INTERNATIONAL DEVELOPMENT ASSOCIATION INTERNATIONAL MONETARY FUND GUYANA Joint World Bank-IMF Debt Sustainability Analysis September 2019 Prepared jointly by the staffs of the International Development Association (IDA) and the International Monetary Fund (IMF) Approved by Marcello Estevão (IDA) and Aasim M. Husain and Edward R. Gemayel (IMF), Guyana: Joint Bank-Fund Debt Sustainability Analysis Risk of external debt distress Moderate Overall risk of debt distress Moderate Granularity in the risk rating Substantial space to absorb shock Application of judgment No The risk of external and overall debt distress for Guyana remains moderate, but debt dynamics will improve significantly with the start of oil production in 2020.1 All external debt indicators remain below the relevant indicative vulnerability thresholds under the baseline scenario, which incorporates the average long-term effects of oil on economic growth, fiscal balance, and current account position. The PV of external debt-to-GDP is projected to decline to 3 percent over the long-term as the need for external borrowing is offset by the accumulation of external assets. Stress tests indicate the susceptibility of Guyana’s external public debt in a very extreme shock which combines simultaneous shocks to real GDP growth, primary balance, exports, other flows (current transfers and FDI), and nominal exchange rate depreciation, as well as second order effects arising from interactions among these shocks. The combined effects of these shocks and their second order effects cause temporary but significant breaches in the external debt thresholds, prompting a moderate risk rating. Nonetheless, Guyana has substantial space to absorb these shocks, reflecting the current low level of external debt. Guyana’s medium- and long-term outlook is very favorable given the incoming oil production and revenues, which will eventually underpin fiscal surpluses and a reduction in external indebtedness. The authorities reiterated their commitment in preserving fiscal discipline. 1 This DSA was jointly prepared by IMF and World Bank staff under the new debt sustainability framework (DSF) for low-income countries (LICs), implemented since July 2018. The debt-carrying capacity is classified using the country-specific composite indicator (CI) derived from three macroeconomic indicators and the World Bank’s Country Policy and Institutional Assessment (CPIA). Guyana’s capacity is assessed as “moderate” using the CI based on the April 2019 WEO and the 2017 CPIA. PUBLIC DEBT COVERAGE 1. The coverage of public sector debt used in this report is central government debt and central government-guaranteed debt. As of end-2018, the government had guaranteed a five- year syndicated loan amounting to G$16.5 billion (2.1 percent of GDP) raised by the National Industrial and Commercial Investments Limited (NICIL) for the purpose of restructuring state- owned Guyana Sugar Corporation (GuySuCo).2 The loan, which is also secured by NICIL’s assets, carries an interest rate of 4.75 percent, placing Guyana as one of the lowest sovereign credit risks in the Caribbean. 3 The government had undertaken the restructuring of GuySuCo following continued losses which resulted in heavy subsidies amounting to 1−2 percent of GDP per year from 2015−17.4 Proceeds from the privatization of GuySuCo’s estates will be used to repay this loan. The central government debt also includes borrowing from the Central Bank of Guyana, amounting to G$72.5 billion (9.3 percent of GDP) as of end-2018. 5 In addition, state-owned enterprises’ (SOEs) debts are included in central government debt as these entities are not allowed to borrow directly. The central government borrows and on-lends to the SOEs. The central government does not issue explicit or implicit guarantees on sub-nationals and local governments’ debts, which are not included in the DSA. External debt is defined based on residency basis. Coverage of Public Sector Debt Subsectors of the public sector Sub-sectors covered 1 Central government X 2 State and local government 3 Other elements in the general government 4 o/w: Social security fund X 5 o/w: Extra budgetary funds (EBFs) 6 Guarantees (to other entities in the public and private sector, including to SOEs) X 7 Central bank (borrowed on behalf of the government) 8 Non-guaranteed SOE debt X BACKGROUND 2. Total gross public debt has declined significantly over the past decade, driven by debt relief, repayments, and prudent debt management. Guyana’s total public-sector debt declined to 55 percent of GDP (including central government guarantee on NICIL’s G$16.5 billion syndicated loan) in 2018 from 61.2 percent of GDP in 2008. The IMF, World Bank (IDA), and Inter-American Development Bank (IDB) provided debt relief amounting to US$640 million in 2 NICIL was incorporated as a Private Limited Company under the Companies Act of 1991 and is 100 percent owned by the Government of Guyana. 3 The spread was broadly in line with investment-grade countries in the region. For example, Trinidad and Tobago’s US$ sovereign bond maturing January 16, 2024 (rated BBB+ by S&P) traded at a yield-to-maturity of 4.36 percent at the point when NICIL raised the syndicated loan. 4 The restructuring of GuySuCo is ongoing as offers have been received for the privatization of 3 of the 6 sugar estates, and all severance payments have been made to the 5,500 displaced workers. 