News Americas, NEW YORK, NY, Weds. Nov. 6, 2019: The International Monetary Fund (IMF) believes the South American CARICOM nation of Guyana will see economic growth of 86 percent next year but the body is warning the country to be wary of the ‘Dutch Disease’ while putting at least five systems in place.
“Dutch disease” refers to the negative consequences that can arise from a spike in the value of a nation’s currency. The economic term is most commonly associated with the paradox which occurs when good news, such as Guyana’s discovery of large oil reserves, harms a country’s broader economy.
“The pace of scaling-up public spending needs to be gradual to reduce bottlenecks from absorptive capacity constraints, avoid waste, and minimize macroeconomic distortions related to ‘Dutch disease’ that has often inflicted economies experiencing sizable increases in resource-based income,” the IMF has stated.
Guyana could grow 14 times the projected pace of China next year, driven by Exxon Mobil Corp.’s discovery of oil. And while Guyana’s $4 billion annual gross domestic product is about a tenth the size of Vermont’s now, it will expand to about $15 billion by 2024, according to the IMF.
The IMF is, however, advising the government of the following:
1: Strengthen institutional, governance and management practices, which will also help reduce vulnerability to corruption.
2: Strengthen transparency and governance.
3: Reassess the monetary policy stance to reflect changes in macroeconomic outlook or risks surrounding the outlook.
4: Implement structural reforms to support economic diversification, and achieve inclusive and equitable growth.
5: Invest in upgrading the education system to enhance skills and employment prospects and address skills gap and satisfy an expected increase in labor demand.