Document of

The World Bank

FOR OFFICIAL USE ONLY

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'r's-8it. Nb- I;5f;z- Q-A 1'/ ~'y't1- ( F!_()).''; )IXSU UJ.)./ X.::JtiS ,/ X tajl.u('i, LA:3t'.' Report No. 9662-GUA

GUYANA

RECENT ECONOMIC DEVELOPMENTS, MEDIUM-TERM PROSPECTS,

AND BACKGROUND TO THE GOVERNMENT'S PROJECT LIST, 1992-95

June 24, 1991

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Report prepared by the World Bank for the Caribbean Group for Cooperation in EconomicDevelopment (CGCED) Meeting on GuyanaParis, July 9, 1991

This document has a restricted distribution and may be used by recipients only in the performanceI of ti sir nffi -l duttj#-,. Its contents may not otherwise be disclosed without World Bank authorization.

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FISCAL YEAR

January 1 - December 31, 1991

CURRENCY EQUIVALENTS

Currency Unit: Guyana Dollar (G$)

On February 21, 1991, the Government of Guyana unified the exchange rate atG$101.75 per US dollar and adopted a floating exchange rate system.

This report is based on the findings of a World Bank mission toGuyana in January 6-31, 1991 composed of Messrs. Alberto Favilla (Chief ofMission), Hernan Campero (Energy); Hermann von Gersdorff (PSIP and EconomicFra_.ework); Peter Gyamfi, Zvi Raanan, and Guillermo Ruan (Transportation);John Strongman (Mining); Leain-Hong Ding (Social Sectors and Project List);and John Falvey (Agriculture). Messrs. Krishna Challa (FinancialIntermediation and Private Sector) and Felipe Saez (Mining) joined the missionwhile in Guyana. Mr. Xavier Coll (Health and Nutrition) provided inputs tothe mission. Mr. Jose Sokol (Lead Economist) contributed to the economicanalysis.

FOR OFFICIAL USE ONLY

GLOSSARY OF ABBREVIATIONS

CARICOM Caribbean CommunityCDB Caribbean Development BankCIDA Canadian International Development AgencyDI Drainage and IrrigationEEC European Economic CommunityECGC Eastern Caribbean Group of CompaniesEIB European Investment BankERP Economic Recovery ProgramESAF Enhanced Structural Adjustment FacilityFAO Food and Agriculture Organization of the United NationsGAYBANK Guyana Cooperative Agricultural and 'ndustrial BankGEC Guyana Electricity CorporationGFC Guyana Forest CommissionGDP Gross Domestic ProductGREB Guyana Rice Export BoardGRMMA Guyana Rice Milling and Marketing AuthorityGTCC Guyana Telephone and Telegraph CompanyGUYMINE Guyana Mining Enterprise Ltd.GUYSUCO Guyana Sugar CorporationGUYWA Guyana Water AuthorityHD Hydraulic Division of the Ministry of AgricultureIDB Inter-American Development BankIFIs International Financial InstitutionsIMF International Monetary FundLIDCO Livestock Development CompanyLMRC Long Run Marginal Cost PricingMMA Mahaica-Mahaicony-AbaryNARI National Agricultural Research InstituteNPRGC National Paddy Grading CenterODA United Kingdom's Overseas Development AssistancePEs Public EnterprisesPSIP Public Sector Investment ProgramSIMAP Social Impact Amelioration ProgramTFAP Tropical Forestry Action ProgramUNDP United Nations Development ProgramUSAID United States Agency for International Development

This document has a restricted distribution and may be used by recipients only in the performanceof their official duties. Its contents may not otherwise be disclosed without World Bank authorization.

TABLE OF CONTENTS

Pate No.

COUNTRY DATA SHEET

SUMMARY AND CONCLUSIONS . . . . . . . . . . . . . . . . .i

I. ECONOMIC GROWTH PROSPECTS

Overview .* * a . * .. * * * * * * * * * * * 1 *Recent Economic Developments ...... ........... .. 1Development Issues ...............a..2............ 2Economic Prospects .999 .99.....9. .... ........... 3Exports, Imports, and External Capital Requirements . . . . . . . 5The Situation of the Public Finances . ... . ...... 7The Central Government Budget and Preliminary Outlook . . . . . . 8

II. SECTOR REVIEW

A Foreword ......... . 9 9Progress in Privatizing Public Enterprises (PEs) . . . . . . . 10Review of the Productive Sectors ................ 12Electricity, Transport, Infrastructure, Water Supply andTelecommunications .... . . . . . . . . . . . . . . . . . . . 19The Sea Defenses . . . .9 .9 9 .9 9 . . .9 9 . . . . 23Education, Health, SIMAP and Housing . . . . . . . . . . . 24Conclusion . . * . * 9 9 9 9 9 9 . . . . . . 27

III. THE PROJECT LIST

Composition and Size .............. ........ 27Financing of Local Currency Costs . . . . . . . . . ........ 28Execution Capacity and the Need for Concerted Effort . . . . . 29

STATISTICAL APPENDIX . . . . . . . . . . . . . . . . . 30

MAP (IBRD 11683)

Page 1 of 2GUYANA - COUNTRY DATA SHEET

Area: 215,000 sq.km Population: 0.6 million (1909) Density: 4 per *q km

Rate of growth: 0.7 X (1989)

Population characteristics Health

Crude birth rate (per 1,000): 25.6 Infant mortality (per 1,000 live births): 58Crude death rate (per 1,000): 7.6 Population per physicion: 0220

Populntlon per hoapital bed: 300

Incom distribution Distribution of land ownership

X of notional income, highest quintile: X owned by top IOX of owners:lowest quintile: X owned by smallest IOX

Access to safe water Access to electricity

X of population - urbon: 100 Energy consumption per capita: 565- rural: es

Nutrition Education

Calor;i Intake as X of requirements: 866. AdulS, literacy rate (X) : 98.9Per capita protein intake (g/day): 69.0 Primary school enrollment

(X) of relevant age group: 90

GNP per capita (USS, 1989) 1/ : 310

GROSS NATIONAL PRODUCT, FY89 ANNUAL RATE OF GROWTH ( X , 1977 prices)

USS Mn X 1976-80 1960-86 1986-87 1968 1969

GNP at Market Pric*e 268.9 100.0 -1.0 -4.2 -5.60 4.7 13.9Gross Dowmstic Investment 95.1 36.0 -9.1 -6.2 -9.8 -32.1 51.3Gross National Saving -27.9 -10.8 -4.4 -62.4 4.6 -8.2 -6.4Current Account 8alance -93.6 -86.2 ..

Export of Goods, NFS 247.0 96.4 -2.9 -4.4 -42 -9.6 -2.6Import of Goods, NFS 283.0 109.8 -6.9 -5.9 -2.6 -23.6 -1.2

OUTPUT, EMPLOYMENT ANDPRODUCTIVITY IN FY89

______________________

Value Added Labor Force V.A. per Worker

USS n X Mn X USe

Agriculture 64.0 256 Industry 68.9 27.6Sorvicet 116.2 46.4

Total / Average 248.1 100.0

GOVERNMENT FINANCE__________________

General Government

o Mn Percent of GOP1969 1986 1989

Current Receipts 2935.0 43.6 37.8Current Expenditure 6726.8 81.0 73.7Current Surplus -2791.8 -37.4 -36.9Capital Expenditure 1093.5 15.0 14.1

1/ World Bank Atlas methodology.

GUYANA - COUNTRY DATA SHEET P 2 of 2

MONEY, CREDIT A PRICES 1965 19" 1"? 199* 1999

(Mn OS outstanding at end of perlod)Broad Money Supply 1970.4 2860.9 8186.4 4361.7 6508.6Bank Credit to Pubile Sector 4277.1 066J.6 6860.7 7660.6 9161.6Bank Credit to Private Sector 520.2 678.5 689.7 991.9 946.9

(percontage or Index numbers)Broad Money as % of OP 960.1 101.2 92.6 104.5 68.7Oeneral Price Index (FY6S a 100) 100.0 107.9 183.9 194.4 863 .

Annual percentage changes In:Oenerul Prico Index 15.1 7.9 2. 40.0 69.6Bank Credit to Public Sector 19.8 16.5 25.8 20.9 19.8Sank Credit to Privote Sector 12.8 29.6 24.7 13.1 -4.8

BALANCE Of PAYMENTS MERCHANOISE P WORTS (AVERAGE 19"5-39)

1996 1997 1966 199 US SSMn X

(USS million) Suaxite 68.4 89.6Exports of Goods, NFS 241.0 275.0 212.0 246.0 Sugar 79.4 87.9Imports of Goods, FS 809.0 *12.0 269.0 268.0 Rice 18.4 0.4

----- -- ---- ----- Gold 6.4 8.1Resoures Gap (deficit * -) -0.0 -87.0 -17.0 -87.0 Spirits 7.3 8.7

Other Goods 16.6 9.9Interest Payments (not) 16.0 14.0 12.0 10.0 ----- ---Othor Factor Payments (net) 66.0 ?0.0 72.0 75.0 Total 2090.6 100.0Nee Current Transfers 10.0 11.0 18.0 14.0 ----- --

Balance on Current Account -142.0 -110.0 -66.0 -103.0ETFERNAL DEBT, DECEMBER 31, 1989

Direct Pvt. For. Investment -12.0 5.0 5.0 7.0 ------ --- ------- --- -Net MLT Borrowing 52.0 81.0 21.0 81.0

Disbursements 65.0 42.0 80.0 46.0 USS MnAmortization 18.0 11.0 9.0 14.0 -- -

__-- - --- Public Debt, inl. Guaranteed 1713.0Subtotal (Dlr.Inv.#Net MLT) 40.0 86.0 26.0 38.0 Non- Ouaranteed Private Debt 0.0

Total Outstanding A Disbursed 1718.0Other Capital (net)

and Capital n.e.i. 21.0 12.0 80.0 0.0 DEBT SERVICE RATIO FOR 1969 2_

Increase In Reserves (-) 61.0 62.0 82.0 64.0 Pubitc Debt, incl. Guarnteed 9.7Non- Guarnteed Privste Debt

Gross Reserves 1/(ond-year) 10.9 11.7 6.6 21.2 Total Outstanding & Disbursed 9.7

RATE OF EXCHANGE EURO/IDA LENDINO (ODw.1, 1969)

Annual Average(end of period) IBM0 IDA

1966 1967 1966 1969 9US Mn)- ---- ---- ---- Outstanding A Disbursed 84.9 34.5

USS1.00 * OS 0.28 0.10 0.10 0.04 Undiabureed 0.0 0.0081.00 a US3 4.27 9.60 10.00 27.20 Outstanding Incl.Undilbursed 04.5 34.5

______________________ --- __ - __________ --- _________

1/ Includes gold holdings.2/ Dobt wervice, as a percentage of exports of goods and non factor service.

SUMMARY AND CONCLUSIONS

Overview

i. Guyana's economic reform program continues to be carried out underdifficult -ircumstances of negative economic growth caused by adverseexogenous factors, deteriorated infrastructure, and excessive debt burden.Since 1988, the Government has implemented fundamental adjustment measures andhas made progress in correcting economic distortions, reducing imbalances andnormalizing relations with external creditors. However, it has been unable tomobilize and allocate resources in the scale necessary to provide the basicinfrastructure required for sustained development. Prospects for the economyin the medih.m term are good if the Government continues with itsmarket-oriented economic policies, reduces the debt burden, creates therequired infrastructure through a large and efficient public sector investmentprogram (PSIP), and by sttracting private investment. The increased publiccapital expenditures would need to be fully financed by external donorsthrough grant and concessional funds, includirg local cost financing ofproject activitiess to be consistent with the Government's financingconstraints and the lack of creditworthiness for conventional borrowing.

Structure of the Report

ii. This report reviews in Chapter I the economic developments inGuyana following the introduction of the Government's Economic RecoveryProgram (ERP), the country's main development issues, economic prospects,external capital requirements, the situation of the public finances, and apreliminary outlook of the Central Government budget. Chapter II places majoremphasis on stimulating a supply response and thus reviews privatizationefforts being pursued by the Government and conditions of key sectors to helpdetermine priority needs, and identifies investment requirements over themedium-term consonant with the Government's ERP. Chapter III reviews thecomposition and size of the Government's 1992-95 Project List (List) to bepresented to interested donors at a special Caribbean Group for Cooperation inEconomic Development (CGCED) meeting to be held for Guyana. It also discussesthe financing of local currency costs, the Government's execution capacity andthe need for concerted donor efforts to support the LRP.

Recent Economic Developments

iii. The Government's drive to liberalize the economy has made majorstrides in recent months. The dual foreign exchange markets (official andparallel) have been unified and the exchange rate is now market-determined.Most of the commodity prices have been liberalized except for petroleum andsugar prices which reflect international prices. The authorities haveeliminated virtually all quantitative restrictions on imports and has anoutward oriented economy. They are also seeking full privatization or jointventures for public enterprises In the productive sectors as well as forpublic utilities.

iv. There are some signs that the Government's program is beginning tobear fruit. The exchange rate has ceased its rapid depreciation and hasstabilized over the past two months. Private sector activity is slowlypicking up. The Government has been expanding the availability of credit totIe vr4vate sector while keoeing total credit expansion within the overall

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celings established under its stabilization program. In addition, potentialforeign investors are beginning to appear in growing numbers. Several havebought or expressed interest in a wide variety of enterprises, from ric, millsto forestry products and gold mines, albeit with a very limited inflow of nowfunds into Guyana so far.