5 The central bank does not borrow externally on behalf of the central government. 2 2006– 07, under the Multilateral Debt Relief Initiative (MDRI). In addition, Paris Club bilateral creditors and some non-Paris Club creditors granted debt relief within the 2004 Paris Club agreement.6 Guyana’s rice exports to Venezuela helped repay part of its debt owed to that country under the PetroCaribe agreement. The PetroCaribe agreement was suspended since 2015 following the revival of a border dispute, and no further borrowing was made since then. The pace of public debt accumulation has slowed following the government’s commitment to containing non- essential expenditures and restraint from contracting large amounts of debt. 3. External debt accounts for two thirds of total public sector debt, mostly to multilateral institutions. Multilateral creditors accounted for around 60 percent of total external debt in 2018. The IDB is the largest multilateral creditor, followed by Caribbean Development Bank, accounting for 39.7 percent and 11.3 percent of total external debt respectively, as of end- 2018. China’s state-owned Export-Import Bank is the largest bilateral creditor, comprising 16.1 percent of total external debt at end-2018. Commercial banks are the most important private creditors. Domestic debt comprises mainly Treasury bills (T-bills) and borrowing from the central bank. Guyana: Domestic Public Debt by Creditor Guyana: External Public Debt by Creditor (End-2018, in percent) (End-2018, in percent) Private, 2.6 T-bill, 47.1 Borrowing from Central Bank, 47.4 Bilateral, 37.8 Multilateral, 59.6 Domestic Loan Debentures, (NIS), 0.2 5.4 Source: Ministry of Finance. Source: Ministry of Finance. 4. The authorities have remained committed to ensuring fiscal prudence and contracting external loans on highly concessional terms before the start of oil production. The government had been prudent in ensuring that its fiscal integrity would not be compromised by contracting large debt. It has been relying on concessional financing from Multilateral Development Banks, consistent with Staff recommendations. One instance of financing from 6Debt relief under the Heavily Indebted Poor Country (HIPC) Initiative and Multilateral Debt Relief Initiative (MDRI) was granted by all multilateral creditors, by Paris Club bilateral creditors, and five non-Paris Club creditors (China, India, Venezuela, Bulgaria, and Cuba). Debt owed to Brazil and North Korea was paid off without relief. 3 private commercial banks was the publicly guaranteed NICIL syndicated loan to fund the restructuring of GuySuCo, which should strengthen the fiscal position over the medium-term by eliminating further government bailouts to that company. BACKGROUND ON MACRO FORECASTS 5. Guyana is poised to be the major crude oil exporter in the Caribbean by 2020 as further oil discoveries have been made since 2015. ExxonMobil made a significant offshore oil discovery in 2015, conservatively estimated to hold between 800 and 1,400 million barrels. A recent 13th offshore discovery has been made in the Stabroek Block, adding to existing recoverable resources of approximately 5.5 billion oil-equivalent barrels, estimated by ExxonMobil. The oil company and its partners have also indicated potential for at least five floating production, storage and offloading vessels on the Stabroek Block producing more than 750,000 barrels/day (bpd) by 2025. The government has plans to undertake a third-party area reviews to ascertain the country’s total oil reserves. The existing associated gas is being considered for the domestic market, allow Guyana to replace the heavy fuel oil (HFO) currently used for power generation. 6. Commercial oil production is expected to start in the first quarter of 2020 as planned. Liza Phase I will begin in the first quarter of 2020, averaging 102,000 bpd during that year. Liza Phase II is estimated to commence production in 2022, starting with an average output of 108,000 bpd. Additional discoveries have been made but their oil production prospects are not known at this time and thus, are excluded in the baseline. 7. The main direct effect of oil on the economy will be through fiscal revenues. Under the revenue-sharing agreement, 75 percent of oil production is initially allocated to “cost recovery” to ExxonMobil and its partners. The remaining 25 percent is considered “profit oil” and is shared 50−50 with the government. The agreement sets a royalty of 2 percent on gross earnings, which brings the government share to 14.5 percent of total oil revenues. The government share will increase substantially once cost recovery on the initial investment is met, and most of production consists of “profit oil.” As the breakeven price for Liza Phase II is relatively low at around US$35 per barrel, it would take a major adverse price shock to delay its development plans. Upside potential remains considerable with prospects for new offshore oil discoveries in other blocks besides Stabroek, and many companies have expressed interest for the ultra-deep offshore block. 