to remain strong in 2007, at 5.4 percent. However, annual inflation rose to 14 percent 2007, reflecting price increases as well as the introduction of the VAT. However, despite continued price fluctuations, mid-2008 figures reflect containment of inflation to 5.8 percent. The external current account deficit is estimated to have widened to 25 percent of GDP in 2006 reflecting strong imports due to high fuel prices and large capital imports associated with significant public sector investment, notably in the sugar sector, and a strong recovery in foreign direct investment. Nevertheless, financing was more than adequate and international reserves increased by US$26 million to US$277 million at end-2006 or 3.1 months of imports and the Guyana dollar has remained broadly stable.

The fiscal consolidation began in 2006 despite the high cost of elections and expenditure associated with flooding. The overall fiscal deficit declined from 13.6 percent of GDP in 2005 to 11.3 percent in 2006. Under the recent Multilateral Debt Relief Initiative, Guyana after receiving debt relief totaling US$585 million in 2003 under the Enhanced Heavily-Indebted Poor Countries (HIPC) initiative. The additional forgiveness of US$354 million provided by the IDB in early 2007 reduced the NPV of external debt-to-revenue ratio from 183 percent in 2006 to 120 percent in 2007, providing important breathing space in the medium term.

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CHALLENGES AHEAD

Guyana’s policy agenda, summarized in the 2001 Poverty Reduction Strategy Paper, has seven pillars:

1.       Broad-based, jobs-generating economic growth;

2.       Environmental protection;

3.       Stronger institutions and better governance;

4.       Investment in human capital, with emphasis on basic education and health;

5.       Investment in physical capital;

6.       Improved safety nets; and

7.       Special intervention programs to address regional pockets of poverty.

The successful recent national elections provide an encouraging sign for a new, less divisive political era. The challenge will be to maintain an inclusive and open dialogue to broaden ownership and build consensus around the policy agenda.

A new five year PRSP is being prepared and is expected to be endorsed in early 2009. The PRSP is informed by a poverty diagnosis based on data from the Household Income and Expenditure Survey completed in mid 2006 and has benefited from wide consultations.

Given the liberalization of the European Union sugar regime, restructuring the sugar sector to maintain its competitiveness and diversifying the economy will be critical for improving Guyana’s medium-term growth prospects. Thus, establishing an environment for sustained growth remains a key challenge and it would require:

• Improvements in public sector efficiency, transparency and governance;
• Strengthening of environmental management and regulations;
• Increased access to basic social services, including in rural and hinterland areas;
• Improvements in infrastructure; and

Improvements in the protection of property rights and enforcement of contracts.

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WORLD BANK ASSISTANCE TO GUYANA

In 2003, the Bank approved a three-year Country (CAS) to support key objectives of Guyana’s Poverty Reduction Strategy Paper (PRSP) including:

1.       Stimulating economic growth and increasing the country’s productivity in key sectors such as sugar;

2.       Improving governance and increasing the accountability and transparency of the public sector;

3.       Improving the quality and delivery of basic services, including health, education, water supply, and safety nets; and

4.       Promoting environmentally sustainable development including the establishment of protected areas and incentives to use alternatives to fossil fuels in sugar production.

To support these objectives, the International Development Association (IDA) has committed US$25 million in credits as well as a US$10 million grant for HIV/AIDS activities and a US$11 million grant for the Water sector, amounting to total. In addition, Guyana receives assistance from funds such as the Institutional Development Facility, the Global Environmental Facility, the Education for All/Fast Track Initiative, the Community Development Carbon Fund, and the Forest Carbon Partnership.

The World Bank has approved two Development Policy Loans to support the Government’s broad-based reform program. The US$12 million Poverty (PRSC), which became effective in 2003, was followed by a US$9.6 million Poverty (PRPMO) which reached effectiveness in July 2006.

A new assistance strategy will be approved in early 2009 to align World Bank support to the new PRSP and the revised national development agenda.

The current World Bank portfolio in Guyana includes:

• Forest Carbon Partnership Facility (2008) this project will support Guyana in leveraging the preservation of forest reserves for national development.
• Global Environment Facility Conservancy Adaptation Project(2008, US$3.8m): This project will reduce vulnerability to catastrophic funding in low-lying coastal areas that are threatened by sea level rise.
• Bagasse Cogeneration Project (2006). This project will help mitigate global climate change by facilitating the use of market-based mechanisms sanctioned under the Kyoto Protocol through support to clean energy projects in Guyana.
• Education For All/Fast Track Initiative- (2003, US$45 million): The goal of this program is to achieve universal primary school completion for all children by 2015. Specific initiatives include: (i) improving the quality of the teaching force in the country’s Hinterland; (ii) enhancing the teaching/learning environment in primary schools; and (iii) strengthening school/community partnerships.
• HIV/AIDS Prevention and Control project (2004, US$10 million): This project is part of the Bank’s Multi-Country HIV/AIDS Prevention and Control Program for the Caribbean, and provides grant financing to support Guyana’s National HIV/AIDS Strategic Plan for 2002-2006 and 2006-2010.
• Water Sector Consolidation project (2005, US$11.3 million): This project supports universal access to safe and affordable water for the population of Guyana, particularly the poor. Specifically, the project will provide access to treated water through the development of treatment facilities and distribution systems in three areas, and will support the ongoing water sector modernization and reform process. This project has also provided emergency funding to support recovery needs following the January 2006 floods.