Development Issues

v. While the execution of the ERP has contributed substantially to theadjustment of Guyana's economy, further efforts depend heavily on thereactivation of the productive sectoru. In ̂ ddition to maintaining anappropriate macroeconomic framework, Guyana's development agenda should focusprimarily on measures to stimulate output and exports. The agenda should alsocontain measures to address the social costs of adjustment and the sharpdeterioration in living standards that have occurred over the years.Initially, priority has to be given to the rehabilitation of the productivesectors to increase output by improving capacity utilization of existingfacilities, by promoting greater efficiency and productivity, and byencouraging activities which are low in capital requirements, quick-yieldingand have a high pay-back. Urgent attention has to be given to rebuilding thecountry's infrastructure. New investments aimed at tapping the country's vastagricultural, mineral and other natural resources as well as at supporting thedevelopment of human capital will also be needed.

vi. This report highlights the key constraints facing the major sectorsand the need for investments to restore the productive capacity of theGuyanese economy. Except for bauxite mining under the Reynolds concession,the other activities are handicapped by continuous disinvestment and neglectresulting from years of inappropriate economic policies, emigration of keypersonn-l and lack of financing (including foreign exchange resources).Physic&. Infrastructure, notably transportation, irrigation, drainage and thesea defenses are a bottleneck to augmented production. Telecommunications,electricity and water supply are also deficient, although the first of thesethree subsectors promises early resolution as a result of its recentprivatization. Compounding the problem is the depletion of the country'shuman capital, a matter that requires urgent correction. The stabilizationprogram, the limited tax base, itagnant economic growth and heavy debt servicepayments are compelling the Government to maintain a limited public investmentprogram. On the other hand, to reactivate the economy, a high capital-outputrelationship will be necessary for several years. This can be brought aboutonly by the support of donorslexternal lenders, given the insufficiency ofdomestic savings for the level of needed investment to restore economicgrowth.

Economic Prospects

vii. Projections for 1992-95 point to an improvement in GDP performance,with higher growth toward the end of the period. This would permit abetterment of private consumption per capita after the fall of recent years.(A 5.4X per year average decline during 1986-89.) With a graduallystrengthened physical infrastructure and market oriented economic policies,sustained economic growth of 3-4Z per year by 1995 would be possible. Guyanahas great agricultural potential and with appropriate policies as well asadditional investment the sector should be able to regain historical

- iii -

production levels. The same is true for the lumber industry given thecountry's vast wood resources (20,000 sq. miles of commercially exploitableforests). The provision of sufficient term finance and the removal of powerand transport constraints should help engender new productive activities,particularly in the area of non-traditional exports. Improvements in GUYHINEassociated with ongoing efforts to privatize the enterprise and tho fruitionof foreign investments in gold mining should stinulato greater mining output.The divestiture of public enterprises, together with now private initiatives,including foreign investment in public utilities, are likely to add impetus tothe GDP performance.

viii. An additional area of growth is the large informal sector.Improving the infrastructure, especially in relation to transport with a viewto reducing freight costs, continued containment of the interventions of thepublic sector in the economy, streamlining the government bureaucracy anddesigning a supportive tax system could make it increasingly --rthwhile forinformal entrepreneurs to be part of the official economy. This developmentwould not only have the statistical effect of capturing non-recordedtransactions but will also have a positive outcome of increased economicefficiency. A further encouragement to this process is given by theliberalized foreign exchange policy now in force.

ix. This projected GDP growth would ensure an improvement in privateper capita consumption which declined during 1986-89 at an average of 5.4Z peryear. Public consumption is projected to be curtailed and private consumptiongrowth is projected to be restrained to a marginal increase of around 31 peryear so as to ensure that domestic savings increase from 9.01 of GDP in 1991to an average of around 13.5Z of GDP during the rest of thc 19909. Such arestrained growth in consumption is necessary to ensure that the additionalincomes generated by increased economic activity is channelled into savingsrequired to finance economic development. Gross domestic investment isprojected to be constant arounA 421 of GDP during 1992-95, beyond which itdeclines to 361 of GDP by 1997. Consistent with the policy of domesticresource mobilization, the public sector primary current account is projectedto generate increasing surpluses during 19909 as a result of public revenueincreasing and expenditure reduction measures. Therefore, the overall fiscalbalance is projected to narrow (in spite of high interest burden on externaldebt) from 61% of GDP in 1991 to 14% of GDP in 1995, beyond which thedeclining trend is likely to continue. Given the low savings, and fiscalconstraints, the bulk of resources needed to finance investment would have tocome from external sources, if Guyana were to continue with sound economicpolicies in order to restore economic growth and financial balance.

x. If, however, external financing constraints were to continue todictate a policy of containing imports, the much sought supply response wouldremain elusive. rhe main effect of this action would be to deter the recoveryof the productive sectors, to realize negligible GDP growth and per capitaconsumption, and to lower export earnings.

xi. Guyana has made significant progress over the past two years inreestablishing normal relations with its external creditors. As stated, withthe extraordinary assistance from the Support Group, the country was able tosettle its overdue obligations to IMF, the World Bank and tho CDB in June1990. It also rescheduled outstanding foreign debts within the Paris Club,

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and with Trinidad and Tobago and the Caribbean Multilateral Clearing FacilityoAccordingly, the country's external payments arrears have been reduced toUS$434 million at the end of 1989 from US$1,031 million a year earlier. TheGovernment proposes to deal with the remaining arrears through rescheduling onexceptional terms with Its bilateral and comuercial creditors. In addition,it also expects to make progress in reocheduling loans maturing after 1990.

xii. Gross external capital requirements, Inclusive of amortization andchanges in net reserves, are projected to total US$717 million during 1992-95(Annex F). Net foreign investment Is projected to be US$178 million duringthis period. Thus, official grants and highly concessional loans areprojected to provide almost all the gross financing roquirements during1992-95. Disbursements from ongoing commitments are projected to mount toUS$261 million during 1992-95, while other resources (including sale ofassets, net short term and errors and omissions) amount to US$99 millionduring this period. The rmainder, defined as new capital requirements, isprojected to total US$485 during the four year period, which is 682 of grosscapital requirements. This is projected to be obtained from bilateral grants(US$120 million), concessional lending from bilaterals (US$88 miliion) andconcessional multilateral lending (US$240 million). External balances wouldonly be manageable through continued external essistance on concessional termsand grants, including balance of payments support to cover the country'sadditional financial requirements. External debt i3 projected to grow ataround 2.9Z per year between 1990 and 1997. However, the ratios of total debtto GDP as well as to total exports is projected to decline rapidly during the1990s. The debt service ratio to total exports Is projected to decrease onlygradually, from 32.72 in 1991 to 27.12 by 1997.

xiii. In order to ensure that Guyana can achieve the projected growthpath and maintain financial balance, it needs to receive a very generous debtand debt servi.ce reduction. The projections of total debt and dobt serviceratios described above do not take into consideration poelible debt reliefoptions. If debt rolief were to materialize, the impact would be noticeablein reducing the projected stock of external debt, which in turn would decreasethe projected debt serviceov It would also help improve the projectedcurrent account balance of the valance of payments and to narrow the fiscalgap. With debt relief, the external debt is estimated to reduce the stock ofexternal debt would decline in 1992 to US$1600 million from US$2080 millionwhich is projected. As a result of such a debt relief, the current account ofthe balance of payments is estimated to be around US$142 million in 1992,which is lower than the corresponding figure (without debt relief) of US$157million. Further, the ratio of debt service to exports Is projected todecline by 3S-4% than without debt relief. However, the full impact of thedebt relief on the debt service ratio will be felt only after 1995. Further,

1/ Sensitivity analysis of one such option where the grant element on debtand debt service roduction is ssumed to be 802 suggests that Guyana'soutstanding bilateral debt of about US$600 million would be reduced by US$480million and that interest obligations would be reduced by US$15 million peryear. After a normal groce period, the annual debt service obligation isestimated to be reduced by el*ut US$65 million.

. V -

on account of the debt rolief, the fiscal gap is estimated to be consistentlylower than tho projected fiscal ga" without any debt relief.

Composition and Size of the Proiect List

xiv. Tho list of projects for the period 1992-95 covers a wide range ofhigh priority investmenrs designed to support the Government's ERP. Unlikeother project lists in %,%Lch a large number of potential projects *represented for consideration by external financing sources, the 1992-95 Listreflects a careful effort to address the overriding needs of the economy,while improving resource allocation.

xv. Given the urgency attached to reactivating the productive sectorsand rebuilding the country's infrastructure, most of the projects have to beinitiated as soon as possible. It would be unrealistic, however, tocontemplate immediate implomentation since the coitments would be undulyburdensome on both Guyana and external donors/lenders. Therefore, a phasingof the over a four-year period had to be carried out. Moreover, for reasonsof preparation, readiness and time of procossing, some of the projects mayslip into later years. It is common to find in countries in a similar stageof deveLopment that for one reason or another less than 70X of the proj3etsare initiated during the period envisaged. Such a percentage may not be toofar from the actual implementation of this List given Guyana's overallconstraints.

vi. The List consists of 42 investment projects and 8 technicalessistance/pre-invostment activities. In addition, there are 9 $mmediatesupport requirements (balancing items) which would contribute directly toincremental output. About 62X of the number of projects would be forinfrastructure, 202 for rcactivating productive activlties, 10 for supportinghuman capital formation and the remaining (82) for general services such asessential weather detection, fire and police.

xvii. The sectoral cotposition of the List, in terms of proposedamounts, reflects the country's development priorities and is as follows:34.6Z in agriculture, including dralnage, irrigation and sea defenses; 7.0tin education, health and SIMAP; 12.32 in electricityl 16.51 in industry,mining and private sector credit; 12.61 in transport, 9.12 for water supplyand sewerage; 5.62 for urbanlhousing; 1.52 for general services and 0.82 fortechnical assistancelpre-inveatment.

xviii. The total cost of the List is estimated at US$987.4 million and theexternal financing sought at US$868.4 million or 882. This wc-ld representannual new commitments of US$217.1 million during 1992-95; however, assuming asuccess factor of only 701 in concretion of external finance, not annualcommitments would come down to about US$152 million. Taking as a base aweighted average of three years for project execution, this level ofcommitments would give annual gross disbursements for long-term loans of aboutUS$51 million, which are somewhat less than those presumed in the economicprojections. (This amount would represent a 91 Increase over average annualdisbursements during 1986-89, i.e., less than average international inflationin the period). The balancing items (US$39.6 million in total), if financed,would help sustain the level of annual disbursements In real terms,particularly during the first two years.

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Financing of Local Currenec Costs of the Proiect List

xix. The foreign exchange component of the List is estimateod at aroundUS$711 million or about 722 of the project costs. Compared to the totalexternal finaneing sought, this would entail financing of local currency costaof about US$157 million or 16Z of total project costs on average. GivenGuyana's low GNP per capita (US$310 in 1989), small tax base, graduallyimproving economic performance and the time required to restore economicviability, such financing of local costs is justified.

The Governmaert's Execution CaRacity and the Need for Concerted Donor Effort

xx. To implement the p.:ojects contained in the List, the Governmentwill have co overcome the major problems discussed in this report, namely,insufficient public savings, limited administration and management, shortagesof skilled manpower and reserved contracting. The first has to be tackledthrough continuing improved fiscal performance (also by foreign financing oflocal costs) and enhanced resource allocation (cancellation of some of theongoing projects which are not fully supportive of the ERP may also benecessary). With World Bank technical assistance, efforts are being made tostrengthen the local capability for investment planning. The other problemscan be overcome through international competitive bidding for uivil works,including maintenance, and intensified skill training. Moreover, and in linewith the privatization drive, the Government will have to give considerationto private concessions for the operation of the shipyards, ferries, ports andwater navigation, and some municipal services. Cost recovery schemes shouldbe intensified to buttress investment financing and asset upkeep.

xxi. In the past, the wide dispersion of effort, in part brought aboutby the uncoordinated project preferences of donors/lenders, has led to the useof scarce financial and human resources in widely dispersed and differentdirecti,ns. This practice should be discontinued and enhanced coordination ofexternal assistance should replace it. External financial assistance shouldbe directet to satisfying priority investments/programs which are mutuallyreinforcin! in support of the Government's ERP. The ultimate objective is toimprove the operational quality of public investment (i.e., a larger outputyield for a given resource input).

I. ECONOMIC GROWTH PROSPECTS

Overview

1. Guyana's economy is largely based on the production and export ofbauxite, sugar and rice. Agricultural activity is concentrated along thecoastal belt of the country where most of the population resides. Theextensive mineral and timber resources within the densely tropicalhinterland -- with the exception of bauxite mining -- remain largelyunexploited. The bauxite and sugar industries are in the process of beingprivatized. The rice sector operates on a mixed basis, with a State MarketingBoard handling the rice of private farmers, though the State has begunt toreduce its involvement. Other important sectors are gold and diamond mining,and lumber. The country's infrastructure needs are substantial on a percapita basis because of the country's topography and large size (83,000 sq.miles). Guyana's population of about 800,000 has an adult literacy rateestimated at 94% in 1985. The economically active population numbered 270,000in 1988. Economic activity has been retarded by a difficult physicalenvironment; by sharp fluctuations in output, stemming from the vulnerabilityof the economy to exogenous factors such as weather and international pricesand demand; and by the Government's past inaction to address economic issuesadequately (excessiv.Ay expansionary fiscal policies caused mounting fiscaldeficits and a build-up of external debt). In addition, private sectoractivity was severely limited by administrative controls and high taxation.The deteriorated situation led to a flight of skilled workers and capital aswell as to the development of a "grey economy'. Since 1975, recorded GDP percapita has fallen by one-quarter in real terms. Guyana is today a countrywith a per capita GNP of US$310 (1989) -- the lowest in the WesternHemisphere.

Recent Economic Developments

2. To stem this economic decline, during the first half of 1988, theGovernment, with the assistance of Bank and IMF staff, prepared a PolicyFramework Paper which outlined an Economic Recovery Program (ERP). Theauthorities introduced the ERP in June 1988 and have remained steadfast in itsimplementation. The policy measures contained in the ERP represent a radicalchange from a system based largely on state intervention and controls to amarket-oriented economy. Under the ERP, the exchange rate system has beenunified at a market determined rate and the trade system has been freed ofmost restrictions; controlled prices have been liberalized and subsidieseliminated. As regards fiscal policy, there has been a significant increasein the primary current account surplus of the Central Government throughincreased public sector tariffs, intensified tax collection, and reduced realpublic expenditures. Economic management is being strengthened by anambitious divestment program and efforts to restructure government operations.The ERP is being supported by an IMF ESAF/Standby and by an IDA StructuralAdjustment Credit (co-financed by the Caribbean Development Bank and theFederal Republic of Germany) following the clearance of arrears to the Fund,the World Bank and CDB through financing arranged by the Support Group forGuyana, chaired by Canada.

