Report No. 2081-GUA Economic Memorandum on Guyana FILE COPY Public Disclosure Authorized June 13, 1978 Latin America and the Caribbean Regional Office FOR OFFICIAL USE ONLY Public Disclosure Authorized Public Disclosure Authorized Public Disclosure Authorized Document of the World Bank This document has a restricted distribution and may be used by recipients only in the performance of their official duties. Its contents may not otherwise be disclosed without World Bank authorization. CURRENCY EQUIVALENTS Through December, 1972 1/ US$1.00 G$ 2.093 G$ 1.00 US$0.48 December, 1973 US$1.00 G$ 2.105 G$ 1.00 US$0.475 December, 1974 US$1.00 G$ 2.229 G$ 1.00 US$0.449 October, 1975 US$1.00 G$ 2.550 G$ 1.00 US$0.392 / The Guyanese dollar floated with pound sterling from July 1972 to October 1975 when the Government announced its linkage to the US dollar at G$ 2.55 = US$1.00. FOR OFFICIAL USE ONLY This memorandum is based on the findings of a mission to Guyana in March 1978, composed of Mr. Jose Sokol (Chief of Mission) and Ms. Constance Bernard (Research Assistant). These findings were updated during a follow-up mission by Mr. Sokol in May 1978. The memorandum also incorporates the work of an earlier economic mission in November 1977 which included Messrs. Murray Ross (Chief of Mission), Peter Davies (Economist), Kalpathi Venkatraman (Investment Advisor), and Ms. Constance Bernard (Research Assistant). This document has a restricted distribution and may be used by recipients only in the performance nf thpir nffiridl diftieq Itc gnntpnte msv nnt nthprwivip hp dtic.lncpd withnu,t Wn.,ld Uo.L., TABLE OF CONTENTS Page No. MAP SUMMARY AND CONCLUSIONS ..................................... i-iv Economic Background ......................................... 1 Economic Developments in 1978 ............................... 3 Development Issues .......................................... 4 Output, Growth, and Investment .............................. 5 Public Sector Investment and Its Financing, 1978-80 .... ..... 6 Balance-of-Payments Outlook ................................. 9 STATISTICAL APPENDIX IBRD 11683 AUGUST 1975 GUYAN A 1'RARAMITA j wObonflO 1-CHARITY 0 a f 3 ( 0>\ F~~~~~~~~~~ANNA REGINA - *t < / ~~~~~~~~~~ADVNURENAM*-w I,IondO 000~~~~~~~~ 4/ _ V~~~~~~~~~~~~~~~~~~~~~~~~~~~~Lgo0~~~~ Islnd@ ** RARTICA M;TMR KANICA N O~~ESGUB J KARTABU~~~~~~~NR7 OIN 1SG RGEIO /O- ASTERDAM Tp-AlbC s -N I RAD KAMARANG S( ) Nii=\+ ) MA ERINI / C REEK /oin0 'i (SSURANA m IN~~~~~~~~~~~~~- Sovonnoh~ ~ ~~ ~ ~.- ==-~ -~ ~ ~~~~~M,/ \ IOAN 7) / RRW IOUOK Uxmnrzmbo7STw ForesteAry eost|sit 1 ECONOMIC ACTIVITIES S<OOOO=00w -% 2 \ M~~~~~~oiRoaOOOdO6s RAN^ a- BOLIVAlluvialCoas t A____reas_____--------.1______ RailroadsoiCHS; ' o oo o> 5 Klnoterntioo Bonare HOPE ES V3 7ECOO MICdneACunT IVITIESp l o oOOOoogoOooEOOOgO CropsPotr A/AN/ ... ----- >P cOCvB oux \it ir C vv\<GNNS P5J. Livestock- 2 >R <S_ Forestry;R ZI N. Page 1 of 2 pages COUNTRY DATA - GUYANA AREA POPULATION DENSITY 214,970 km 2 805,500 (mid-1977) 3.7 per km 2 Rate of Growth: 1.9% (froml965 to 1977) . per km 2 of arable land POPULATION CHARACTERISTICS (1975) HEALTH l (1975) Crude Birth Rate (per 1,000) 32.4 Population per physician 3270.0 Crude Death Rate (per 1,000) 6.9 Population per hospital bed 190.0 Infant Mortallty (per 1.000 live births) 38.0 INCOME DISTRIBUTION DISTRIBUTION OF LAND OWNERSHIP % of national income, highest quintile owned by top 107. of owners .oep lowest quintile *Z owned by smallest 107 of owners ACCESS TO PIPED WATER 1968 ACCESS TO ELECTRICITY % of population - urban 93 % of population - urban - rural 32 - rural NUTRITION (1975) EDUCATION (tL'970 Calorie intake as % of requirements 104.0 Adult literacy rate h 85.0 Per capita protein intake 58.0 Primary school enrollment % 98.0 GNP PER CAPITA in 1976a! US$540 GROSS NATIONAL PRODUCT IN 1977 ANNUAL RATE OF GROWTH (M. constant prices) US$ Mln Z 1965-70 1970-74 1977 GNP at Market Prices 418.4 100.0 4.0 2.0 Gross Domestic Investment 119.2 28.5 4.7 5.0 Groas National Saving 27.5 6.6 10.5 14.4 Current Account Balance -94.9 22.7 -Exports of Goods, NFS 274.5 65.6 4.4 -1.5 Imports of Goods, NFS 345.5 82.6 3.2 0.1 OUTPUT, LABOR FORCE AND PRODUCTIVITY IN 1975 Value Added Labor Force.b V. A. Per Worker US$ Mln % ('000) b US$ % Agriculture 146.6 24.3 66.5 34.0 2204.5 92.9 Mining and Quarrying 48.7 15.3 28.6 14.6 1702.8 71.8 Manufacturing 62.5 11.2 56.8 29.0 1100.4 46.4 Other 