While noting the positive outlook of Guyana’s oil and gas sector and the benefits it brings to the country’s economy in the short and medium term, the International Monetary Fund (IMF) has warned the Guyana government that it needs not to go on a spending spree with revenues from the oil and gas sector, since excessive spending could expose the country to the Natural Resource curse.

In its report, the IMF noted that since the start of this year oil revenues coming into the budget will have a significant positive impact on budget financing and debt dynamics.

 It noted that oil production is expected to increase by 2025 by more than 300,000 barrels per day compared to the 2019 forecast which will see the government having more money to spend on social programemes like Health, Education and infrastructure as well as gradually paying off the government’s overdraft with the central bank.

“Increased dependence over time on oil revenue could expose the economy to oil price volatility. In addition, excessively rapid increases in government spending from oil revenues could subject Guyana to the “natural resource curse,” with significant inflationary pressures, eroding competitiveness from real exchange rate appreciation, and governance concerns,” the IMF said in its recently released country report on Guyana.

The IMF said further oil discoveries announced this year could significantly improve Guyana’s economic prospects over the long-term, particularly because the oilfield discoveries announced by Exxon in April 2022 are not incorporated into projections and Guyana can gain more from them.

“As in the past, they will be incorporated only when the production agreements with the government are concluded, and investment plans by Exxon management approved. Oil prices, which are currently taken from the latest WEO forecast, may be higher than under current projections if sanctions on Russia intensify,” the IMF reported pointed out.

The IMF explained further in its report that with real growth projections averaging close to 17 percent a year for several years, the public debt to GDP ratio is projected to fall from 22.8 percent in 2022 to 12.7 percent in 2032.

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