3. While the Government is carrying out decisively the needed reforms,the reactivation of the economy remains a difficult task owing to themagnitude of structural and financial constraints. Structural constraints

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include infrastructure bottlenecks stemming principally from a steadydeterioration of electricity supply, of the road network and ferries, ofports, of drainage and irrigation, and of sea defenses, from the undercapitalization of the productive soctors and from an increasing shortage ofskilled manpower. The financial constraints originate principally from amassive debt overhang of about US$2 billion and from a lack of public savingsto finance the sorely needed investment. Real GDP is estimated to have fallenby 3.5% in 1990 after declining by 3.3% in 1989.

4. The depressed economic activity has impacted upon the ERP's fiscalobjectives. In 1989, the current account deficit of the Central Governmentamounted to about G$793 million (102 of GDP) on a cash basis and the overalldeficit was about G$1.8 billion (23% of GDP), despite a shortfall in capitalexpenditures. In 1990, because of efforts to compress central governmentexpenditure, including the wage bill, and increasing tax collections, thenonfinancial public sector's deficit was within nominal targets and theCentral Government's non-interest or primary current account balance improvedsignificantly from G$361 million (52 of GDP) in 1989 to G$1.7 billion (13% ofGDP) in 1990. However, with the additional interest debt service payments,the current account deficit rose to about G$ 5 billion (372 of GDP) and theoverall deficit to about G$7.7 billion (572 of GDP). Domestic interestpayments were three times higher than budgeted and amounted to the equivalentof 79% of current revenues. Unexpectedly low capital revenues, inflation,depreciation of the exchange rate and rising fuel costs affected overalloutlays. Consumer prices are estimated to have risen 85% in 1990 compared to101% in 1989 . Notwithstanding these difficulties, the Governmentdemonstrated its resolve by keeping the program on track and by remainingcurrent in its debt service payments to the multilateral institutions.

Development Issues

5. While the execution of the ERP has contributed substantially to theadjustment of Guyana's economy, further efforts depend heavily on thereactivation of the productive sectors. In addition to maintaining anappropriate macroeconomic framework, Guyana's development agenda should focusprimarily on measures to stimulate output and exports. The agenda should alsocontain measures to address the social costs of adjustment and the sharpdeterioration in living standards that have occurred over the years.Initially, priority has to be given to the rehabilitation of the productivesectors to increase output by improving capacity utilization of existingfacilities, by promoting greater efficiency and productivity and byencouraging activities which are low in capital requirements, quick-yieldingand have a high pay-back. Urgent attention has to be given to rebuilding thecountry's infrastructure. New investments aimed at tapping the country's vastagricultural, mineral and other natural resources as well as at supporting thedevelopment of human capital will also be needed.

2/ The Statistical Bureau stopped measuring the Consumer Price Index in June1989 because of the inadequacy of the underlying basket of goods.

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Economic Prospects

6. There are some positive signs that the economy is bottoming-out andthat a small turnaround in activity with a 1% real GDP growth is probable in1991. In response to the currency devaluation, low labor costs,privatization, and a more liberal trade regime, a moderate supply response isapparent, among both traditional and non-traditional exporters. However, thecontinuing infrastructure problems and the uncertainty surrounding theforthcoming national elections are precluding a faster pace of economicrecovery. The highlights of possible main changes in output during 1991 areas follows:

i) sugar production is forecasted to reach only 134,000 tons becauseof the deteriorated productive capacity in GUYSUCO (therehabilitation of the enterprise will take time);

ii) in 1990, rice production was at its lowest level since '959.However, now that the price has been liberalized, and e portion ofmilling capacity has been privatized, rice production has alreadyshown indications of a significant increase. The 1991 large springharvest attests to this;

iii) the fishing industry is rapidly approaching maximum productivecapacity;

iv) the manufacturing sector has begun to take advantage of Guyana'slow labor costs and other comparative advantages. However, theunreliability and the high cost of transport as well as the powersupply problems are expected to continue restraining growth. Thesector is also constrained by skilled manpower shortages, a lack ofterm credit to finance permanent working capital and plantrenovation/expansion;

v) bauxite production is expected to increase gradually as GUYMINE'snew equipment becomes available. Beyond 1991, however, that rateof increase could accelerate significantly as production fromReynolds International's new mine and facilities comes on stream;

vi) declared gold and diamond production doubled in 1990 in response toa change in the Government's procurement price. As long as thispolicy is maintained, declared gold and diamond production islikely to increase further;

vii) in 1990, the construction sector remained mostly idle because ofthe low level of private and public investment. For 1991, no majorchanges are expected in this situation;

viii) consistent with the liberalization of the economy, services arelikely to register continuing gains; and

ix) goverament value added is expected to be reduced in consonance withthe stabilization program and the divestiture of publicenterprises.

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Table 1t GUYANA - SELECTED ECONOMIC INDICATORS, 1989-95(in percent)

Actual Proiected1989 1990 1991 1992-95

(average)

GDP Growth -3.3 -3.5 1.0 3.0Gross Investment/GDP 32.6 40.0 43.0 41.5Domestic SavingsJGDP 19.7 13.3 9.0 13.6Central Government Deficit/GDP 1/ 23.4 57.1 42.0 49.0Exports GDP 2/ 85.7 84.4 91.3 103.6Export Growth 2/ -5.3 -4.4 10.5 8.7Imports GDP 2/ 98.6 111.5 126.4 134.2Import Growth 2/ -2.7 9.9 15.6 5.9Resource Gap/GDP 2/ -12.8 -27.2 -35.1 -30.6Ext. Current Acct./GDP -35.1 -78.0 -88.6 -45.3Ext. Current Acct./Exports -40.9 -67.7 -57.1 -36.6Total DOD/Exports 666.5 701.4 629.8 518.0Debt Service/Exports 19.1 87.7 32.7 29.0

1/ Cash basis.2/ In constant 1989 prices.

Source: Ministry of Finance, Bank staff estimates and projections.

7. Projections for 1992-95 show continuing improvement in GDPperformance, with higher growth toward the end of the period. This wouldpermit a betterment of private consumption per capita after the fall of recentyears (5.41 annual average decline between 1986 and 1989). With increasedprivate sector participation and external financial assistance, grossinvestment would need to be maintained at around 421 of GDP (the investmentcoefficient has a high import content estimated at 72%). With a graduallystrengthened physical infrastructure and market oriented economic policies,sustained economic growth of 3-41 per year by 1995 would be possible. Guyanahas great agricultural potential and with appropriate policies as well asadditional investment the sector should be able to regain historicalproduction levels. ThA same is true for the lumber industry given thecountry's vast wood resources (20,000 sq. miles of commercially exploitableforests). The provision of sufficient term finance and the removal of powerand transport constraints should help engender new productive activities,particularly in the area of non-traditional exports. Improvements in GUYMINEassociated with ongoing efforts to privatize the enterprise and the fruitionof foreign investments in gold mining should stimulate greater mining output.The divestiture of public enterprises together with new private initiatives,including foreign investment in public utilities, are likely to add impetus tothe GDP performance.

8. An additional area of growth is the large informal sector.Improving the infrastructure, especially in relation to transport with a viewto reducing freight costs, continued containment of the interventions of thepublic sector in the economy, streamlining the government bureaucracy anddesigning a supportive tax system could make it increasingly worthwhile forinformal entrepreneurs to be part of the official economy. This developmentwould not only have the statistical effect of capturing non-recordedtransactions but will also have the positive outcome of increased economicefficiency. A further encouragement to this process is given by theliberalized foreign exchange policy now in force.

9. The economic projections assume an improvement in domestic savings.Public consumption is projected to be curtailed and private consumption growthis forecasted to be restrained to a marginal increase of around 3% per year soas to ensure that domestic savings rise from 9.0% of GDP in 1991 to an averageof around 13.5% of GDP during the rest of the 1990s. Such a restrained growthin consumption is necessary to ensure that the additional incomes generated bytb4 enlarged economic activity are channelled into savings required to financedomestic investment. Consistent with the policy of domestic resourcemobilization, the public sector primary current account is projected togenerate increasing surpluses during 1990s as a result of public revenueincreasing and expenditure reduction measures. Therefore, the overall fiscalbalance is projected to narrow (in spite of high interest burden on externaldebt) from 61% of GDP in 1991 to 14% of GDP in 1995, beyond which thedeclining trend is likely to continue. Given the low savings, and fiscalconstraints, the bulk of resources needed to finance investmenAt would have tocome from external sources, if Guyana were to continue with sound economicpolicies in order to restore economic growth and financial balance.

10. If, however, external financing constraints were to continue todictate a policy of containing imports, the much sought supply response wouldremain elusive. The main effect of continued import restraint would be todeter the recovery of the productive sectors, to realize negligible GDP growthand per capita consumption, and to lower export earnings.

Exports, Imports and External Capital Requirements

11. Merchandise exports are projected to grow by 10.5% in 1991 and at asomewhat slower average annual rate thereafter of 8.7Z in 1992-95. On thisbasis, exports would total US$459 million in 1995 compared with the low levelof US$254 million attained in 1990. This projection is predicated under thescenario of a partially recovered bauxite and sugar industry, enlarged riceproduction, continued gains in non-traditional exports, extended access topreferential export markets and other foreign sales attracted back to theofficial economy through the unified exchange rate. Imports would need toincrease at a real rate of about 5.92 per annum during the same period torestore productive capacity and achieve the economic growth projected. Inline with this and the constraints of Guyana's narrow export base, the tradedeficit is forecast to increase from US$56 million in 1990 to US$76 mlllion in1995. The external current account deficit would fall from US$172 million in1990 to US$136 million in 1995.

12. Guyana has made significant progress over the last two years inreostablishing normal relations with its external creditors. As stated, with

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the extraordinary assistance from the Support Group, the country was able tosettle its overdue obligations to the IMF,, the Bank end CDB In June 1990. Italso rescheduled outstanding foreign debts within the Paris Club and withTrinidad and Tobago and the Caribbean Multilateral Clearing Facility.Accordingly, the country's external payment arrears have been reduced toUS$434 million at the end of 1989 compared with US$1,031 million a yearearlier. The Government proposes to deal with the remaining arrears throughrescheduling on exceptional terms with its bilateral and commercial creditors.It also expects to make progress in rescheduling loans maturing after 1990.

Table 2 - OUYANA: EXTEMNAL FINANCINO REUtIREMENTS, 1090-1096(In millions t of16)

Actual Pro eted Total1- 1901 19 2 1 1994 199C1992-96

Capital Requirements 214 191 2C9 166 16C 161 717Non-interest Curr. Acot. Deficit To 11 75 iT _ Ui41 117Interst Payments 48 78 54 67 as 91 8OAmortization 68 46 49 46 42 44 181Reserve Accumulation s/ -11 -28 -4 - -10 -19 -41

Finnncina I rose) 214 191 209 18t 16 161 717gross Disbursements1 lET in S[ in III of

Long Term Capital 146 207 16s 171 159 169 682Multi lateral* 111 96 64 St 69 261Bilaterals 9 16 26 24 21 82 198Privete Suppliers Credits 12 16 28 11 7 6 41Direct Investmnt 14 87 48 44 45 46 176Grants 15 so as Ss as so 120

Othor 75 41 81 28 16 22 99

Memorandum ItemNew Capital Requirements 11i 118 128 485

lateral e6 Ia 48 e9 266Grants U 3s Ss 3J 120Concessional Loans 29 29 1t U 8O

Multilateral 48 66 so 66 246ConcessIone I Loans 46 as 66 6 246

Prvate SUDDIl Trs 209 19 7 9 J7iCr dits 29 1i 7 0 87

p/ A negative sign Indicates r*esrv accumulation.

Source: World Bank staff projections.

13. Gross external capital requirements, inclusive of amortization andchanges in net reserves, ar- projected to total US$717 million during 1992-95(Annex F). Net foreign investment is projected to be US$178 million duringthis period. Thus, official grants and highly concessional loans areprojected to provide almost all the gross financing requirements during1992-95. Disbursements from ongoing commitments are projected to amount toUS$261 million during 1992-95, while other resources (including sale ofassets, not short term and errors and omissions) amount to US$99 millionduring this period. The remainder, defined as new capital requirements, isprojected to total US$485 during the four year poriod, which is 681 of gross

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capital requirements. This is projected to be obtained from bilateral grants(US$120 million), concessional lending from bilaterals (US$88 million) andconcessional multilateral lending (US$240 million). External balances wouldonly be manageable through continued external assistance on concessional termsand grarts. including balance of payments support to cover the country'sadditional financial requirements. External debt is projectetd to grow ataround 2.9% per year between 1990 and 1997. However, the ratios of total debtto GDP as well as to total exports is projected to decline rapidly during the1990s. The debt service ratio to total exports is projected to decrease onlygradually, from 32.7% in 1991 to 27.1% ly 1997.

14. In order to ensure that Guyana can achieve the projected growthpath and maintain financial balance, it needs to receive a very generous debtand debt service reduction. The projections of total debt and debt serviceratios described above do not take into consideration possible debt reliefoptions. If debt relief were to materialize, the impact would be noticeablein reducing the projected stock of external debt, which in turn decrease theprojected debta. It would also help improve the projected current accountbalance of the balance of payments and to narrow the fiscal gap. With debtrelief, the stock of external debt would decline in 1992 to US$1600 millionfrom US$2080 million which is projected. As a result of such a debt relief,the current account of the balance of payments is estimated to be aroundUS$142 million in 1992, which is significantly lower than the correpondingfigure (without debt relief) of US$157 million. Further, the ratio of debtservice to exports is projected to decline by 3Z-4% than without debt relief.However, the full impact of the debt relief on the debt service ratio will befelt only after 1995. Further, on account of the debt relief, the fisc61 gapis estimated to be consistently lower than the projected fiscal gap withoutany debt relief.