4 8. The assumptions in the baseline scenario are consistent with the macroeconomic framework presented in the staff report. As in the 2018 DSA, the baseline scenario incorporates the macroeconomic effects of oil through fiscal revenues and value added to domestic economic activities through employment and capital flows. 7 The discount rate used to calculate the net present value of external debt remains at 5 percent, consistent with the 2018 DSA and other LIC economies. The main assumptions are: • Real GDP growth is projected at 16.7 percent, on average, during 2018–28. The projection takes into account three factors: (i) contribution of oil production starting from 2020 as Liza Phase I begins operation and Liza Phase II commences in 2022; (ii) stimulus to the domestic economy from an increase in central government developmental and capital spending to address social development and infrastructure needs, supported by oil revenues; and (iii) broadening of growth of the domestic non- oil sectors, benefitting from public capital investment, which improves infrastructure, connectivity, and efficiency. It also assumes a fiscal responsibility framework— consistent with the rule already in place governing transfers from the National Resource Fund (NRF) to the budget—that targets an overall balanced budget from 2022 onwards, by ensuring that the non-oil overall deficit do not Guyana: Baseline Macroeconomic Assumptions (In percent of GDP, unless otherwise stated) exceed fiscal transfer from the NRF. This minimizes 2018 DSA 2019 DSA 2017-27 2018-28 the “Dutch” disease Average Average crowding out effects on Real GDP growth 11.8 16.7 Real Non-oil GDP growth 3.9 5.0 private investment and Consumer prices (eop) 1/ 2.7 2.8 Central Government overall balance 2/ 5.2 -0.9 consumption while External current account balance 3/ 24.4 -5.3 ensuring long-term fiscal Foreign direct investment -15.7 11.1 sustainability and the Sources: Guyanese authorities, IMF staff calculations and projections. 1/ Measured as percent (y/y) change. accumulation of assets in 2/ After grants. 3/ The deterioration in external current account balance reflects high value imports of oil goods and the NRF as a buffer against services for 2018 onwards. shocks and for future generations. • Inflation (measured by CPI) is projected to average 2.8 percent during 2018–28, slightly higher than the previous DSA projection to capture the structural rigidities associated with capacity constraints as the government increases spending to address infrastructure gaps and social development needs. • Fiscal outlook: The ten-year forward-looking central government overall fiscal position is expected to average -0.9 percent of GDP, reflecting an overall balanced budget from 7Based on staff projections for Liza I and II from the Fiscal Analysis of Resource Industries (FARI) Model with inputs from the authorities, taking into consideration oil royalty and production profit-sharing with ExxonMobil, and the fiscal rule in the NRF Act. 5 2022 onwards (in line with the fiscal path described above) compared to the assumption of accumulating surpluses in the 2018 DSA. 8 This allows some front-loading of government spending to address infrastructure gaps and social development needs, and ensures that the accumulation of assets in the NRF will not be offset by the accumulation of public debt.9 It is assumed that the path of ramping up public spending would be gradual given the need to address capacity constraints and minimize macroeconomic distortions related to “Dutch” disease. Going forward, external financing is also not required as capital and current expenditures will be met by oil revenues and non-oil revenues. • External sector outlook: The current account balance is projected to worsen to a deficit of 5.3 percent of GDP, on average, during the forecast period due to high value imports of oil-related equipment and services. However, the flow of foreign direct investment will increase, by an average 11.1 percent of GDP, reflecting mainly the private sector financing of these oil-related imports and oil exploration activities. 9. The favorable outlook is subject to downside and upside risks. The significant challenges associated with measuring economic performance amid major structural changes could cause reported outturns to differ from the baseline.10 Also, on the downside, increased dependence over time on oil revenue could expose the economy to oil price volatility. In addition, excessively rapid increases in government spending from oil revenues could subject Guyana to the “natural resource curse,” with significant inflationary pressures, eroding competitiveness, and governance concerns. A slowing global economy could also affect non-oil exports, particularly sugar, rice, and other commodities. On the upside, further oil discoveries and production, if managed effectively, could significantly improve Guyana’s economic welfare over the long-term. Concrete measures are needed to address issues relating to capacity constraints to mitigate the risks of under-execution of public capital investments. 