Report No. 2505-GUA Economic Memorandum on Guyana Public Disclosure Authorized May 11, 1979 Latin America and the Caribbean Regional Office FOR OFFICIAL USE ONLY Public Disclosure Authorized Public Disclosure Authorized Document of the World Bank Public Disclosure Authorized 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 1/1 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$0.392 1/ The Guyanese dollar floated with pound sterling from July 1972 to October 1975 when the Government announced its linkage to the US dollar at G$ 2.55 = US$1.00. FOR OFFICIAL USE ONLY to This report is based on the findings of an economic mission of Guyana during March 20 - April 5, 1979. The mission was composed (Economist). Mr. Jose Sokol (Chief of Mission) and Mr. Jose Lopez Lopez performance| This document has a restricted distribution and may be used by recipients only in the authorization.| of their official duties. Its contents may not otherwise be disclosed without World Bank TABLE OF CONTENTS Page No. MAP COUNTRY DATA SUMMARY AND CONCLUSIONS ................................. i - vi 1 I. ECONOMIC BACKGROUND ...................................... A. Introduction ........................... 1........... B. Recent Economic Developments ......................... 2 C. Economic Developments in 1978........................ 4 6 II. DEVELOPMENT ISSUES ....................................... 10 III. PUBLIC SECTOR INVESTMENT PROGRAM ......................... 14 IV. ECONOMIC PROSPECTS ...................................... A. Output and Expenditure ............................... 14 B. Financing of Public Sector Investment ................ 15 C. Balance of Payments ................................. 17 GOVERNMENT'S PROJECT LIST STATISTICAL APPENDIX iB R D 11683R] ~. GUYAN A -/ PORr KA)TUR..A 4umk ~' M.tihews Ridg .j -t-BARAMITA CHARITY 0 - 70,?'JD~AKAIMA V~ANNA REGINA - ID ~ AD0rJTu'E ~ Wa6enaam hioand P,ESSEQUIBO 0 0TLUDIc VREEDEN STEERid ('' KARTABU POINT liE AM'I ERD A 'LIEP.ROAD MCAOlOEiKErJ,'i? RIABWOOD \½:/ ~~~ISSANO \A ~ (RE - LPANDING EMTME ~ *~ . MAH-DIA-- i \MT RORAIMA.V5AETU KAETURNAWARUK -II\, C' / ORINDUIK MONKEY MT / Alluv'ol Coast Areags Savonnah I. Main Roads ~LI X J Secondarh Roads C< ------ I-- Railroads IANNAI~.AOEIK t- Airfields Rivers O j -.- InternialianalBoundaries '~ranambo ECONOMAIC ACTIVITIES - ETICrops /Postlure Bauxite Z Ei Livestock rlI! EJForeslry N ANTIJ 10 20 30 40 50 4 CA VXWL!A'' PAesi- I 201 40 60r 8)ISHfLTDEz 60 CWHE ZUELANTi T; AI'AN / BR A Z I L B R A Z IL iBOL.VIA Page 1 of 2 pages COUNTRY DATA - GUYANA POPULATION DENSITY AREA / 3 8 214,070 i0 -- 7,000 (mid-1978) . per kmi Rate of Growth: 1.8% (from 1970to 1978) . per kmbi/Df arable land POPLILATION CHARACTERISTICS (1978) HEALTH (1975) Crude Birth Rate (per 1,000) 28.5 Population per physician 327(:.0 Crude Death Rate (per 1,000) 7.3 Population per hospital bed 190.0 Infant Mortalit.y (per 1,000 live births) INCOME DISTRIBUTION DISTRIBUTION OF LAND OWNERSHIP % of national income, hig1est quintile .. % owned by top 10% of owners lowest quintile .. % owned by smallest 10% of owners ACCESS TO PIPED WATER (1978) ACCESS TO ELECTRICITY J\ 4 : % of population - urban *- % of population - urban - rural - rural NUTRITION (1975) EDUCATION (1970) Calorie intake as % of requirements 104.0 Adult literacy rate % (1970) 85.0 Per capita protein intake 58.0 Primary school enrollment %(1973) 94.0 GNP PER CAPITA in 1977 US$560 GROSS NATIONAL PRODUCT IN 1978 ANNUAL RATE OF GROWTH (%. constant prices) US $ Mln. % 1973-77 1976-78 1978 GNP at Market liices 473.9 100.U .. -2.0 0.6 Gross Domestic Investment 95.2 2n.1 3.8 -29.4 -31.9 Gross National Saving 67.7 14.3 4.1 51.3 131.1 Current Account Balance -27.5 5.8 -58.7 -75.1 Exports of