The Situation of Public Finances

15. The financial performance of the public sector deterioratedmarkedly in the 1980s as the Central Government's revenue base was eroded bythe decline in recorded activity ("grey market') and the operations of thepublic enterprises turned from overall surplus positions to substantialdeficits. Furthermore, as external payments arrears accumulated, externalfinancing declined sharply and domestic credit expanded to finance the risingdeficits, resulting in increased pressuro on domestic prices, the balance ofpayments and the exchange rate. A series of policy meaasures, therefore, wereinstituted between 1983 and 1987 to increase fiscal revenues and reduceexpenditures.

16. As the revenue base continued to be affected by parallel marketactivities (estimated at 40-70% of the official economy in 1988), awarenessgrew in the Government that expenditure restraint would be an important part

3/ Sensitivity analysis of one such option where the grant element on debtand debt service reduction is assumed to be 80% suggests that Guyana'soutstanding bilateral debt of about US$600 million would be reduced by US$480million and that interest obligations would be reduced by US$15 million peryear. After a normal grace period, the annual debt service obligation iRestimated to be reduced by about $65 million.

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However, given overall resource constraints, minimal amounts have beenallocated with a view to maintaining project execution.

22. While fiscal performance is expected to continue lnproving, it is

unlikely that the revenue base will expand soon. The tax reform will taketime and the merging of the parallel market with the official economy will be

gradual. It is likely, therefore, that deficits, although steadily declining,

will remain for sometime. The tax exemptions granted, particularly in

association with the privatization drive, will also affect the revenue base.When the sale of State assets is completed, this source of funds will become

depleted. In addition, debt service will remain an important expenditure

item. Thus, to achieve the level of public investment incorporated in the

economic projections, extraordinary assistance from external sources, in the

form of financing projects' local currency costs, will be necessary.

II. SECTOR REVIEW

A Forewore

23. With the opening of the economy and the restoration of incentivesto production as reflected in the Government's ERP, this chapter focuses on

three aspects of stimulating a supply response: (a) privatization effortsbeing pursued by the Government; (b) conditions of key sectors to helpdetermine priority needs; and (c) identification of investment requirementsover the medium term. Where feasible, the need for balancing items(machinery, light equipment, spares and permanent working capital in the formof minimum levels of inventories of raw materials) that are likely toencourage incremental production is also addressed.

24. With the support of consultants financed by the United Kingdom'sODA, the Government is about to embark on a major restructuring of the publicsector which involves reducing the number of ministries from 18 to 10 andconsolidating scarce manpower resources. (In preparation for this, theCentral Government decreased the number of civil servants by 5,213 or 21.3Zbetween 1988 and 1990). This may affect some of the recommendations thatfollow in regard to management and arrangements for project execution. Inlarge measure, however, they will remain valid, since most are aimed atimproving efficiency. Whatever institutional &walgamation may take place,therefore, the need would not diminish to strengthen resource allocation, to

accelerate project implementation, to buttress the supply response, and to

reinforce management capabilities and decision-making.

25. ODA is contemplating a second phase to assist the Guyaneseauthorities review the organization and structure of Regional and LocalGovernments. With the advent of regionalization in 1982, the responsibilitiesfor management, construction and maintenance of physical infrastructure and

social services was transferred from the Central Government to theRegional/Local Governments. The lack of financial and human resources at the

regional and local levels have accentuated the deterioration of the country's

infrastructure. Strengthening of these authorities' management and

administrative capacities, in particular program execution and facilities

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maintenance, is considered essential to ensure that the contemplauedimprovements will be long lasting.

26. Although efforts are underway to improve project implementation,much remains to be done. In addition to financial constraints, insufficientavailability of construction equipment, skilled-manpower shortages in part dueto the low remuneration in the public sector, the long standing practice ofthe Government being the major contractor has been the cause of lengthyconstruction and unfinished works. In many instances, construction periodshave been so protracted that works in progress have shown signs of decaybefore completion. Very often this has occurred because of inadequateprovision in the budget for the completion of ongoing projects. The 1991public sector investment program (PSIP) is beginning to address this problembut financial limitations preclude its complete elimination. Local costfinancing by externally funded projects (including the earmarking of most ofthe counterpart resources generated from balance of payments support tofinance the PSIP) and the creation of revolving funds by externallenders/donors to finance project activities would help strengthen projectexecution, and thereby boost the process of capital formation. Also, it seemsworthy to explore the possibility of advertising civil works in largergroupings to attract the attention of foreign contractors and to lead to thehiring of pre-qualified consultants to oversee the construction and thecertification of expenditures of contracts.

Progress in Privatizina Public Enterprises (PEs)

27. The Government has moved swiftly on privatization. In 1986, itshut down Guyana Glassworks Limited and in 1989, it sold Guyana NichimoLimited (fishing nets), Quality Foods Limited (foodstuffs) and Sijan PalaceLimited (restaurants) to the private sector. More recently, it has taken thefollowing actions:

(a) public utilities - 802 of the Guyana Telecommtunications Corporationhas been sold to Atlantic Tele-Network (US Virgin Islands) forUS$ 16.5 million with the Government holding the remainder of theequity; negotiations with a US Corporation regarding divestiture ofthe Guyana Electricity Corporation are continuing but in the eventof no agreement the Government proposes to invite foreign operatorsto run the company (a condition requested by the IDB); so far nooffers have been received for the Guyana Airways Corporation (twoBoeing 707s, one of which is wholly owned, one Twin-Otter, one DC-6Cargo and one HS 748) and the remaining assets of Guyana TransportServices Limited (8 urban buses).

(b) aari-based PEs - a management contract with Booker-Tate (UK) forGUYSUCO has been signed and a feasibility study is expected to leadto a joint-venture arrangement; the processing facilities of GuyanaFisheries have been leased to Guyanese-Japanese investors, however,buyers for the company's remaining two trawlers have not yet beenfound (eight trawlers have already been sold); Guyana Woods hasbeen sold and a group of British investors is interested inacquiring the Demorara Wooda, Ltd; two of the rice mills have beensold to private interests in Curacao and St. Vincent, and three of

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the remaining four are reported to be in process of divestiture;negotiations for 51% control in the Livestock Development Companyby the Caribbean Food Corporation are still proceeding but notakers have yet been found for tho National Edible Oil Company; theEastern Caribbean Group has recently expressed interest in buyingthe assets of Guyana Stockfoods Limited (producer of poultryconcentrates).

(c) Guyana Mining Entoririse Limited (GUYMINE) - a management contractfor the Linden operations is being sought, which may lead to aneventual joint-venture agreement. Talks are being held withReynolds regarding operation of the Berbice facilities (ajoint-venture with Reynolds is already in place for the bauxitedeposits in Aroima, 75 miles south-east of Linden).

(d) Commercial PEs - 51% and 24% of the National Paint Company Limitedhas been sold to private investors (Trinidad & Tobago) and itsemployees, respectively; by breaking down its assets, 501 of theGuyana National Trading Corporation has been divested mostly toGuyanese interests; a 5X equity sharo has been given to theemployees of the profitable Guyana Stores Limited (generaldepartment store); the Guyana Seals and Packaging Company isproposing the sale of 80% of its shares to CARICOM investors tofinance plant expansion; no proposal has yet been receivedregarding the Soaps and Detergent Company.

28. The fate of the remaining shares of Guyana Srores Limited and ofthe ownership of Guyana Oil Company (petroleum products), Guyana NationalShipping Corporation, Guyana Printers Limited, Demerara Sugar Terminals,Guyana Pharmaceutical Corporation, Guyana National Engineering Corporation(shipyards, port facilities, import of heavy equipment, auto and truckdealership, and general engineering) and Sanata Textiles Limited is stillundecided. For the time being, the Government proposes to slow down theprocess of privatization, at least until the above-mentioned arrangements arefirmly in place. At any rate, the Government appears committed to leaving allproductive activities in the hands of the private sector.

Review of the Productive Sectors

29. The concentration of agriculture along the narrow costal belt ofGuyana has facilitated exploitation of major export crops, particularly sugarand rice which account for two-thirds of sector output and about half of totalexports. Agriculture employs over 352 of the labor force and provides formost of the domestic food supply. As a result of poor policies, deficientmanagement, financial difficulties and disintegrating physical infrastructure,agricultural production has been declining. Sugar production in 1990 was lessthan 130,000 tons or about 37% of the output prior to the nationalization ofthe industry in 1976. Similarly, rice output has continued to fall and in1990 was about half that of the late 1970s (184,00 tons).

30. Guyana's robust comparative advantage in agriculture and productivepotential could be tapped with the restoration of price incentives, provisionof appropriate sector finance and intensive rehabilitation of basicinfrastructure. Because the financial requirements are quite high,

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rectification should be tackled gradually in circumstances where resources arethus constrained. However, in cases where foreign investors assume all risks,local financial constraints are removed and the pace of rehabilitation can beaccelerated. For this reason, the Government is promoting foreign privateinvestment in agriculture on the basis of long-term leases.

31. Sugar production is a candidate for private sector involvement. Itis in the process of rehabilitation and its restoration would be acceleratedif a joint-venture is negotiated with Booker-Tate (the World Bank hasindicated its readiness to finance the joint-venture if suitable loanguarantees can be established and sufficient capital contributions by foreignpartners are made available with complementary external cofinancing). IDB'sinvestigation concluded that the sugar industry requires inputs formechanization (including mechanical harvesting to overcome labor shortages),changing of bed cane layouts, agronomic modifications to return to a plantplus four ratoon system, refurbishing of factories and cane transporthandling, and marketing to maintain a 101 buffer stock in the country.Booker-Tate fielded a management team last year to study the long termdevelopment of GUYSUCO (the study is to be completed in mid 1991). In themeantime, Booker-Tate has already identified immediate requirements forreturning to increased sugar production. These include equipment for drainagemaintenance, large volume pumps to assist in draining areas where earthen damshave been erected as barriers to salt water invasion from several largebreaches in the sea defenses, hydraulic excavators, drag lines, factory powerplants, electrification of drainage pumps and some all-terrain vehicles.Except for the drainage pumps, most items can be accommodated under theongoing IDB loan. External finance for the drainage pumps is being sought.GUYSUCO's planned investment outlays for 1991 are anticipated to reach US$ 16million equivalent, 641 of which will come from the IDB loan.

32. Notwithstanding the early identification of the areas of emphasis,Booker-Tate estimates that the process of rehabilitating GUYSUCO will begradual, particularly as a result of the time required to improve caneplantations and drainage systems, transport and plant modernization as well asthe scarcity of field workers (daily wages have been raised with the hope ofattracting needed workers). Encouraged by the management contract, someprivate farmers began using idle land for sugar cane to supplement GUYSUCO'soutput. All things considered, therefore, it is unlikely that sugarproduction will approach required export levels soor, and this may place injeopardy Guyana's quota in preferential export markets (182,000 tons of sugarcombined to the EEC and the US).

33. With some 15,000 farmers estimated to be producing paddy, thisactivity has one of the largest multiplier effects on the economy. Over theyears, however, farmers have been leaving the land and in major producingareas considerably less than half of the acreage remains under ricecultivation. Some of this is under cash crops such as tomatoes, eggplant andcattle for the limited Georgetown and New Amsterdam markets. Theinfrastructure in the two largest land development schemes and in most of theother rice regions is in serious disrepair. (Black Bush Polder and MahaicaMahaicony Abary are the two largest land development schemes. The latter ofthe two has been financed by the IDB). Farm to market roads are in poorshape, irrigation and drainage canals are silted and with heavy vegetation,the majority of the pumping stations are inoperable, and storageldrying

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facilities are in a stage of abandonment. Compounding the problems are thebreaches in the sea defenses, which in front of the Mahaica-Mahaicony-Abary(MMA) have almost been taken away by the ocean. Aging and inefficient farmmechanization, lack of new rice varieties which make the crop susceptiblo todisease, distorted low producer prices, high transport costs which are eatingaway mininal profits, insufficient credit, inelastic supply of fertilizers andchemicals, delayed produce payments and deficient sector organization arefactors that need alleviation. Under these conditions, it is surprising thatfarmers have continued to produce paddy, even in declining amounts.

34. The foregoing assessment should not obscure the fact that Guyanacan produce economically high quality rice. Its soils, with a ph ranging from4.5 to 5 and mildly deficient in phosphorus, are well suited for riceproduction. Empirical studies carried out, including one by USAID in 198B,suggest that potential milled rice production, based on two crops per yeaz,could easily reach 360,000 to 420,000 tons from 500,000 acres (for compari&onMMA's land extension alone when completed will be 422,000 acres). This couldprovide at least an exportable annual surplus of some 300,000 tons, i.e. sixtimes the level of rice exports in 1990, and over US$ 100 million in foreignexchange at current prices.

35. Recognizing the urgency of restoring financial incentives to riceproducers, last March the Government permitted free access to export marketsby private millers and the retention of all foreign exchange earned throughsuch sales. In due course this is expected to be translated into higherfarm-gate prices and more prompt payment to producers (the Guyana Rice Millingand Marketine Authority (GRMMA) has taken up to six months to pay farmers forthe paddy delivered). In anticipation of the higher prices, farmers haveincreased rice plantings, and the spring crop is reported to be 37X over thelast year's crop. Also, the new private millers are modernizing plantfacilities, particularly for parboiling paddy, to increase value added andexport sales.

36. In addition to the provision of appropriate financial incentive3, aplan of action to minimize production bottlenecks is immediately needed.Foremost is the privatization of all remaining milling capacity and theprovision of medium and long-term credit for on-farm investments, includingmechanization, and refurbishing of the mills. IDB has supported upgrading ofsome of the mills and part of its sector loan will finance farm equipmentpurchases, but much more is required. Although the balance of paymentssupport has provided increased availa1bility of fertilizers and pesticides,most farmers lack working capital for buying them in needed quantities. Whileawaiting rehabilitation, repairs to pumping stations, sluices, farm-to-marketroads and selective sea defenses must receive urgent attention.