10. The realism tools support the reasonableness of our projections, in line with historical and peer experiences, and expected structural changes in Guyana’s economy with the emergence of significant oil production. • Forecast errors (Figure 3): In the past, changes in both public- and publicly-guaranteed (PPG) external debt and public debt are largely due to economic performance. This factor continues to be a major determinant underpinning the changes in debt levels in our forecast. For the projection of PPG external debt, FDI is now a significant contributor, consistent with large FDI inflows arising from oil production and continuing exploration. Forecast errors of our past debt estimates (measured as the 8 The framework assumes accumulation of assets in the NRF following the provisions of the NRF Act. 9 The zero-overall balance framework will also allow a gradual repayment of the central bank overdraft. 10 Projected real GDP growth in 2020 is potentially overstated and subject to large subsequent revisions because of the very high growth rate of oil GDP, which in turn is elevated on account of the very low (zero) base in 2019. Hence, even small changes to the projected oil output in 2020 would result in large changes in real oil GDP and overall real GDP growth rates. Work is ongoing to rebase the real GDP series to account for oil-related activities since 2015 in advance of actual oil production in 2020. 6 difference between actual and anticipated contributions on debt ratios) suggest that that we have been conservative—our estimation of PPG external debt and public debt had been higher relative to their actual levels compared to the distribution of other LIC economies. • Realism of fiscal adjustment (Figure 4): The three-year adjustment in the primary balance of 2 percentage point of GDP is consistent with our recommendation to a adopt fiscal responsibility framework that targets an overall balanced budget. It is worth noting that fiscal policy will remain expansionary in the three years, supported by the new-found oil wealth.11 The baseline growth path in 2020 is higher than implied under different fiscal multipliers due to the start of oil production which leads to a significant increase in exports, fiscal revenue, and FDI. This is consistent with the chart which shows significantly higher contribution of other factors (namely private capital from ExxonMobil and other oil-related companies) to economic growth compared to public capital. In addition, the chart on public and private investment rates shows that private investment will pick up gradually from 2022 onwards, in line with our current DSA assumption of a gradual increase in public capital spending which mitigates “Dutch” disease. COUNTRY CLASSFICATION AND DETERMINATION OF SCENARIO STRESS TEST 11. Guyana is assessed to have a “medium” debt carrying capacity. Based on the April 2019 WEO macroeconomic framework, the country’s composite indicator (CI) score is 3.01, within the range of 2.69–3.05 for “medium” rated countries. From the 2018 Guidance Note on The Bank-Fund Debt Sustainability Framework for Low Income Countries, the relevant indicative thresholds for public and publicly guaranteed (PPG) external debt in this category are: 40 percent for the PV of debt-to-GDP ratio,180 percent for the PV of debt-to-exports ratio, 15 percent for the debt service-to-exports ratio, and 18 percent for the debt service-to-revenue ratio. The benchmark of the PV of total public debt for “medium” debt carrying capacity is 55 percent. 11While the overall fiscal deficit will narrow and move to a balanced budget, the ratio of non-oil deficit to non-oil GDP (often used to measure fiscal stance in oil-exporting countries) would be widening gradually over the medium term, indicating a sustained expansionary fiscal stance. 7 Guyana: Debt Carrying Capacity Under the Composite Indicator Index Components Coefficients (A) 10-year average CI Score components Contribution of values (B) (A*B) = (C) components CPIA 0.39 3.31 1.28 0.42 Real growth rate (in percent) 2.72 7.82 0.21 0.07 Import coverage of reserves (in percent) 4.05 30.90 1.25 0.42 Import coverage of reserves^2 (in percent) -3.99 9.55 -0.38 -0.13 Remittances (in percent) 2.02 8.47 0.17 0.06 World economic growth (in percent) 13.52 3.56 0.48 0.16 CI Score 3.01 100% CI rating Medium Guyana: Composite Indicator Index Thresholds EXTERNAL debt burden thresholds Medium PV of debt in % of Exports 180 GDP 40 Debt service in % of Exports 15 Revenue 18 12. The stress test for combined contingent liability shock adjusts the default setting for public–private partnership (PPP) debt. The authorities indicated no PPP debt outstanding as of end-2018 and any financing requirements by developmental agencies are met directly through central government borrowing. The World Bank Investments in IDA Countries Report also shows no outstanding PPI investments and projects in Guyana from 2013–17. Guyana: Combined Contingent Liability Shock 1 The country's coverage of public debt The central government plus social security, government-guaranteed debt Used for the Default analysis Reasons for deviations from the default settings 2 Other elements of the general government not captured in 1. 0 percent of GDP 0.0 3 SoE's debt (guaranteed and not guaranteed by the government) 1/ 2 percent of GDP 2.0 4 PPP 35 percent of PPP stock 0.0 The authorities and IDA confirmed that PPP stock is zero. 5 Financial market (the default value of 5 percent of GDP is the minimum value) 5 percent of GDP 5.0 Total (2+3+4+5) (in percent of GDP) 7.0 1/ The default shock of 2% of GDP will be triggered for countries whose government-guaranteed debt is not fully captured under the country's public debt definition (1.). If it is already included in the government debt (1.) and risks associated with SoE's debt not guaranteed by the government is assessed to be negligible, a country team may reduce this to 0%. 