Goods, NFS 313.7 66.2 2.7 -1.6 14.1 Imports of Goods, NFS 312.1 65.9 5.8 -38.7 -22.0 Value Added US $ Mln. % Agriculture 106.0 23.8 Industry 67.2 15.1 Services 211.4 61.1 Total/Average 100.0 GOVERNMENT FINANCE Consolidated Public Sector Central Goverrunent (GMln, % of GDP ( '3$ Mln.) % G'- GDP 1978 1978 1976-78 1978 1978 1976-78 Current Receipts 512.7 40.5 40.4 363.8 28.7 31.5 Current Expenditure 443.5 35.0 38.5 424.0 33.5 36.9 Current Surplus 69.2 5775 l9 -60.2 -T.8T :37 Capital Expenditures 251.0 19.8 29.2 109.0 8.6 16.6 External Assistance (net) 101.0 8.0 11.9 52.0 4.1 5.8 a! The Per Capita GNP estimate is at 1977 market price;, calculated by the same conversion technique as the 1977 World Atlas. All otliAr 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 MONEY, CREDIT and PRICES 1972 1973 1974 1975 1976 1LQ77 1978 (G$ million outstanding end period) Money and Quasi Money 227.5 258.1 299.8 384.7 417.3 538.1 59.1) Bank Credit to Public Sector 96.5 169.7 139.3 155.5 412.7 603.0 661.0 Bank Credit to Private Sector 97.5 117.8 125.6 117.4 120.0 113.0 121.0 (Percentages or Index Numbers) Money and Quasi Money as % of GDP 38.4 40.0 31.6 32.3 36.8 48.2 44.6 General Price Index (1963 = 100) 106.7 117.2 140.3 148.7 161.7 179.1 Annual percentage changes in: General Price, Index 4.9 9.8 19.7 6.0 8.7 10.8 Bank credit to Public Sector 30.2 75.9 -17.9 11.6 165.4 46.1 9.6 Bank credit to Private Sector 0.8 20.8 6.6 -6.5 2.2 -5.8 7.1 BALANCE OF PAYMENTS MERCHANDISE EXPORTS (AVERAGE 19 76-78) Prelim. 1976 1977 197E US $ Mln % (Millions US $) Sugar 88.9 32.0 Exports of Goods, NTFS 194.3 275.7 313.7 Bauxite and alumina 124.2 44.7 Imports of Goods, NFS 403.1 347.5 312.2 Rice 31.0 11.1 Resource Gap (deficit = ) -108.8 -71.8 1.5 All other commodities 34.0 12.2 Total 278.1 100.0 Interest Payments (net) -18.4 -14.8 -16.9 Other Factor Payments (net) -5.8 -7.1 -6.1 Net Transfers -4.2 -3.9 -6.0 EXTERNAL DEBT, DECEMBER 31, 1978 Balance on Current Account -f3772 -97.6 -27.5 US $-M1n Direct Foreign Investment Net Public Disbursements Public Debt, incl. guaranteed 420.5 Disbursements 107.5 59.2 1G0.4 Non-Guaranteed Private Debt Amortization 18.8 -23.9 -60.8 Total outstanding & Disbursed . 25 Subtotal 88.7 35.3 39.6 a/ DEBT SERVICE RATIO for 1978 Other Capital (net) -43.2 0.4 7.9 Capital Account Balance 45.5 35.7 47.5 Public Debt, incl. guaranteed 24.8 Overall Balance 91.7 61.9 -20.0 Non-Guaranteed Private Debt - Change in Reserves 91.7 22.3 - Total outstanding & Disbursed 24.8 Arrears - 32.5 -10.2 Government Funds - 7.1 2.4 RATE OF EXCHANGE IBRD/IDA LENDING, (February. 1979) (Us$ M1jlrinT IBRD IDA Since - Oct. 1975 US$1.00 - G$2.55 G$1.00 = US$0.392 Outstanding & Disbursed 29.24 15.23 Undisbursed 14.08 3.42 Outstanding incl. Undisbursed 43.32 18.65 a/ Ratio of Debt Service to Exports of Goods and Non-Factor Services. not available not applicable SUMMARY AND CONCLUSIONS Background 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. Although the 1974 sugar boom more than compensated for the increase in import prices, the successive fall in sugar prices coupled with the full impact of the 1973-74 petroleum price increase required the economy to adjust to these changing conditions. The necessary adjustment became particularly difficult because the temporary flood of sugar earn- ings led to a greatly expanded level of public sector investment and a result- ing 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 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 the high level of 36% of GDP in 1976. One consequence of this overall situation 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 neasures which improved the balance of payments position, and a 40% reduction in public sector capital expenditures.