37. Priority has to be given to the eventual reconstruction ofirrigation and drainage facilities (rural roads and sea defenses are discussedseparately). Estimates of studies suggest increased yields in sugar and riceof the order of 20% and in ground provisions of 40X as a result of betterwater management practices. Yet, the first phase of MMA is incomplete(tertiary works are needed to make the scheme fully operational) and requiresrehabilitation. IDB is already financing the rehabilitation of the irrigationcanals in Black Bush Polder but additional programs are necessary.Consultants retained by IDB to review drainage and irrigation (D&I), have

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concluded that D&I facilities across the country are in dire need ofrehabilitation. They have recommended the preparation of an agricultural planto select least-cost alternatives. Among other recommendations, theconsultants have suggested the redesign of works in parts already meritingrehabilitation, Including merging D&I areas to minimize maintenance costs,closer integration with the *ea defenses (direct outlet to the ocean),replacement of engines and pumps, better design of sluices (preferably inpairs connected by a facade drain), enhanced upkeep of access roads andstructures, improvements in rate setting and collection dues, and morecentralized administration by the Hydraulic Division (HD) of the Ministry ofAgriculture. Currently, the reaponsibility for D&I Is excessively dividedamong HD, Water Conservancy Boards, Regions, and Local Authorities, which areaccountable for about half of the canals. Cost recovery is insufficient tocover O&M outlays and revenue collections are a serious problem (there is someconsolidation of land tenure but vacant plots and slow progress inregularizing land titles is adversely affecting the situation); therefore, inaddition to the cumbersome and inefficient organization, lack of funds hasbeen another major impediment to adequate maintenance of D&I facilities.

38. Further privatization of milling capacity questions the existenceof public organizations responsible for managing the rice sub-sector. GRMMA,which up to now has been in charge of all operations in rice for the domesticmarket, would no longer have a role. The same is true for the Guyana RiceExport Board (GREB). Only the National Paddy Grading Center (NPRGC), whichreceives a 1S levy on the prices paid to rice producers to finance itsoperations, and the National Agricultural Research Institute (NARI), which isresponsible for rice goneties, are likely to remain. Both institutions,however, need strengtheniag; UNDP/FAO is providing technical assistance inbreeding, certification and grading. Finance for mobile seed cleaners, batchdryers, laboratory and field equipment, and extension work is also required.Properly equipped and managed these entities can play a crucial role inimproving the quality and production of rice.

39. Apart from rice and sugar, livestock has the greatest potential.Previous World Bank involvement assisted the establishment of the LivestockDevelopment Company (LIDCO) and has demonstrated that it can be a profitableundertaking. Government intervention and lack of financing has precluded thecompany from carrying out its long-term development program. In addition tosupplying the domestic market with beef and dairy products, LIDCO can developan export market for live cattle in Curacao and CARICOM. A market studyperformed by the Caribbean Food Organization has identified a wide marketpotential (this study forms the basis of its interest in acquiring majorityshares in LIDCO). Boats sufficient to carry 200 to 300 head of cattle arealready in possession of Guyanese shippers (minimum four). At the same time,LIDCO needs to explore the feasibility of building a slaughterhouse ofinternational stanuards (i.e., under strict hygienic and health conditions) toprocess chilled or frozen boneless beef for markets in CARICOM; the existenceof a slaughterhouse would eliminate the seasonality involved in moving livecattle to the ports.

40. Fresh fruits and vegetables are produced in Guyana for the homemarket and some are exported to CARICOM countries. In particular, pineapples,eachalots, passion fruit and plantains are being shipped abroad. The lowprices paid to farmers for paddy have forced many of them to grow cash crops;

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unfortunately, the small size of the domestic market has resulted in a glut oftomatoes, eggplant, lettuce and watermelon. With the small exception of somefood processing (preserves, jams and jollies), the lack of storage andtransport facilities to handle perishables is constraining the possibility ofdeveloping export outlets for these commodities. However, insufficientinformation is available to make an assessment about the probable size ofpotential markotes

41. For many years, the continental shelf off the coast of Guyanatogether with the largo rivers and lakes has provided ample fishin antdshrimping grounds. Production of fish and prawns (shrimp) has increasedconsiderably and together exceeded 40,000 tons in 1989. From subsiatenceactivity, fishing has been transformed Into a full-fledged commercialindustry, contributing about 40% of the main source of animal protein on aweight basis nationally. Most of the prawns (972 of the catch) and about halfof the fish are exported. Recently, the catch of prawns has been decliningand in 1989 was 36% below the low level of 1987 of 5.7 million pounds.Trawlers suspended operations between June and December 1990 because of thepoc: harvest of prawns. Estimates of fish density based on acousticobservations and selective trawling to depth of 700 mt. carried out by theNorway flagship "Dr. Fridjof Nansen" in 1988 (financed in part by FAO)indicate a general stock decline brought about by fishing. A comparison ofcurrent catches with the level of standing biomass of the relevant stocksreveals that the potential long-term yield Is only 45,000 tons annually.These findings together with the lack of processing facilities for fin fishand overdue rehabilitation of the fishing fleet, point to the likelihood of aplateau having been reached in the production and export of fish products. Tomaintain export levels, priority has to be given to the completion of theexisting plant at Houston to be able to handle fin and salted fish. Boatengines, spares and handling equipment to refurbish the fishing fleetconstitute additional requirements. Finally, technical assistance tostrengthen the capacity of the Fisheries Division of the Ministry ofAgriculture in policy formulation, resource management and Investigation ofmarine, estuarine and riverine fish habitats is urgently needed.

42. The tropical rainforest of Guyana covers 18.4 million hectares(approximately 83% of the land area) and is composed of hundreds of hardwoodspecies. Guyana is one of the few countries in the world that still has themajority of its forest intact. Only about 40% of the forest area ispresently accestlible; a total of 3,7 mi ion hectares have been allocated forcommercial use by ten large companies sAd 250 medium and small operators,which are supplying to the domestic market and some CARICOM countries. In1989 recorded timber production was about 5.2 million feet. Development ofthe industry has been hindered by the lack of basic infrastructure, shortageof people at all levels, financial scarcities, lack of equipment and spares aswell as high freight costs in exports outside CARICOM.

43. The Government is giving high priority to the development of theforest industry and is relying on the private sector, including internationalinvestors. There are growing enquiries from foreign lumber companies aboutexploiting Guyana's forest resources and, as already mentioned, internationalfirms have acquired some of the PEs operating in the subsector. The TropicalForestry Action Plan (TFAP), financed by CIDA and FAO, identified 37 technicalassistance projects having to do with sector institutions and manpower, timber

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industry, conservation and resource management, land use and wood energy.One of the projects is aimed at strengthening the Guyana Forest Cormnission(GFC), which is responsible for managing the country's forests. Althoughconservation is a stated policy of the authorities, little has been done to

intensify forest management and reforest logged areas. GFC is too thinlystaffed to be able to discharge its functions effectively. Unless forestmanagement is invigorated, unscrupulous exploitation of the tropical forestcould lead to serious environmental problems. (The USAID and CIDA may provideadditional assistance to GFC for this purpose).

44. Guyana's mineral potential is large but so far only bauxite, goldand diamonds are being exploited. Deposits of kaolin, feldspar, silica sand,semi-precious stones, copper, molybdenum, tungsten, nickel, columbite, talc,

magnesite and phosphates have been identified, but additional exploration isneeded to determine their commercial production. Studies conducted byqualified geological companies indicate that oil is available in the UpperBerbice Region and in the Takatu Basin bordering Brazil (two exploratory wellsdrilled by Home Oil in 1982 at Takatu produced crude of 42 API with flowtested at 500 barrels per day). Seismic testing has indicated potential oil-bearing formations on a 2.5 million-acre tract along the Rewa River. In viewof the more favorable terms now offered for mining concessions, there is

augmented interest for oil searching and four companies have initiatedexploratory activities (Hunt Oil, LASMO/BHP, TOTAL, and Mobil). Finding oil

in sufficient quantities would be a major breakthrough for the Guyaneseeconomy.

45. With p %ven reserves of very high grade ore in excess of 100million tons, bauxite is the most important mineral resource and the largest

foreign exchange earner (37Z of total merchandise exports and 121 ofregistered GDP in 1990) The industry produces feur bauxite goods, but theLinden calcined grades (refractory, used to line steel furnaces, and abrasive,employed for fuse alumina in electric furnaces) and Berbice metallurgic are

the principal ones.

46. GUYMINE has been the sole State-owned producer and exporter of

bauxite. Its performance over the years has detericrated because ofoperational problems resulting from deficient managemnent, equipmentobsolescence, mine depletion, skill shortages, poor -inances including highindebtedness, lack of foreign exchange which precluded the importation ofspares, machinery and equipment, labor disputes and wo k stoppages. To arrestthis situation, with the support of the European Inves nent Bank (EIB), theenterprise begean undertaking a rehabilitation program. In line with this, itsinvestments for 1991 are estimated to reach US$ 19 million equivalent and willbe mostly externally financed. The good quality of the calcined grade ore atthe North East Kara-Kara mine together with the new equipment arriving underthe EIB loan and improvements in the barge fleet, are projected to result in a

16Z increase in total bauxite production (from the low level of 1.42 millionmt in 1990 to 1.65 million mt in 1991). The sharpest gains are expected inthe output of calcined and chemical grades while for metallurgic output, theforecast is a decline.

47. Over the past years, the Government has been seeking joint-ventureswith foreign partners to recapitalize the bauxite mining. In 1988, itconcluded an agreement with the DAYCO (Venezuela) to exploit bauxite reserves

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at 8-Chimery (Kwakwani). In early 1989, it concluded the already mentionednegotiations with Reynolds Metal Company for a joint-enterprise to develop andexploit the deposits at Aroima; ore shipments are expected to resume. Talkswith Reynolds involving operation of the Berbice mines and a mothballedalumina plant near Linden are also in progress. The Government is alsoseeking foreign operators for the Linden mines which may lead to theireventual privatization. These developments augur well for bauxite productionand exports.

48. Endowed with good rock and stone formations, over the years, threequarries (one State-owned and two private concerns) have been established inGuyana. The private St. Mary's quarry, which has been a major supplier ofboulders, gabions and crushed stone, has seen its output decline from 133,120tons in 1981 to 54,098 tons in 1990. The other two quarries are not fullyoperational. The insufficient number of civil works has been the major factorfor this situation. Without rocks and aggregates it will be difficult tocarry out the much needed rehabilitation of the country's infrastructure.Furthermore, export possibilities for gabbro stone exist in Suriname and inthe CARICOM and are not being tapped. The industry is decapitalized andrequires modernization.

49. Since the days of Sir Walter Raleigh ("The Discovery of the Large,Rich and Beautiful Empire of Guiana", 1596), the name Guyana has conjured upvisions of gold. The largest historic lode-mines, Peters and Aurora, producedsomewhat over 1 and 2 mt of gold in 1905-09 and 1939-50, respectively. Thebank of the Essequibo River at Omai has also been a gold producerintermittently since the 1880s and now supports thousands of small miners('porkknockers") who are mining gold from the detritus of high-grade quartzveins (small miners are also responsibte for diamond production which in 1990was declared to have reached the total of 14,816 Carats). The precariousextraction methods employed by the porkknockers (pan, pick, shovel, sluice,plastic hose, burlap and/or can to boil off mercury) are silting the river andcausing mercury pollution. From these sources, most of Guyana's gold Isobtained; in 1990 official purchases reached some 39,000 oz., a two-foldincrease over 1989 (this pronounced hike is mainly the result of smallerparallel market sales that are the result of the Government's policy to payfor gold in foreign currency instead of payments of 80X in Guyanese dollarsand 201 in foreign exchange as in the past). To improve gold miningoperations among the porkknockers, while preserving the environment, technicalassistance to the Guyana Geology and Mines Commission is a priority.

50. The long-term outlook for gold appears very favorable. Attractedby the liberalized mining-investment policy, several foreign and local firmshave or are about to initiate undertakings (the Canadian group of Golden StarResources/Cambior Incorporated; the ?razilian tin-mining and constructionconglomerate, Paranapanema; the US-Canada joint-venture of South AmericanGoldfields/Homestake Mining/Denison Mines; and the Guyanese firm ofP. Pereira). The largest new venture is that of Golden Star Resources atOmai. The company has completed the feasibility study and proposes to investclose to USS 150 million over the next two-three years in mining facilities,wharf and upgrading of the Mabura Hill Road and the access road to Essequibo.Expected production from the mine during the first three years is around250,000 oz. and declining gradually thereafter. Development of two smallermines by local investors is also underway, with investments totalling USS 10

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million and projected annual production of about 15,000 oz. While the otherconcessions are still undergoing first and secondary explorations, it appearsthat exportable gold production would Increase in the future.

51. On the other hand, the picture in manufacturing (contributing about4X of registered GDP) is less clear. The shrinking domestic market,difficulties in developing export outlets, uncertainty about the future courseof the economy, capital scarcities (both foreign and demestic), low capacityutilization, high energy costs because of self-generation and a growingshortage of technical skills are being manifested in Insufficient dynamismamong private entrepreneurs. Aging plant and equipment is an additionalfactor. Guyana's moderate labor costs, the increasing interest of foreignersto invest in manufacturing and the success of some firms in developing newexport markets, namely garments, wood prefabrication, agri-businesses and foodprocessors (the last three for CARICOM) should reactivate the manufacturingsector in the near future. The passage in July 1988 of a document entitled"Guyana's Investment Policy", which sets out rules and incentives for privateinvestment, should be a stimulus to investors interested in manufacturing.For instance, GUYMIDA has approved 10 fiscal incentive packages to privateinvestments of US$46 million in the first four months of 1991 compared to 11for a total investment of US$37.4 million during the entire of 1990.Nevertheless, the growth of manufacturing in Guyana will tako some time,spearheaded by the PEs now being privatized. As the ERP continues to takehold and basic infrastructure, including telecommunications, is graduallyrehabilitated, production of manufactured goods would pick up. Clearobjectives regarding the public sector's role in productive activities andconsistent economic policies will buttress the overall effort. Economies ofscale will dictate the optimum size of individual firms, and given the smallsize of the domestic market, export orientation will be essential.