8 DEBT SUSTAINABILITY ANALYSIS External PPG Debt 13. Under the baseline scenario, all external PPG debt indicators remain below the policy relevant thresholds for the next ten years (Figure 1). The PV of debt-to GDP ratio is expected to decline gradually from 22 percent in 2019 to 3 percent in 2029 as existing debt is being amortized and the need to incur additional new external debt is significantly reduced with the incoming oil revenues to the central government starting from 2020 onwards. 14. The standardized stress test shows that combined shocks have the largest negative impact on the debt trajectory, causing a breach of the threshold for the PV of debt-to-GDP ratio in the immediate-term which normalizes in the medium-term. The combined shocks include temporary shocks to real GDP growth, primary balance, exports, other flows (including current transfers and FDI), and nominal exchange rate depreciation.12 Under these shocks—a very extreme scenario—the PV of debt-to-GDP ratio could increase to 145 percent in the first year after the shocks, rising to 183 percent in the second year before declining gradually to 56 percent in 2029. In addition, the combined shocks which include a large nominal exchange rate depreciation13 could also result in the PV of external debt service-to-revenue ratio breaching its threshold in 2021. Significant shocks to exports could also potentially lead to a temporary breach in the PV of debt- to-exports ratio in 2021 and 2022. 15. The results suggest that the risk of external debt distress remains moderate although in the baseline scenario, all sustainability indicators remain below their vulnerability thresholds. It is important to note that the breaches in the ratios of PV of debt-to-GDP, PV of external debt service-to-revenue, and PV of debt-to-exports are caused by shock assumptions which, under current and anticipated developments in Guyana, may be less relevant and probable. • External debt-to-GDP: One reason for the PV of debt-to-GDP ratio threshold breach is that the sensitivity analysis neglects the high real GDP growth in 2020 (as if oil production in Liza Phase I did not start).14 The historical standard deviation may be distorted by the underestimation of GDP, imports, and FDI in years prior to the start of oil production as the authorities’ current data on the national accounts and balance of payments do not reflect foreign companies’ investments in developing Guyana’s offshore oil resources during the preparatory phase. Thus, while this scenario is meant to capture large but plausible adverse shocks, in this case it is mainly removing the level effect on GDP of going from no oil production to becoming an oil producer. 12 Section VI of the 2018 Guidance Note provides further details. 13 Assumes a one-time 30 percent nominal depreciation of the domestic currency in the second year of the projection period, or the size needed to close the estimated real exchange rate overvaluation gap, whichever is larger. 14 The standardized shock on real GDP growth is set to its historical average minus one standard deviation, or the baseline projection minus one standard deviation, whichever is lower for the second and third years of the projection period. 9 • External debt service-to-revenue ratio: The assumption of a one-time 30 percent nominal exchange rate devaluation in 2021 is not reflective of Guyana’s current economic cycle and past exchange rate path (the steepest exchange rate depreciation since 1990 was 11 percent, in 1998). On the contrary, the start of oil production in 2020 will substantially increase international reserves and may create significant appreciation pressures on the Guyanese dollar. • Debt-to-exports: The shock on exports is distorted by the high standard deviation of export growth in the historical data due to the high share of commodity exports (85 percent of total exports), high volatility of commodity prices, and a few idiosyncratic shocks (e.g. the suspension of rice exports to Venezuela, and the collapse of the sugar sector). 16. Guyana has substantial space to absorb shocks, reflecting the current low level of external debt. Figure 5 shows that all debt burden indicators in the baseline scenario are well below their respective thresholds. Only shocks in the upper quartile of the observed distribution of shocks would downgrade the country to high risk of debt distress. Public Sector Debt 17. Under the baseline scenario, the PV of public debt-to-GDP ratio does not breach the 55 percent vulnerability threshold (Figure 2). The PV of debt-to-GDP ratio is expected to decline gradually from 46 percent in 2019 to 6 percent in 2029 as existing debt is being amortized and the need to incur large additional new external debt is significantly reduced with the increasing oil revenues as well as the fiscal responsibility framework that targets an overall balanced budget. 