Guyana’s oil economy to double this year, economic growth nears 60% – IMF

Oil production offshore Guyana increased significantly this year and the International Monetary Fund (IMF) projects that the local oil economy will double this year, while the country experiences a 57.8 per cent overall growth rate.

The IMF, in a statement issued on Tuesday, said that oil production in Guyana could facilitate the transformation of Guyana’s economy. 

With existing discoveries, Guyana’s commercially recoverable petroleum reserves are pegged at 11 billion barrels- an amount the IMF acknowledges is one of the highest levels per capita in the world. 

“This could help Guyana build up substantial fiscal and external buffers to absorb shocks while addressing infrastructure gaps and human development needs,” the IMF stated. 

Already, two oil vessels are producing, storing and offloading oil in Guyana’s prolific Stabroek block. One, from Liza Phase 1, is producing an estimated 130,000 barrels a day, while the second, from Liza Phase 2, began production in February, moving production to 220,000 barrels a day.

The third project, Payara, could get going towards the end of next year and the fourth project, Yellowtail, could begin production in 2025.

Altogether, the four projects could see Guyana producing 750,000 barrels of oil per day by the end of 2025. The IMF said that between 2023 to 2026, the oil economy could grow by about 30 per annually. 

Even so, the financial institution acknowledged that there are risks involved. 

Oil prices that quickly increase and decrease, a slow global economy or even rapid increases in local investments are among the potential challenges. 

Cognisant of these challenges, the IMF emphasised that “continued prudent policies and structural reforms” are crucial. These efforts, assisted by the Fund itself, can help to avoid the buildup of macroeconomic vulnerabilities while guaranteeing more inclusive growth and equity locally. 

Specific macroeconomic measures were noted.

On the macroeconomic front, however, Executive Directors of the Fund backed Guyana’s debt management- specifically the “significant decline” in public debt and the commitment to debt sustainability. 

Restraint in using the country’s oil funds before the passage of the Natural Resource Fund Act and continued prudent management of oil revenues were welcomed. 

Still, in what appears to be a continued concern for ‘overheating’ the economy, the IMF suggested that Guyana’s government moderately increase spending by constraining the annual non-oil overall fiscal balance to not exceed the expected oil transfers.

More social spending was also encouraged. 

“Directors called for the continuation of broad-based reforms to address structural weaknesses and diversify the economy, emphasising the significant human development and infrastructure needs. 

“They commended the authorities’ progress in strengthening Guyana’s anti-corruption framework and fiscal transparency and encouraged continued progress on implementation of the recommendations provided by the Extractive Industries Transparency Initiative (EITI),” the IMF statement noted too. 

Importantly, Guyana’s climate resilience efforts under the country’s Low Carbon Development Strategy (LCDS) was also commended. 

This release was issued after the The Executive Board of the IMF concluded the Article IV consultation with Guyana. 

Through this consultation, an IMF team assesses economic and financial developments, and discusses the country’s economic and financial policies with government and central bank officials. It is expected that global views and international policies might influence national policies.