52. Small enterprise financing (Institute of Small EnterpriseDevelopment) appears to be making progress and is being well served by thefunds provided by USAID to finance its activities (25Z of counterpartresources generated by the PL480 program). There is a demand at present formedium and long-term credit to finance plant improvement and permanent workingcapital in manufacturing. Unfortunately, GAIBANK is understaffed and itscapital base is limited; it has also been eroded by the negative real rates ofinterest it has charged (351 per annum) in recent years and by its assumptionof foreign exchange risks. This situation needs to be corrected.

53. The development of a strong, efficient, and responsive financialsector, with an effective banking system at its core, is required toreactivate private sector activity. The authorities have been takingimportant steps toward liberalizing the financial system and removingartificial credit allocations. Yet, Guyana's financial system remains fragile.It is handicapped by institutional weaknesses, insufficient mobilization offinancial resources, outdated banking practices and staff shortages, all ofwhich have been hindering the capacity to finance productive activities.Rural areas have suffered the most from inadequate credit and financialservices. Unregulated money lenders have been the only source of funds formany people. To increase financial intermediation, and capitalization ofsector entities, strengthening of the regulatory and banking supervisionframework will be necessary. This will require external financial and

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technical assistance. Further, privatization of commercial and mortgage banksshould also be considered.

Electricity. Transport, Infrastructure, Water Supply and Telecommunications

54. Guyana's power sector is confronting institutional, technical,commercial and financial problems. Institutionally, the Guyana ElectricityCorporation (GEC), is poorly organized and inadequately staffed. The numberof vacancies is high because salaries, particularly at the managerial andtechnical levels, are low. Technically, the power system has been unable toprovide a satisfactory electricity supply because of derating in majorgenerating plants, unreliable transmission and distribution grids, hightechnical losses and deficient operation and maintenance. The pricing,metering, billing and fraud-control practices have been inappropriate, causingblock losses of energy delivered of almost 202. Financially, sales income hasnot been enough to meet the company's operation, maintenance and debt servicerequirements, and budgetary transfers from the Government have therefore beennecessary. Recently, the Government authorized rate adjustments to improveGEC's financial condition.

55. To overcome t-he institutional deficiences, the authorities havebeen holding negotiations with a private U.S. concern for the sale of 60% ofGEC with the Government retaining the remaining 40% (eventually theGovernment's share would be divested to the Guyanese private sector). As analternative, the Government is considering reputable thermal-plant-experiencedoperators to manage the company. Whatever the choice, the Government willhave to strengthen its regulatory body to ensure that the system is reliableand operated at least cost. By the same token, the final arrangement willhave implications for the type and level of foreign financial assistancerequired.

56. Generation capacity in the country remains lower than demandrequirements, but it is rapidly improving with the works completed and/or inprogress. Energy supply is expected to be almost normal within the next fewmonths, though short duration black-outs could persist because of the lowreliability of power plants, and because of constraints in frequuncyconversion capacity inadequacies of the transmission and distribution systems.The overall system will be able to cope with the estimated potential demand of

! about 45MW and by 1992 will have a minimum operation reserve. However, incoming years high financial and technical capabilities will be required tooperate a system with unreliable generating units and a limited reservemargin, with which to carry out preventive maintenance on the old rebuiltplants. Over the medium term, additions to plant generation as well asrehabilitation of transmission and distribution will be needed. Given thegestation period of these works, they should be started as soon as possible.

57. The final report on Guyana's Integrated Power Investment Program,prepared by foreign consultants and financed by the IDB, is about to bedelivered to the Government. The observations that follow are based on areview of the first draft which recommends a financially enormous program(US$ 290 million over ten years and annual operating expenses of US$ 55

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million). Based on a high reliability factor (double contingency), theconsultants recommend the installation of 132MW through the year 2000 for 74MWexpected peak demand, allowing for usage and climatic derating. For a countrylike Guyana, such a high reserve margin is too costly and a better alternativewould be to invest in good preventive maintenance instead. If carried out,the proposed program would entail a long run marginal cost (LRMC) of US$16O/MWh for distribution compared with a present LRMC of US$100/MWh. Tariffs,therefore, would require a sizeable increase, with the effect of a possibledampening of demand and costly idle capacity. Optimization of the investmentprogram and efficient operation of the system, therefore, would be necessaryto avoid idle capacity. While the general structure of the program proposedby the consultants is adequate, combinations of slow-speed diesel and peakingcombustion turbines would need to enter the least cost solution. Likewise,because of the high derating affecting turbines in warm climates, medium andhigh-speed diesel would also have to be investigated.

58. Given Guyana's abundant water resources, it is probable that thelong-term expansion of the sector will depend mostly on hydro-generation and,as the domestic market expands, on interconnections with Venezuela and Brazil.To explore alternatives to this effect, studies dealing with the feasibilityof developing small hydro-plants and interconnections with Venezuela andBrazil are required. Studies are also needed to help reduce system losses(presently about 352 of gross generation which, correlated to the marginalcost of the proposed expansion, if mitigated could generate savings of aboutUS$ 2 million per year).

59. Guyana's transport network has deteriorated over the years and thetask of developing a road system to the interior remains a formidablechallenge. Of the 1467 miles of primary roads (328 miles), feeder roads (159miles), and interior roads and trails (980 miles), only 287 miles (202) are ingood condition. Little or no maintenance has been done to the primary roadsystem, including bridges, over the last fifteen years. This has led to longjourneys and high vehicle operating costs. Most of the feeder roads have beenpoorly constructed and inadequately preserved. Freight transport is providedby an aged fleet of 1800 single unit trucks (2 and 3 axles) and some 140tractor-trailers. Cargo rates are unregulated with customers and truckersnegotiating the price prior to the provision of service. On several of theroads, the Government collects toll charges but these are insufficient tocover normal upkeep.

60. Urban passenger transport is provided by a reasonably new stock ofprivately owned vehicles made up of 2400 minibuses and 7000 hire cars withenough capacity to satisfy current demand. In view of the costly inefficiencyof the State-owned Guyana Transport Services Limited (to be divested or shutdown), since 1985 Government policy has been to encourage the development ofprivate transport services. However, fares remain x.egulated.

61. Ferry services across the mouths of the Demerara, Berbice andEssequibo rivers link the primary roads in the coastal area. A floatingbridge, 1.25 miles long, is also available to cross the Demerara River. Inaddition, there are ferry services in the Corentyne River for traffic betweenGuyana and Suriname. For several years now the EEC has been financing theforeign exchange costs, mostly on the basis of tied procurement of necessarymaterials and equipment, associated with emergency works on the ferries and

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floating bridge. Unfortunately, because of management deficiencies and staffshortages in the Ministry of Communication and Works' Transport and HarborsDepartment, and because of the lack of sufficient domestic financing and thelow work capacity of the Government's Guyana National Engineering Corporation,progress on these works has been slow. Only one ferry is fully refurbished.The other ferries and the floating bridge are still to be rehabilitated(Recently, the bridge was out of commission for seven weeks). This situationis leading to protracted traffic delays and vast economic costs (disincentivesto agricultural production and spoilage of perishables). These services aresupplemented by small craft plying the river mouths in circumstances that areextremely hazardous to the lives of passengers. A plan of action torehabilitate the ferry fleet and the floating bridge is therefore neededwithout delay.

62. Merchandise for international trade is transported by ships fromthree locations: the wharves at Georgetown near the estuary of the DemeraraRiver, the bauxite loading installation at Linden, sixty miles up the DemeraraRiver and another bauxite loading facility at Everton, near the mouth of theBerbice River. There are smaller ocean going wharf locations, primarily fortimber, at Supenaam on the Essequibo River and at Morawhanna in the NorthwestDistrict, near Venezuela. There is also a bauxite storage vessel, anchored inthe Demerara estuary, where loaded bulk ships coming from Linden are toppedoff. The wharves of Georgetown are operated by three State companies and aprivate one. The facilities are built of greenheart hardwood snd aregenerally in very poor state of repair. Since the wharves cannot bear heavyequipment, ships unload with their own cranes or derricks onto trailers. Witha small frontage (only 2,700 ft), and insufficient depth alongside (because ofneglected dredging) and with mud-bars across the estuaries, operations arelimited to vessels drawing 16-21 ft, depending on tidal conditions. The lackof navigation lights restricts the use of the port to day-time sailing only.Almost all general cargo arrives in containers and they are piled up on anarrow strip behind the wharves. These precarious conditions manifestthemselves in costly ocean-freight rates, which according to a World Bankstudy ("Do Caribbean Exporters Pay Higher Freight Costs?", Discussion Paper,1989) are estimated to be the highest in the Caribbean. The situation ofbauxite shipping at Linden and Everton is similar, port facilities are in poorcondition. Ore is transported in small-open vessels during the daylight tide,with cargo not exceeding 8,000 tn, and unloaded at storage vessels. Unlessmeasures are taken to realize savings in ocean and river shipping, Guyana'scomparative advantage and economic efficiency in a wide range of productiveactivities will continue to be whittled away by these high freight costs.

63. Air transport is a necessity in Guyana because of its development,topography and physical layout. There are 150 airfields in use across thecountry; domestic traffic radiates from either the Ogle Airfield in Georgetownand the Timehri International Airport located 24 miles to the south of thecapital city. Infrastructure in most of the interior airfields has beenneglected because of the limited use made of them. At Timehri, thenavigational aida, security equipment and terminal building have not beenproperly maintained. At present a number of landing equipment is disabled,and modern ground communication, land-to-air and point-to-point systems arenon-existent. The runway is too short to receive wide-bodietd aircraft. Cargofacilities are lacking; goods stay in the open, subjected to pilferage andexposed to the elements until they are put on the aircraft. The Government is

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seeking rapid improvement in international air-transport services and,therefore, is seeking foreign operators to run the Timehri airport. It isdoubtful, however, that this will be achieved without upgrading the facilitiesto international standards.

64. From this brief review the following priorities emerge:(a) rehabilitation of primary roads and, 'n some cases, bridges (157.3 miles);(b) reconstruction of high priority feeder and farm-to-market roads (200miles); (c) rehabilitation of the ferry fleet and the Demerara Floatingbridge; (d) licensing of safe river worthy small craft for the transport ofpassengers; (e) dredging of the river alongside the wharves; (f) technicalassistance for shipyard rehabilitation and establishment of a privateconcession to enable sound and timely repair of ferries and other essentialfloating equipment; (g) building of a freight station to improve cargohandling and ease congestion in the Georgetown Port; (f) rehabilitation andupgrading of the Demerara River navigational system between Georgetown andLinden; and (g) improvements at the Timehri Airport to boost its airliftcapabilities. Technical assistance to help update the 1976 UNDP TransportSurvey and to strengthen the Central Transport Planning Unit and the RoadsDivision of the Ministry of Communications and Works is also necessary.

65. The condition of water supply and sewerage facilities in Guyana ispoor. In spite of substantial foreign support (technical assistance from IDBto strengthen the engineering and management of the agencies responsible forwater and sanitation; a Pan American Health grant for water purificationsrecently completed EEC financing to replace 8,000 mt of sewerage main,installation of 24 new pumps and construction of a new sea outfall inGeorgetown; additional EEC assistance to rehabilitate the water supply ofGeorgetown, New Amsterdam, Wismar, and several rural communities; and UNICEFsupport to help improve small water supply systems in rural areas) the qualityof water remains unsatisfactory. In Georgetown water losses are estimated at

55% and breaks in the main pipes are allowing impure water to contaminatesupply. The situation of the rural areas is no better; it is estimated that,although many households have pipe connections, 701 of the population is notreceiving regular water supply. As a result of lack of maintenance, wellpumps are idle while others have stopped functioning for want of replacementand scarcity of spares. In other instances, wells have been drilled but thepumps were never installed. People have to walk several miles to obtainwater. Drainage in urban areas is poor as the canals are silted, and in somecases, blocked by debris.

66. In addition to deficient revenue collection and foreign exchangeconstraints to import necessary equipment and spare parts, the crisis facingthe sub-sector stems from its cumbersome organization and dearth of qualifiedpersonnel because of the large emigration from the country. In addition tothe Guyana Water Authority (GUYWA), there are the Regional DemocraticCouncils, Sugar Industry Labor Welfare Fund Committee, Georgetown Water andSewerage Commissioners, New Amsterdam Town Council and GUYMINE. While GUYWAserves as a contractor and consultant to the different agencies, it has noresponsibility for managing the individual systems. GUYWA itself needsconsiderable strengthening and more so the others. Restructuring thesubsector organization with the aim of restoring to GUYWA the administrationof the country's rural water supply systems, a responsibility it had until1984, would go a long way to improving the overall situation. With regard to

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the large urban centers, it would be desirable that tho municipal authoritiesrun their own systems but with the technical support of GUYWA.

67. With financing from the IDB a meter plan study to iproveGeorgetown's water supply, sewerage and storm drainage Is being carried out.When completed in late 1992 or early 1993, the study will provide guidelinesfor addressing the needs of the elty. In the meantime, mrgency works tocontain water losses and Improve water supply are requLred. In rural areainterim remedies must be found to address the lark of potable water. Longerterm programs to Improve rural water supply and upgrade the services Inmedium-size cities also deserve priority.

68. With the privatixation of che GTC, the problems which have affectedtelecommunications namely, a hlgh fault rate and large unsatisfLed demand areexpected to be corrected. The new company, Guyana Telephone and TelegraphCompany (GTCC), proposes to give priority to call completions and trunkLng tooverseas, improve existing cable plant to reduce faults and Install 20,000 newindividual lines over the next three years (et present there are only 28,000)as requirid by the sale agreement.

The Sea Defenses

69. The coastal lowlands, 10 to 40 miles wide and less than 700 squaremiles in area, generally lie below sea level and are protected by a system ofsea defenses. They are very fertile soils, on which almost all the country'spopulation lives and the lion's share of economle activity takes place. Thesea defenses consist of a combination of natural sandbanks, earth embankmentsand slope protection, sea walls, drainage canals and sluLces.