18. The standardized stress test shows that the largest shock that leads to the highest PV of debt-to-GDP ratio in 2029 is the shock to real GDP growth. Under this shock, the debt ratio could reach 122 percent of GDP in 2020.15 In addition, commodity price shock could result in a breach of the vulnerability threshold in 2026, pushing the PV of debt-to-GDP ratio to 68 percent in 2020. The vulnerability to such a shock highlights the importance of structural reforms to diversify the domestic economy to ensure broad-based growth and reduce over-reliance on oil which could lead to large volatility in economic growth. The susceptibility these shocks also underscore the importance of adopting a fiscal responsibility framework to safeguard long-term debt sustainability. 15As in external debt, this standardized sensitivity analysis totally neglects the high real GDP growth in 2020 and treats as though oil production in Liza Phase I does not exist. 10 CONCLUSION 19. The debt sustainability analysis under the new LIC DSF framework suggests that Guyana’s risk of external and overall debt distress remains moderate. While the country’s debt dynamics improve considerably under the baseline, it remains vulnerable under the standardized stress test. In the baseline scenario, debt indicators remain well below their respective vulnerability thresholds over the projection period. The PV of external debt-to-GDP ratio is projected to decline to around 3 percent in the long run as the need for external borrowing is eliminated by the accumulation of external assets. However, stress tests indicate that Guyana’s external public debt ratio is vulnerable to an extreme shock which combines simultaneous shocks to real GDP growth, primary balance, exports, other flows (current transfers and FDI), and nominal exchange rate depreciation as well as second order effects arising from interactions among these shocks. While some of these shocks are less probable given the distortions in the historical standard deviations used in the stress test, it highlights the importance of structural reforms to diversify and strengthen the domestic economy and reduce over-dependence on oil which could exacerbate economic growth volatility. At present, Guyana has substantial space to absorb shocks, reflecting the current low level of external debt. While the NRF Act enshrines a budget transfer rule that ensures fiscal transfers are determined by the expected financial return on the NRF in the long- run, a complementary fiscal responsibility framework is needed to ensure that fiscal policies remain disciplined in line with the principle underlying the budget transfer rule, which in turn is necessary to safeguard debt sustainability and the accumulation of net wealth (that is, asset accumulation without a corresponding accumulation of public debt) in the NRF. AUTHORITIES’ VIEWS 20. The authorities agreed with the debt sustainability assessment under the new framework and are committed to preserving fiscal discipline. They noted that prudent fiscal policies over the last 5 years had helped reduce the debt-to-GDP ratio, from 61.2 percent in 2008 to 55 percent (including central government guarantee on NICIL’s G$16.5 billion syndicated loan) in 2018. Nevertheless, the authorities recognized that extreme shocks emanating from external risks such as fluctuations in global commodity prices and capital flows could put pressure on the domestic economy. As such, they are committed to maintaining fiscal prudence to ensure enough buffers to weather such shocks. They concurred with staff’s recommendation of adopting a fiscal framework that anchors fiscal policy by constraining the annual non-oil deficit to not exceed the expected transfer from the NRF as this will ensure that public debt does not rise. To improve public financial management, the authorities intend to adopt rigorous project selection, prioritization and costing criteria that will also inform multi-year budgeting. They indicated that they would consider other mechanisms to further improve fiscal transparency and have requested further information on the Fiscal Transparency Evaluations. 11 Table 1. Guyana: External Debt Sustainability Framework, Baseline Scenario, 2016 −2039 Actual Projections Average 8/ Historical Projections 2016 2017 2018 2019 2020 2021 2022 2023 2024 2029 2039 External debt (nominal) 1/ 33.2 34.4 33.9 33.3 18.6 18.3 16.0 13.0 12.6 4.4 1.0 40.5 13.0 Definition of external/domestic debt Residency-based of which: public and publicly guaranteed (PPG) 33.2 34.4 33.9 33.3 18.6 18.3 16.0 13.0 12.6 4.4 1.0 40.5 13.0 Is there a material difference between the No two criteria? Change in external debt -2.6 1.2 -0.5 -0.6 -14.7 -0.3 -2.3 -3.0 -0.4 -0.8 -0.1 Identified net debt-creating flows -4.4 0.0 2.3 -3.5 -19.5 -5.9 -10.2 -11.1 -7.4 -5.8 4.7 -1.3 -9.1 Non-interest current account deficit -0.9 6.3 16.9 22.2 18.1 15.6 5.4 0.6 -1.9 -2.4 8.0 8.6 3.3 Deficit in balance of goods and services 9.4 15.7 29.6 34.9 2.3 -0.6 -24.7 -38.7 -40.8 -7.0 7.9 24.0 -14.0 Exports 45.7 44.7 39.1 39.8 51.0 50.7 62.8 69.0 68.0 29.1 13.1 Debt Accumulation Imports 55.0 60.4 68.7 74.7 53.3 50.1 38.1 30.3 27.2 22.1 21.0 2.5 50 Net current transfers (negative = inflow) -9.9 -9.2 -12.8 -12.8 -9.5 -9.3 -8.2 -7.3 -7.2 -5.5 -2.0 -14.8 -7.6 of which: official -0.7 -1.4 -1.0 -1.1 -0.6 -0.8 -0.4 -0.4 0.0 0.0 0.0 45 Other current account flows (negative = net inflow) -0.4 -0.3 0.1 0.1 25.3 25.5 38.4 46.5 46.1 10.0 2.1 -0.7 25.0 2.0 40 Net FDI (negative = inflow) -0.9 -5.9 -12.7 -24.8 -23.3 -20.9 -12.7 -8.6 -5.3 -3.0 -3.2 -7.5 -10.2 Endogenous debt dynamics 2/ -2.6 -0.4 -2.0 -1.0 -14.3 -0.6 -2.8 -3.0 -0.2 -0.4 0.0 35 1.5 Contribution from nominal interest rate 0.5 0.6 0.6 0.5 0.2 0.2 0.2 0.2 0.2 0.1 0.0 30 Contribution from real GDP growth -1.1 -0.7 -1.3 -1.4 -14.6 -0.8 -3.1 -3.2 -0.4 -0.5 -0.1 1.0 25 Contribution from price and exchange rate changes -2.0 -0.2 -1.3 … … … … … … … … Residual 3/ 1.8 1.2 -2.7 2.9 4.8 5.6 7.9 8.1 7.0 5.0 -4.8 0.4 6.4 20 of which: exceptional financing 0.0 0.0 -2.