At the beginning of the 2000s, Guyana’s economy had stagnated, exacerbated by a difficult security situation and political tensions between the two major political parties deeply divided along racial lines. This weakened investor confidence and accelerated Guyana’s brain drain.
To address the nation’s problems, the Government of Guyana committed to reorienting its economic and social policies towards poverty reduction. In 2001, a Poverty Reduction Strategy (PRS) was approved that prioritized the need to improve transparency and public sector accountability, expand access to basic services, support private-sector growth, and protect Guyana’s environmental assets. Lessons from the first Poverty Reduction Support Credit (PRSC) in 2002 indicated that Guyana lacked the capacity to implement a PRSC every year and that reform should be simplified and focused. The volatility of the political situation and the need for a flexible instrument led to the Poverty Reduction and Public Management Operation (PRPMO). PRPMO focused on four main areas: better linking of public spending to poverty priorities and more effective investments; improving transparency and efficiency in public resource use; enhancing the Government’s ability to monitor and evaluate its poverty reduction efforts; and improving environmental management and regulations in the key sectors of sugar, mining, and forestry.
In a difficult economic and political context, the Guyana Poverty Reduction and Public Management Operation helped the Government put in place reforms that strengthened economic governance, increased the transparency and efficiency of public investments, improved poverty monitoring and introduced environmental protections in the areas of forestry, sugar, and mining.
PRPMO was disbursed after the Government implemented key reforms, for which there was strong ownership and broad-based consensus, including:
- Improved programming of public investments. A five-year rolling public investment program was adopted as part of the yearly budgetary process. A methodology for selecting and ranking projects was put in place to prioritize investments in the 2006 and 2007 national budgets in line with PRS objectives.
- More transparent and efficient public financial management and procurement. An assessment by the World Bank, Inter-American Development Bank (IDB) and the European Union found that management of public finances in Guyana improved considerably in the last five years, in part as a result of the PRPMO. New laws and regulations were enacted to address systemic financial management weaknesses and close loopholes. A new Audit Act was enacted giving the Auditor General legal powers to carry out effective and independent audits. The Lottery Fund was audited. In public procurement, regulations and standard bidding documents were introduced for use by national and regional tender boards. PRPMO supported the launching of the first phase of the fiduciary oversight strengthening program.
- Better monitoring and evaluation enabled the Statistics Bureau to publish the 2002 census data, carry out the 2007 Household Budget Survey, and prepare a poverty report to orient a new Poverty Reduction Strategy.
- Stronger environmental regulations. The Government adopted an Environmental Management Plan for the new sugar mill and sugarcane fields being developed. The 2007 Guyana Forestry Commission Bill empowered the Guyana Forestry Commission to oversee sustainable forest development practices. A strategic environmental assessment of the mining sector was completed to guide future legislation.
The Bank contributed to the analytical basis for the PRPMO policy reforms, including preparation of a Development Policy Review, a Public Expenditure Review, a Country Financial Accountability Assessment, a Country Procurement Assessment Report, and two poverty and social impact analyses of the bauxite and sugar sectors. The Bank provided grant resources for technical assistance, including a PHRD grant, to prepare the fiduciary oversight report and standard procurement bidding documents, as well as train public officials in procurement, monitoring, and evaluation.
The preparation of the PRPMO benefited from a consultative process that included a broad range of stakeholders, such as the opposition parties, which helped create strong ownership of, and commitment to, the reforms proposed in the program. A difficult political consensus was achieved on key policy issues. For example, the Government consulted with and found common ground with opposition parties to define an action plan for the fiduciary oversight reforms, which the Parliament subsequently unanimously approved. A single-tranche operation better reflected Government capacity and was timed to the speed of the Government’s implementation performance. This focus on deepening a narrower reform agenda was consistent with country realities.
Strong donor coordination generated agreement on the reform agenda and created consistent policies between key donors in Guyana, including the World Bank, the IDB, the International Monetary Fund, the European Union, Canada, Britain, and the United States. Technical assistance was critical. Complementary capacity building helped agencies across Government better design and monitor reforms.
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