70. The World Bank (sea walls around Georgetown) and the ODA of theUnited Kingdom (protection and walls in the Essequibo Region) have been themajor source of foreign exchange for sea defense construction. With WorldBank assistance, an Lmproved design of sea defenses was developed (Irip-rapslope on an artificial filter fabrle, topped by a concrete wall with steelsheet pilings). However, in 1984 external financial asistance for the seadefenses was curtailed and, thereafter, the scale of the program wasdrastically reduced. This coincided with the process of regionalization whichtransferred the responsibility for maintenance of the sea defenses to thelocal authorities, except for Region 2 which remained under the jurisdictionof HD. The regions postponed preventlve maintenance (partleularly resealingof expansion joints), sluice attendants did not open the drainage canals,wooden sluices rotted away, and erosion began to work both from inslde andoutside the sea defenses. The result has been a calsm!tous situation; withnumerous breaches in the sea defenses and, in some cases, several miles ofprotection that have washed away. In addition to the ineffective organizationand insufficient finance, the lack of crushed stone and boulders, and theaccelerated obsolescence of HD's equipment (average useful life of its heavyequipment is only three years) contributed to the problem. To carry emergencyworks on the sea defenses HD is presently borrowing equipment from otherexternally financed priority projects.

71. Under the Lome IIr convention, the EEC agreed to fiManes anemergency program for the sea defenses to be carried out by HD, with smalldomestic contractors (ECU 4.7 million). The program started ln 1987 but

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suffered delays because of insufficient domestic funding and late arrival of

imported steel sheets; the program is now scheduled for completion in 1992.

The Government has requested additional financing from the EEC under Lome IV

to carry out 8 miles of permanent sea defense works by HD.

72. Consultants financed by the EEC are assisting HD to evaluate the

sea defense situation and ongoing/proposed corrective measures, prepare aneffective five-year management and maintenance program, and strengthen service

and repair of its heavy equipment pool. Although not included in theconsultants' terms of reference, it would be desirable to explore thepossibility of engaging private contractors, both domestic and foreign, for

construction and other works on the sea defenses under the supervision of HD.

Rebuilding of the sea defenses and their sound upkeep are of utmost importance

for the recuperation of Guyana's agricultural sector.

Education. Health. SIMAP and Housing

73. In spite of Guyana's past successes (a 94X literacy rate), theeducation sector is facing serious difficulties. There is a shortage of

trained and dedicated teachers, brought about mainly by the low pay scales. A

large proportion of the substitute and temporary teachers are under-qualified.Physical facilities require significant rehabilitation, maintenance and

repair. Teaching aids and reference material are lacking, and textbooks are

insufficient or antiquated at all levels. The result is that the proficiency

level in primary schools is very low, with the detriment that this is

contributing to deficient preparation for the secondary and tertiary levels.

Compounding the situation is an ineffective organization at the regional level

which has failed to seek improvements in rural education and has let the

facilities deteriorate.

74. The key constraint to better education has been inadequate funding.

According to senior officials in the Ministry of Education, less than one-

fourth of necessary improvements were financed in the last few years. Tocorrect this situation the authorities have sought external financing from

both multilateral and bilateral sources. At the primary school level, an IDB

project (US$ 51.6 million) has just started disbursements, after nearly a year

of delay. IDB also funded University and Technical/Vocational projects (US$

16 million combined), which have encountered early delays caused mainly by

lack of domestic financing and lack of familiarity with the lender'sdisbursement procedures. CIDA is financing the printing of needed exercise

books.

75. In consonance with the policy objectives of providing freeeducation and equal access to all, the Guyanese authorities may have to rely

on some form of cost recovery, especially at the secondary and tertiarylevels, to finance recurrent costs in education. The planned improvement of

facilities will result in incremental current outlays because of the betterstandards of education. It will be very difficult to accommodate these higher

operating costs in the budget and, therefore, novel revenue sources need to be

tapped to prevent the new facilities from deteriorating.

76. Cognizant of the efforts underway, two additional areas ofeducation are regarded as prioritiesa (i) refurbishing and upgrading of the

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country's secondary school system to help strengthen the quality of education;and (ii) continuing technical and vocational skill training to meet themanpower needs of the productive sectors, e.g., machinist, mechanics,plumbers, welders, mill wrights, electricians, carpenters, sewing machineoperators, masons and heavy machine/vehicle conductors.

77. PUDbliC sector endeavors in the promotion of health, prevention ofillness and disability, the care of the sick and the restoration of usefulwork of those whose health has been impaired have declined in recent years.The lack of and/or discrepancies in measurable indicators prevent makingquantitative assessment but sector officials readily confirm this trend.Funds available for public health are at best limited and even more so at theregional level. Since private enterprise in health and medical care isrudimentary, the State has been the provider of health care. In general, thecountry's health facilities are in need of repair and modernization.Equipment and drugs are in short supply. Manpower shortages are vast andsalaries are low to attract and retain qualified personnel (this ischaracterized by the recent eleven-week nurse's strike that asked for a 30Zincrease to their low US$ 10-20 monthly wage).

78. IDB has been the principal financing source for the health sector.In 1978, it approved a USS 10.9 million project to help improve primary andsecondary health care in areas outside Georgetown. Recently, it has financeda second project (US$ 31 million) to begin rehabilitation of the main hospitalin Georgetown, to expand diagnostic services at suburban health centers nearGeorgetown, to correct the deficit in drugs and medical supplies, to completethe communication network linking the primary and secondary health facilitiesunder the first project and strengthen management of health services in thecountry. Bilateral donors, PAHO and UNICEF have been providing eupport formalaria eradication, the incidence of which has risen in recent years. TheECC has donated a laboratory for AIDS testing. To supplement ongoingprograms, district hospitals would need to be improved. The way to increasethe efficiency of health delivery services would also have to be studied.

79. Similar to education, the improvement of physical facilities willbe reflected in incremental operating costs (one of the Government's recentconcerns is how to pay for the running costs of the main Georgetown Hospitalonce it is rehabilitated). There is a growing opinion in government circlessupporting the introduction of cost recovery arrangements in respect of someof the health services. A study to this effect is required.

80. As part of the ERP, the Government devised SIMAP to help cushionthe initial impact of the adjustment process on vulnerable groups, namelypensioners, school children, urban and rural poor, small farmers withinadequately drained land and limited access to assets, unskilled female headsof households and residents of depressed hinterland communities. Asconceived, SIMAP focused on a selected range of projects, with a maximumlifespan of two years, to maintain incomes through employment creation usinglabor intensive techniques and food-for-work arrangements, through theprovision of pension supplements and feeding programs to support thenutritional level of school age children, and through the promotion ofemployment among school drop-outs and the unemployed, the latter to beassisted with technical and vocational training. In October 1990, when theSIMAP agency became a semi-autonomous body under the Public Corporations Act,

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the scope o' MIHAP activities was expanded to include more directly theprovision of nutrition supplements, of maternal child care, and of shelter forspecial high-risk groups, and the fostering of education and communityinvolvement in the delivery and use of social services. The institutionalframework for this widened span of activities is non-existent and SIMAP willhave to enhance its capabilities gradually over time.

81. Financed in 1990 mostly by PL480 counterpart funds, cashsupplements wore made available, through the Post-Office, to old-agepensioners, recipients of public assistance, neody pregnant/lactating mothersand children below the age of five years. However, support for the hinterlandlagged because of the overwhelming demand from vulnerables seeking relief.The rosulting higher financial requirements and administrative burden couldnot be accommodated within the Government's financial constraints. At anyrate, 22,551 or 852 of the old pensioners and social beneficiaries as well as71,012 or 752 of the pregnant/lactating mothers and children under five yearstargeted received assistance. The 1991 Budget provides for continuation ofcash supplements and appropriations are expected to cover a larger percentageof the rural poor.

82. In spite of agreed financing from the IDB, CIDA through the FutureFund, Australia, France, EEC, South Korea, U.S. (additional PL480counterpart), Germany and UNDP, the rest of SIMAP experienced start-up delays,mainly because of unexpected problems in finalizing contractual arrangementsfor these funds and in staff recruitment.

83. A review of the SDMAP's current project pipelino (88 proposals witha combined cost of about US$1.5 million) reveals that 892 of the program wouldbe of an infrastructural nature (construction of sanitary blocks, pumps anddrainage, rehabilitation of nursery schools, small bridges, farm to marketroads, community centers and markets), 7S for nutrition/feeding programs,small business and agricultural activitios, and 42 for technical andvocational training (to be funded mainly by IDB). Co-mitments from the abovementioned external sources are expected to total US$3.4 million during 1991;therefore, the current project pipeline needs to be augmented. An IDA projectpreparation advance (USS 0.75 million) should assist SIMAP In this task. Atany rate, given its recent beginnings, it should not be surprising that theagency should depend on substantial technical assistance to become fullyoperational.

84. Both urban and rural populations are equally in need of solutionsto the pressing problem of lack of affordable housing. Because of the harsherliving conditions, brought about by the falling real personal incomes, and theincreased movement of people from the rural areas to the main cities squattingis on the rise. In sections of Georgetown this situation is widespread; thesquatters along the Lamaha Canal, which is the main source of water supply tothe city, have multiplied and are posing a threat to water supply. Since thelate 1970's public outlays for housing have sharply declined, whileconstruction for new living quarters across the country has stagnated. Thehousing shortage has forced rents to unprecedented levels. The authoritiesare deeply concerned with this situation and are seeking external financingfor two projects, one to assist urban-based low income families orect theirown housing by the provision of serviced lots and the other, to rehabilitateurban infrastructure and servicos.

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Conclus ion

85. The foregoing discussion has highlighted the key constraints facingthe major sectors and the need for investments to restore the productivecapacity of the Guyanese economy. Except for bauxite mining under theReynolds concession, the other activities are handicapped by continuousdisinvestment and neglect resulting from years of inappropriate economicpolicies, emigration of key personnel and lack of financing (including foreignexchange resources). Physical infrastructure, notably transportation,irrigation, drainage and the sea defenses are a bottleneck to augmentedproduction. Telecommunications, electricity and water supply are alsodeficient, although the first of these three sectors promises early resolutionas a result of its recent privatisation. Compounding the problem is thedepletion of the country's human capital, a matter that requires urgentcorrection. The stabilization program, the limited tax base, stagnanteconomic growth and heavy debt service paymonts are compelling the Governmentto maintain a limited public investment program. On the other hand, toreactivate the economy, a high capital-output rolationship will be necessaryfor several years. This can be brought about only with the support ofdonors/external lenders, given the insufficiency of domestic savings for thelevel of needed investment to restore economic growth.

III. THE PROJECT LIST

Composition and Size

86. The list of projects for the period 1992-95 covers a wide range ofhigh priority investments designed to support the Government's ERP. Unlikeother project lists in which a large number of potential projects arepresented for consideration by external financing sources (so called 'shoppinglists"), the 1992-95 Project List (List) reflects a careful effort to addressthe overriding needs of the economy, while improving resource allocation.

87. Given the urgency attached to reactivating the productive sectorsand rebuilding the country's infrastructure, most of the projects have to beinitiated as soon as possible. It would be unrealistic, however, to expectimmediate implemexrtation since the commitments would be unduly burdensome onboth Guyana and external donors!' nders. 'snerfore, a phasing of the needsover a four-year period nad to be carried out. Moreover, for reasons ofinsufficient readiness and necessary processing time by lenders/donors, someprojects may slip into later years. These slippages are common in countriesin similar stage of development and, therefore can result in that no more than70% of the projects are initiated during the proposed year. Such a percentagemay not be too far from the final outcome of this list.

88. The List consists of 42 investment projects and 8 items requiringtechnical assistance/pre-investment activities. In addition, there are 94mmediate support requirements (balancing items) which would contributedirectly to incremental output. About 62% of the number of projects would befor infrastructure, 20Z for reactivating productive activities, 10% forsupporting human capital formation and the remaining (8%) for general servicossuch as essential weather detection, fire and police.

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89. The sectoral composition of the List, in terms of proposed amounts,reflects the priorities discussed in the previous Chapter and is as follows:

34.6X in agriculture, including drainage, irrigation and sea defenses; 7.OZ ineducation, health and SIMAP; 12.32 in electricity; 16.5% industry, mining andprivate sector credit; 12.6Z in transport, 9.12 for water supply and sewerage;5.6% for urban/housing; 1.5Z for general services and 0.8Z for technicalassistance/pre-investment.

90. The total cost of the List is estimated at US$ 987.4 million andthe external financing sought at US$ 868.4 million or 882. This wouldrepresent annual new commitments of US$ 217.1 million during 1992-95; however,assuming a success factor of only 702 in the conctretion of external finance,net annual commitments would come down to about US$ 152 million. Taking as abase a weighted average of three years for project execution, this level ofcommitments would give annual gross disbursements for long-term loans of aboutUS$ 51 million, which are somewhat less than those presumed in the economicprojections. (This amount would represent a 92 increase over average annualdisbursements during 1986-89, i.e., less than average international inflationin the period). The balancing items (US$ 39.6 million in total), if financed,would help sustain the level of annual disbursements in real terms,particularly during the first two years.

Financing of Local Currency Costs

91. The foreign exchange component of the List is estimated at aroundUS$ 711 million or about 72% of the project costs. Compared to the totalexternal financing sought, this would entail financing of local currency costsof about US$ 157 million or 162 of total project costs on the average. GivenGuyana's low GNP per capita (US$ 310 in 1989), small tax base, graduallyimproving economic performance, and the time required to restore economicviability, such financing of local costs is considered justified.