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.5 15 10 Sustainability indicators 0.0 PV of PPG external debt-to-GDP ratio ... ... 22.8 22.4 12.3 12.1 10.5 8.6 8.4 3.1 0.7 5 PV of PPG external debt-to-exports ratio ... ... 58.3 56.2 24.2 23.9 16.8 12.5 12.4 10.6 5.4 -0.5 0 PPG debt service-to-exports ratio 3.4 3.8 5.1 4.5 1.7 1.7 1.2 0.9 0.8 1.2 0.7 2019 2021 2023 2025 2027 2029 PPG debt service-to-revenue ratio 6.3 6.4 7.4 6.4 4.8 4.7 4.3 3.8 3.2 1.3 0.4 Gross external financing need (Billion of U.S. dollars) 0.0 0.1 0.2 0.0 -0.3 -0.4 -0.7 -1.0 -1.0 -1.8 3.4 Debt Accumulation Grant-equivalent financing (% of GDP) Key macroeconomic assumptions Grant element of new borrowing (% right scale) Real GDP growth (in percent) 3.4 2.1 4.1 4.4 85.7 4.7 20.6 26.1 3.2 9.9 5.1 4.0 17.2 GDP deflator in US dollar terms (change in percent) 6.0 0.8 3.8 1.2 5.4 2.7 2.2 3.9 6.9 1.9 -0.2 3.3 6.2 Effective interest rate (percent) 4/ 1.5 1.8 1.8 1.5 1.4 1.4 1.4 1.5 1.4 1.4 1.4 1.4 1.4 External debt (nominal) 1/ Growth of exports of G&S (US dollar terms, in percent) 23.6 0.7 -5.4 7.6 150.9 6.9 52.7 43.8 8.8 -4.1 1.8 5.1 24.5 of which: Private Growth of imports of G&S (US dollar terms, in percent) 0.6 12.9 22.9 15.0 39.8 1.1 -6.5 4.2 -1.0 9.5 5.2 5.9 10.8 35 Grant element of new public sector borrowing (in percent) ... ... ... 39.7 41.4 43.4 41.4 38.1 36.4 0.0 0.0 ... 21.9 Government revenues (excluding grants, in percent of GDP) 24.5 26.2 26.9 28.0 18.5 18.7 17.3 15.7 17.1 26.1 26.7 24.0 20.9 30 Aid flows (in Billion of US dollars) 5/ 0.1 0.2 0.2 0.1 0.2 0.2 0.2 0.1 0.1 0.0 0.0 Grant-equivalent financing (in percent of GDP) 6/ ... ... ... 2.3 1.4 1.2 0.9 0.6 0.4 0.0 0.0 ... 0.6 25 Grant-equivalent financing (in percent of external financing) 6/ ... ... ... 60.3 53.7 55.4 47.2 46.2 36.4 ... ... ... 49.9 Nominal GDP (Billion of US dollars) 4 4 4 4 8 9 11 14 15 35 69 20 Nominal dollar GDP growth 9.6 2.9 8.1 5.7 95.7 7.6 23.2 31.0 10.4 12.0 4.9 7.4 24.2 15 Memorandum items: 10 PV of external debt 7/ ... ... 22.8 22.4 12.3 12.1 10.5 8.6 8.4 3.1 0.7 In percent of exports ... ... 58.3 56.2 24.2 23.9 16.8 12.5 12.4 10.6 5.4 5 Total external debt service-to-exports ratio 3.4 3.8 5.1 4.5 1.7 1.7 1.2 0.9 0.8 1.2 0.7 PV of PPG external debt (in Billion of US dollars) 0.9 0.9 1.0 1.0 1.1 1.2 1.3 1.1 0.5 0 (PVt-PVt-1)/GDPt-1 (in percent) 0.9 1.8 0.7 0.9 0.7 0.7 -0.2 -0.1 2019 2021 2023 2025 2027 2029 Non-interest current account deficit that stabilizes debt ratio 1.7 5.0 17.4 22.9 32.9 15.9 7.7 3.6 -1.5 -1.6 8.1 Sources: Country authorities; and staff estimates and projections. 0 1/ Includes both public and private sector external debt. 2/ Derived as [r - g - ρ(1+g) + Ɛα (1+r)]/(1+g+ρ+gρ) times previous period debt ratio, with r = nominal interest rate; g = real GDP growth rate, ρ = growth rate of GDP deflator in U.S. dollar terms, Ɛ=nominal appreciation of the local currency, and α= share of local currency-denominated external debt in total external debt. 3/ Includes exceptional financing (i.e., changes in arrears and debt relief); changes in gross foreign assets; and valuation adjustments. For projections also includes contribution from price and exchange rate changes. 4/ Current-year interest payments divided by previous period debt stock. 5/ Defined as grants, concessional loans, and debt relief. 6/ Grant-equivalent financing includes grants provided directly to the government and through new borrowing (difference between the face value and the PV of new debt). 7/ Assumes that PV of private sector debt is equivalent to its face value. 8/ Historical averages are generally derived over the past 10 years, subject to data availability, whereas projections averages are over the first year of projection and the next 10 years. (In percent of GDP, unless otherwise indicated) Notes: The residuals reflect external debt comprising mainly concessional borrowing with long-term maturities. Projected real GDP growth in 2020 is potentially overstated and subject to large subsequent revisions because of the very high growth rate of oil GDP, which in turn is elevated on account of the very low (zero) base in 2019. Hence, even small changes to the projected oil output in 2020 would result in large changes in real oil GDP and overall real GDP growth rates. Work is ongoing to rebase the real GDP series to account for oil-related activities since 2015 in advance of actual oil production in 2020. The GDP deflator in 2020 reflects deflators in the non-oil and sectors. The deflator in the oil sector accounts for prices of ancillary services relating to oil production, in addition to oil price projections. 