National Statistical Strategy Development (2006, $285K): Supported by the Trust Fund for Statistical Capacity Building, this project supports the strengthening of statistical capacity and monitoring and evaluation.

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PROJECT ACHIEVEMENTS
 

World Bank support has contributed to achieving the objectives articulated in the Guyana Poverty Reduction Strategy, including:
 
Water
 
The water sector in Guyana has undergone significant restructuring and reform, supported by a  Water Supply Technical Assistance and Rehabilitation Project(1994-2004). In addition to providing assistance in the creation of Guyana Water Inc, by contributing to institutional strengthening, the project supported capital works. Major rehabilitation works were undertaken at nine water treatment plants, while an additional 84 minor facilities were rehabilitated. The project also invested in providing long-term, cost-effective water supplies to poor people in 20 squatter communities, benefiting an estimated 26,000 people.

Education

The Secondary (SSRP), implemented during 1996-2004, initiated an education reform program that has improved the quality, relevance, equity, and efficiency of secondary education in Guyana. The project contributed to improvements in national-level exam scores and a 30% nationwide increase in the number of secondary students writing end-of-school exams between 1996 and 2004. In supporting the rehabilitation and repair of schools, the SSRP improved the learning and physical environment of 12 pilot schools and completed emergency repairs at 18 secondary school facilities, creating a total of more than 6,000 new student places countrywide. The project also supported activities to enhance the ability of national and regional institutions to design, plan for, and implement sustainable education reform.

Amerindian Development

The World Bank provided a grant in 2002 to support capacity building in the Ministry of Amerindian Affairs. The grant supported legislative review, including nationwide consultations on the development of a new Amerindian Act, land demarcation from which over 70 communities benefited, strategy formulation, the development of a communications and outreach strategy, and skills development. Public administration within the Ministry was also strengthened.

Poverty Reduction

The Poverty (PRSC) supported structural reforms undertaken by the Government of Guyana in a number of areas, including (1) reforms in the public sector, including procurement and financial management; (2) the implementation of a new education sector strategy; (3) an expanded effort to combat HIV/AIDS; (4) tax reform, including improvements in local government tax administration; (5) reforms in the water sector, including the introduction of private management, increasing efficiency and water quality, and expanding service to poorer communities; and (6) restructuring of the sugar sector, including investments designed to lower costs, reduce redundant workers, and increase productivity.
 
Building on the reforms supported by PRSC, the Poverty (PRPMO) supported the Government's efforts to implement critical reforms aimed at improving the transparency, accountability, and efficiency with which overall resources are utilized across the public sector. This included: (i) preparation and publication of a 5-year Public Sector Investment Program, including a methodology for selecting and ranking future projects; (ii) enactment of new Audit Act and gazetting of its regulations; (iii) launching of the first phase of a fiduciary oversight strengthening program; (iv) adoption and implementation of the amended National Procurement Act and Regulations; (v) adoption and implementation of an Environmental Management Plan (EMP) for the Skeldon sugar factory and associated cane field expansion. In addition, the operation supported actions to strengthen environmental management and regulations to ensure the sustainable use of Guyana's natural resources.

These reforms were supported by a Public Sector Technical Assistance Creditto help the Guyanese authorities strengthen their institutional capacity to manage, monitor, and evaluate the country’s progress in implementing the PRSP. This technical assistance credit also helped strengthen the country’s fiscal, financial, and fiduciary management in areas such as revenue collection, procurement administration, parliamentary oversight and strengthening the effectiveness of the country’s social safety net programs.

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For more information on Guyana, please contact:

In Georgetown:  Tamara Whalen, Operations Analyst (twhalen@worldbank.org)

World Bank Office
c/o UNDP Building
42 Brickdam and UN Place
Stabroek, Georgetown
Guyana
Phone: (592) 223-5036, (592) 223 5037, (592) 223 5039
Fax: (592) 225 1384

Or in Washington, DC:  Alejandro Cedeno, Communications Officer (acedeno@worldbank.org)

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For more information on World Bank assistance to Guyana, including lending breakdown and project reports, see:

Proposed Projects
All Projects