206.4 49.2 43.8 22.4 4712.3 198.7 Total/Averaae 464.2 100.0 195.7 100.0 3720 T10.T GOVERNMENT FINANCE Central Government (G$ Mln) % of GDP 1977 1977 1973-76 Current Receipts 35L.8 31.4 34.3 Current Expenditure 415.0 37.1 30.8 Current Surplus -63.2 5.6 3.5 Capital Expenditures 131.0 11.7 21.0 a/ The Per Capita GNP estimate is at 1976 market prices, calculated by the same conversion technique as the 1977 World Atlas. All other conversions to dollars in this table are at the average exchange rate prevailing during the period covered. b/ Total labor force; unemployed are allocated to sector of their normal occupation. "Unallocated" consists mainly of unemployed workers seeking their first job. not available not applicable Page 2 of 2 pages COUNTRY DATA - GUYANA 1977 MONEY, CREDIT and PRICES 1972 1973 1974 1975 1976 (G$ Million outstanding end period) 538.0 Money and Quasi Money 227.5 258.1 299.8 384.7 417.3 632.9 Bank Credit to Public Sector 96.5 175.2 139.3 155.5 412.7 113.0 Bank Credit to Private Sector 85.0 101.8 105.9 117.4 120.0 (Percentages or Index Numbers) 48.3 Money and Quasi Money as % of GDP 43.3 40.0 31.4 32.4 37.4 179.1 General Price Index (1970 - 100) 106.7 117.2 140.3 148.7 161.7 Annual percentage changes in: 10.8 Price Index 4.9 9.8 19.7 6.0 8.7 General 53.4 Bank Credit to Public Sector 30.2 81.5 -21.6 11.6 165.4 -5.8 Bank Credit to Private Sector 0.6 19.7 4.0 10.9 2.2 (AVERAGE 1975-77) BAIANCE OF PAYMENTS MXRCHANDISE EXPORTS Prelim. US$ Mln % 1972 1976 '1971 (US$ Million) Sugar 116.5 38.7 164.5 294.3 274.5 Bauxite and alumina 119.5 39.7 Exports of Goods, NFS 30.3 10.1 Imports of Goods, NFS 168.2 403.1 345.5 Rice Resource Gap (deficit = -) -3.7 -108.8 -71.0 All other commodities 34.6 11.5 300-9 100.0 Interest Payments (net) -5.1 -17.5 -14.8 Total Factor Payments (net) -6.4 -4.8 -4.8 Other 31, 1977 Net Transfers -0.1 -6.1 -4.3 EXTERNAL DEBT, DECEMBER Balance on Current Account -15.3 -137.2 -94.9 Foreign Investment Direct guaranteed 380.5 Net Public Disbursements Public Debt, incl. Debt 3 Disbursements 13.4 107.5 58.8 Non-Guaranteed Private Amortization 2.5 -18.8 -23,5 Total outstanding & Disbursed SubCotal 10.9 88.7 35.3 DEBT SERVICE RATIO for 1 977a/ % Other Capital (net) 10.2 -43.2 -9.6 guaranteed 14.0 Increase in Reserves (+) 5.8 -91.7 -69.2 Public Debt. incl. Non-Guaranteed Private Debt - 14.0 Gross Reserves (end year) 36.8 27-3 22.0 Total outstanding & Disbursed Net Reserves (end year) -2.3 -14.3 -83,5 1977) (US$-Million): RATE OF EXCHANGE IBRD/IDA LENDING, (DEC. IBRD IDA Since - Oct. 1975 Outstanding & Disbursed 20.1 6.7 18.8 7.0 US$1.00 = G$2.55 Undisbursed 38.9 13.7 G$1.00 = US$0.392 Outstanding incl. Undisbursed a/ Ratio of Debt Service to Exports of Goods and Non-Factor Services. not available not applicable Summary and Conclusions i. Guyana, a country highly dependent upon its external sector, has in recent years been adversely affected by a number of changes in external economic conditions. The boom in sugar prices in 1974 more than compensated for the increase in import prices but with the fall in sugar prices, Guyana is now belatedly confronting the full impact of the 1973 petroleum price increase. The necessary adjustment has been made particularly difficult by the fact that the temporary flood of sugar earnings led to a greatly expanded level of public sector investment and a resultingly high import bill, neither of which has it been possible to sustain. In addition, a sizeable expansion of Central Government current expenditures in 1976, coupled with the drop in sugar revenues, and continuing consumer subsidies led to a deterioration in gross public sector savings in 1976 to about 0.2% of GDP. This occurred at a time when the growing participation of the public sector in the economy and a shrinking private investment made a strong public sector savings performance important for financing investment at an adequate level. Investment reached almost 40% of GDP in 1976. One consequence of this was a current account balance-of-payments deficit of over 30% of GDP. In absolute terms, the deficit exceeded US$135 million and gross international reserves fell from US$100 million to US$27 million during the year. ii. In 1977 only a marginal improvement in the economy took place despite the introduction of restrictive measures which improved the balance of payments position, and a 40% reduction in public sector capital expenditures.