Table 3: GUYANA - HIGHLIGHTS OF THE 1992-95 PROJECT LIST(in US$ million, unless otherwise stated)

Sector No. Total External 2 ofProjects Cost Financing Total Cost

Agriculture 8 342.4 297.9 34.6Education, Healthand SIMAP 4 69.2 65.1 7.0

Electricity 5 121.6 110.0 12.3General Services 3 14.6 12.5 1.5Manufacturing,Mining and Finance 3 163.2 138.0 16.5Transport 12 124.0 113.5 12.6Urban/Housing 2 55.0 49.5 5.6Water Supply andSewerage 5 89.8 75.0 9.1Technical Assistance/Pre-Inveatment 8 7.6 6.9 0.8Totals 50 987.4 868.4 1OG.O

* r # -iv n1 r ' D-nl t*AFf tA, t

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Execution Capacity and the Need for Concerted Effort

92. To implement the projects contained in the List, the Governmentwill have to overcome the major problems discussed in this report: namely,insufficient public savings, limited administration and management, shortagesof skilled manpower and reserved contracting. The first problem has to betackled through continuing improved fiscal performance (also by foreignfinancing of local costs) and enhanced resource allocation (cancellation ofsome of the ongoing projects which are not fully supportive of the ERP mayalso be necessary). With World Bank technical assistance, efforts are beingmade to strengthen the local capability for investment planning. The otherproblems can be overcome through international competitive bidding for civilworks, including maintenance, and intensified skill training. Moreover, andin line with the privatizationi drive, the Government will give considerationto private concessions for the operation of the shipyards, ferries, ports andwater navigation, and some municipal services. Cost recovery schemes shouldbe intensified to buttress investment financing and much needed asset upkeep.

93. In the past the wide dispersion of effort, in part brought about bythe uncoordinated project preferences of donors/lenders, has led to the use ofscarce financial and human resources is widely dispersed and differentdirections. This practice should be discontinued and enhanced coordination ofexternal assistance should replace it. External financial assistance shouldbe directed to satisfying priority investments/programs which are mutuallyreinforcing in support of the Government's ERP. The ultimate objective is toimprove the operational quality of public investment (i.e., a larger outputyield for a given resource input).

STATISTICAL APPIUDIK

TABLE OF CONTENTS

TABLE NO.

1.1 National Accounts, 1985-901.2 National Accounts, 1985-90 (in constant 1989 prices)2.1 Balance of Payments, 1985-902.2 Composition of Merchandise Exports, 1985-902.3 Composition of Merchandise Importo, 1985-902.4 Direction of Trade, 1985-883.1 Central Government Operations, 1985-894.1 Summary of External Debt Operat0ons, 1985-89

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Table 1. l WYANA - NATIONAL ACCOUNTS, 1969-90----^-- (as mtliIon)

Prel IN.1W6 190 I"? 1ion 19 9 1990

Gross Deew tic Product m.p. 2066 28809 84a 4172 7772 18584Net Indirect Tax-e *14 888 441 560 1024 1782

Resource Solonee -830 -80e -an -178 -997 -8067Exports of GNFS 1048 1014 2703 20n 0662 o06Itport of GwNS 187 1862 8154 2311 7650 12027

Total Expenditure 2806 2647 8623 480 67609 17401

Total Consumption lo4 2052 2t47 3476 6287 10229Private Consumption 1151 1360 1706 2812 4500 7360Goner- I Government 6183 68 962 110S 1737 2849

Gross ae s tic Investment 552 log 1061 67s 2332 7172

Gross National Product 1758 1976 2560 828 5100 10461

Gross Oomestic Saving 222 207 602 097 168 8805Net Faetor Income -299 -863 -071 -089 -2672 -8073Net Current Tranefors -9 13 46 24 $73 12

Gross National Saving -as -58 -188 -213 -759 244

Source: Statistical Bureau of Guyana; World Sank staff estimte.

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Table 1.2t WYANA - NATAONAL ACCIN4TS, 19t-90-__- (01 mililon nt 1900 9pleem)

19105 11W in? is" 19110 1090

Grooss Doetie Product m.p. 770 7T90 7906 7979 7772 7502Neot ndiroct Teatee 1325 1258 lot 1060 1024 g0o

Resource Balance -12t -1045 -J4 -JOs -997 -2060Uxpoesa of owS 8974 as" 6$3 7037 6662 O6UOImport, of PS 6229 4644 7 7273 760t 8416

Total Expenditur 904S 9026 6302 "7 O769 9062

Total Consumption OW9 39K 681 7148 6237 65s3Prlvate Consu_ption 4872 466o 4121 4919 4W00 4797Ganra I Government 2597 2830 2191 2224 1737 1754

Groos Ome tle Inveetment 2079 2027 243 2.674 2582 800l

Grose National Product 6668 6748 6907 6164 51oo 4429

Gross Domestic Saving 624 93! 16s" 086 1185 9SlNet Factor Inco" -1130 -1287 -2001 -1793 -2672 -3073Neb Current Transfera 137 144 287 289 378 12

Groom National Saving -119 -111 -175 -720 -7t9 -2110

Sources Sttisticeal Bureu of Ouyans; World Sank staff cetimtee.

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Table 2.1s WUYANA - BALANCE OF PAYVNTS, 1969-90--~~~ (W9US mi1llon)

Pro la.190 C 1t906 in9? 19 In9 o900

Exports of foods £ NFS 236 241 2c 262 24S 234Merchandise Exports 211 210 240 21C 200 204Non-Factor Services 21 oil U 8? 46 60

Imports of Cools NFS we 809 712 269 285 885Merchandlse lports 215 260 kG2 216 212 200Non-Factor Imports 65 49 60 I1 71 TV

Resource Balance -72 -69 -17 -17 -87 -79

Factor Services and Transfers -40 -74 -7n -71 -71 -92Not Factor Incom -71 -44 404 404 -5 -106

Factor Receipts 11 6 7 6 1 1

Factor Payments 02 90 91 S9 so 106o/w Interest Psymentc 12 16 14 12 10 26

Net Current Transfers 11 10 11 i8 14 13Current Recolpts 11 10 11 1s 14 18Current Payments 0 0 0 0 0 0

Current Account Balance -132 -142 -110 -JJ -106 -171

Long-Term Capital Inflow 48 GO 44 88 46 96DIrect Investment * -12 6 6 7 14Offic;al Capital Grents 0 6 10 7 7 lNot LT Loans 4 62 511 21 11 09

Disbursements 60 6s 42 80 46 122Repayments 12 15 1i 9 14 63

Other LT Inflows (net) -19 22 -2 0 0 0

Total Other Items (net) -10 -7 4 28 -1 19Not Short Term Capital -12 0 0. a 16Capital Flows N.I. 22Errors and Omsintonn 2 -7 4 1 -1 1

Capital Account Balance 58 6I 49 6 44 117

Overall Balance -49 -1 -62 -82 644 -64

FinancingChanges in Not Reserves 99 61 62 82 64 64Nt Crodit from IMF 0 -1 0 0 2Other Reserve Changes 91 32 02 82 64 C2

Source: DOnk of Guyana; Ministry of Finance; Statistical BurOau Of Guyan*l World Bank.

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Table 2.2: GUYANA - COMPOSITION Of MIERNCHMsE EXPORTS, 1965-90(USS mTIlion)

Profin..t965 1966 197 1966 19619 lg

Totel Merchandise Exports 202 205 232 209 200 203

Bauxite 9as so so0 72 76

Sugar as so0 75 63 75

Rice 18 11 16 15 12 14

Oold 8 6 9 8 a 13

Spirits 7 7 10 a 7 5

Timber 4 4 6 a J 3

Shrimp 4 a 5 4 S 6

Other Goods 9 6 11 1S 12 13

(in percent of total)

Bauxite 47.6 40.5 87.1 86.8 U6.0 86.9

Sugor 32.7 40.5 168.8 a.9 41.6 86.9

Rice 6.4 5.4 6.9 7.2 6.0 6.9

Cold 1.5 2.9 3.9 3.8 8.0 6.4

Spirits 3.5 3.4 4.8 3.6 3.5 2.6

Timber 2.0 2.0 2.2 1.4 1.5 1.6

Shrimp 2.0 1.6 2.2 1.9 2.5 2.6

Other Goods 4.5 8.9 4.7 7.7 6.0 6.4

(annual percentage change in value)

Bauxite 6.3 -13.5 3.6 -7.0 -10.0

Suger -4.8 25.6 6.4 -16.7 10.7

Rice -37.6 -15.4 46.5 -6.8 -20.0

Cold 0.4 100.0 50.0 -11.1 -25.0

Spirits .. 0.0 42.9 -20.0 -12.5

Timber .. 0.0 25.0 -40.0 0.0

Shrimp .. -25.0 68.7 -20.0 25.0

Other Goods .. -11.1 37.5 45.6 -25.0

Not available.

Source: Sank of Guynna; GUVUINI; GUYSUCO; GRES; World Dank StOff *etimate'.

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Table 2.s GUYANA - COWOSITION OF M0tC ISIE tWORTS, 1965-90-- (USS mlillion)

Prl laZ.1916 1966 197 106 1ng9 1990l

Merchandise Z"port 255 260 262 216 212 260

Coneumer Goods 24.7 29.6 28.9 24.2 23.1Intermediate Goods 164.2 179.1 173.1 146.7 113.2Capital Goods 66.1 51.1 es 43.1 73.?

(In percent of total)Consumer Ooods 0.7 11.6 11.0 11.2 10.9Intermediate Goods 64.4 63.9 63.0 &.9 58.4Capital Goods 25.9 19.7 21.0 20.0 16.7

(annual percentag change)Consumer Goods 1.4 26.9 -6.4 -17.6 -1.4Intermediate Ooods 8.1 3.9 -0.6 -16.5 -28.9Capital Goods 113.9 -22.7 7.6 -21.6 75.6

o evailable.

Source: Statistical sureou of Guyana; Guyana National Energy Authority; World Sank staff estimates.

.

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Table 2.4: UYANA - DIRECTION OF TRQOE, 19 c-n___ -_ (tn percent)

1964 10116 16 1SS? 1M$

Total Exports, f.o.b. 100.0 100.0 100.0 100.0 100.0

United States 19.8 J 2.9 16.6 22.6 22.6

Canada 4.6 6.0 J.1 9.6 S.6Japan 4.9 9.7 4.8 8.0 2.6

EC countrels 48.6 42.5 48.6 50.7 50.0United Kingdom 81.7 24.2 80.6 84.1 80.3

eromany 6.1 9.1 0.6 5.0 5.2Other 7.9 9.2 11.2 11.6 14.0

CARICOM countrie 12.6 9.4 5.4 4.9 7.1Trinidad and Tobgo .6. 6.68 1.7 0.9 1.7Jamaica 0.7 0.2 1.6 1.9 2.6Berbados 1.5 1.8 0.9 0.0 1.1Other 0.9 1.1 1.0 1.J 1.7

CMEA countries 8.6 1.2 1.0 1.0 1.6Rest of the World 9.6 9.J 5.8 6.8 10.4

Total port., .i.tf. 100.0 100.0 100.0 100.0 100.0

United States 16.4 16.4 22.9 80.6 33.2Canada 8.J 1.6 1.6 2.2 2.8Japan 2 8.7 .6. 4.7 6.4Venesuala 0.5 1.1

EC countries 14.3 20.1 20.6 21.3 16.5

United Kingdom 9.7 9.7 10.3 18 9.3Germany 1.6 4.2 8.5. 2.6 2.6Other 8.2 6.2 7 5.6 4.7

CARICOM countries 40.8 85.6 10.6 6.2 10Trlnidad and Tobago 87.6 82.1 9.7 8.5 4.9

J am ICa 1. 2.1 2.2 2.1 2.8Barbados 0 .s 0.5 6.5 0. 0.9Other 0.2 0.9 1.2 1.6 1.9

CMEA countries 0.7 0.6 0.9 1.2 1.8Rest of the world 20.8 20.7 25.7 81.6 81.8

Source tIw, Dlrectle of Trad SattIstc.

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Table 3.1: GUYANA - CENTRAL GOVERNMENT OPERATIONS, 1985-89(0- million)

1985 196s 1987 1988 1969

Current revenues 780.2 1019.2 1133.8 1660.7 2936.0

Direct tax revenue 312.7 413.8 441.2 830.5 1096.5

Imdi rot tax revenue 388.6 607.8 588.1 896.2 1493.3

Nontax revenue 78.9 97.6 109.6 135.0 346.2

Current Expenditures 1493.7 1696.0 2394.3 2790.2 6726.8

Goods and services a/ 683.0 682.6 961.9 1166.3 1741.8

Interest b_/ 702.8 993.4 1207.8 1313.5 3220.2

Transfers 99.2 211.0 219.1 800.1 769.0

Others 8.7 8.0 15.5 11.3 6.8

Current Budget Balance -713.5 -875.8 -1255.5 -1129.5 -2791.8

Capital revenue and grants 34.6 27.1 102.2 60.9 252.1

Capital expenditure/not lending c_J 382.7 360.3 675.6 473.7 1093.6

Capital Budget Balance -348.1 -323.2 -473.4 -412.8 -841.4

---------------------- ----- ----- ----

Overall Balance -1061.6 -1199.0 -1728.9 -1642.3 -3633.2

Financing

Financing of public corporations .. 863.5

Total financing requirements 1061.6 2062.5 1728.9 1642.3 3633.2

Net external financing 23S.9 141.0 234.1 322.0 308.7

Net domestic financing 82S.7 1921.S 1494.8 1220.3 3324.6

aj Includes payments to NISb_J Scheduled interest payments.c_/ Excludes equity contributions and loans to replace both overdrafts and some

corporations as well as the capital contribution to the Bank of Guyana of

0S375 in 1984.

Source: Ministry of Finance; IMF staff estimates.

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Table 4.1: GUYANA - SUMMARY Of EXTERNAL ODET OPERATIONS, 1966-69--------- ~~(USS miII e )

19151 l96 1967 1966 1989

Total External Debt Outstanding J 1462 1615 1713 1678 1713

Net Disbursemnt 48 52 31 21 31

Disbursements 60 a6 42 TO 45

Repayments 12 13 11 9 14

Interest Payments 15 16 14 12 10

Publicly gauranteed debt 12 16 14 12 10

IMF 8 0 0 0 0

Arrears 154 215 263 344 240

Principal 106 10 201 241 151

Interest 48 65 62 103 86

MEMORANDUM ITEM (percent)

Total Debt Outstanding/GDP 29S6S 303.8 496.1 402.2 596.6

Debt S*rvice/XGANFS 11.4 12.0 9.1 06. 9.7

Intorest/XOANFS 6.4 6.6 5.1 4.9 4.0

Total Debt Outstanding/XO*NFS 628.0 670.1 622.9 682.1 693.5