12 Table 2. Guyana: Public Sector Debt Sustainability Framework, Baseline Scenario, 2016−2039 (In percent of GDP, unless otherwise indicated) Actual Projections Average 6/ 2016 2017 2018 2019 2020 2021 2022 2023 2024 2029 2039 Historical Projections Public sector debt 1/ 50.7 51.4 55.0 56.6 29.7 28.3 23.0 17.5 15.8 6.9 3.8 58.2 19.5 Definition of external/domestic Residency- of which: external debt 33.2 34.4 33.9 33.3 18.6 18.3 16.0 13.0 12.6 4.4 1.0 40.5 13.0 debt based of which: local-currency denominated Change in public sector debt 0.6 0.6 3.6 1.6 -26.9 -1.4 -5.4 -5.5 -1.7 -0.8 -0.2 Is there a material difference Identified debt-creating flows -0.2 2.7 -0.7 1.6 -26.9 -1.4 -5.3 -5.5 -1.6 -0.8 -0.1 -0.6 -4.4 No between the two criteria? Primary deficit 3.4 3.3 2.4 4.0 0.1 0.2 -0.4 -0.3 -0.3 -0.1 0.0 2.5 0.2 Revenue and grants 25.6 27.8 28.2 29.3 19.1 19.1 17.5 15.9 17.1 26.1 26.7 25.8 21.2 of which: grants 1.1 1.6 1.3 1.3 0.6 0.4 0.2 0.2 0.0 0.0 0.0 Public sector debt 1/ Primary (noninterest) expenditure 29.0 31.2 30.6 33.3 19.1 19.3 17.0 15.6 16.8 26.0 26.7 28.4 21.4 Automatic debt dynamics -3.6 -0.6 -3.1 -2.4 -26.9 -1.6 -4.9 -5.1 -1.3 -0.7 -0.1 of which: local-currency denominated Contribution from interest rate/growth differential -2.2 -1.0 -2.5 -2.6 -26.5 -1.4 -4.9 -4.9 -0.8 -0.7 -0.2 of which: foreign-currency denominated of which: contribution from average real interest rate -0.5 0.1 -0.5 -0.3 -0.3 -0.1 0.0 -0.1 -0.2 0.0 0.0 of which: contribution from real GDP growth -1.6 -1.1 -2.0 -2.3 -26.1 -1.3 -4.8 -4.8 -0.5 -0.7 -0.2 60 Contribution from real exchange rate depreciation -1.5 0.4 -0.6 ... ... ... ... ... ... ... ... 50 Other identified debt-creating flows 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 Privatization receipts (negative) 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 40 Recognition of contingent liabilities (e.g., bank recapitalization) 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 30 Debt relief (HIPC and other) 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 Other debt creating or reducing flow (please specify) 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 20 Residual 0.8 -2.1 4.3 0.2 -0.5 -0.1 -0.1 -0.3 -0.6 0.0 0.0 -0.1 -0.4 10 Sustainability indicators 0 PV of public debt-to-GDP ratio 2/ ... ... 43.8 45.6 23.5 22.2 17.6 13.1 11.7 5.6 3.5 2019 2021 2023 2025 2027 2029 PV of public debt-to-revenue and grants ratio … … 155.6 155.8 123.4 116.1 100.5 82.6 68.1 21.4 13.3 Debt service-to-revenue and grants ratio 3/ 58.2 68.3 63.3 69.2 65.9 58.2 51.1 38.0 27.7 10.0 10.6 Gross financing need 4/ 18.3 22.3 20.2 24.2 12.6 11.3 8.5 5.7 4.4 2.5 2.8 of which: held by residents of which: held by non-residents Key macroeconomic and fiscal assumptions 60 Real GDP growth (in percent) 3.4 2.1 4.1 4.4 85.7 4.7 20.6 26.1 3.2 9.9 5.1 4.0 17.2 Average nominal interest rate on external debt (in percent) 1.5 1.8 1.8 1.5 1.4 1.4 1.4 1.5 1.4 1.4 1.4 1.4 1.4 50 Average real interest rate on domestic debt (in percent) -3.8 0.8 -2.7 -0.7 -2.1 -0.1 0.4 -0.9 -3.3 1.1 1.1 -0.8 -2.0 40 Real exchange rate depreciation (in percent, + indicates depreciation) -4.2 1.2 -1.7 … ... ... ... ... ... ... ... -1.6 ... 30 Inflation rate (GDP deflator, in percent) 6.0 0.8 3.9 1.3 6.0 3.9 3.5 4.9 7.9 1.9 0.9 3.4 6.9 Growth of real primary spending (deflated by GDP deflator, in percent) 15.3 9.6 2.2 13.6 6.9 5.6 6.5 15.1 11.7 10.6 5.3 5.2 15.0 20 Primary deficit that stabilizes the debt-to-GDP ratio 5/ 2.8 2.7 -1.2 2.4 26.9 1.6 4.9 5.1 1.3 0.7 0.2 1.4 4.6 10 PV of contingent liabilities (not included in public sector debt) 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0 2019 2021 2023 2025 2027 2029 Sources: Country authorities; and staff estimates and projections. 1/ Coverage of debt: The central government plus social security, government-guaranteed debt . Definition of external debt is Residency-based. 2/ The underlying PV of external debt-to-GDP ratio under the public DSA differs from the external DSA with the size of differences depending on exchange rates projections. 3/ Debt service is defined as the sum of interest and amortization of medium and long-term, and short-term debt. 4/ Gross financing need is defined as the primary deficit plus debt service plus the stock of short-term debt at the end of the last period and other debt creating/reducing flows. 5/ Defined as a primary deficit minus a change in the public debt-to-GDP ratio ((-): a primary surplus), which would stabilizes the debt ratio only in the year in question. 6/ Historical averages are generally derived over the past 10 years, subject to data availability, whereas projections averages are over the first year of projection and the next 10 years. 13 Table 3. Guyana: Sensitivity Analysis for Key Indicators of Public and Publicly Guaranteed External Debt, 2019−2029 (In percent) Projections 1/ 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 PV of debt-to GDP ratio Baseline 22 12 12 11 9 8 6 5 4 4 3 A. Alternative Scenarios A1. Key variables at their historical averages in 2019-2029 2/ 22 25 27 30 33 36 37 40 43 45 46 0 #N/A #N/A #N/A #N/A #N/A #N/A #N/A #N/A #N/A #N/A #N/A B. Bound Tests B1. Real GDP growth 22 42 42 37 30 29 20 17 15 13 11 B2. Primary balance 22 13 13 11 9 9 7 6 5 4 4 B3. Exports 22 28 44 37 30 28 20 18 16 15 13 B4. Other flows 3/ 22 23 31 27 21 20 14 13 12 10 9 B5. Depreciation 22 15 14 12 10 10 7 6 5 4 4 B6. Combination of B1-B5 22 145 183 155 123 117 84 75 68 62 56 C. Tailored Tests C1. Combined contingent liabilities 22 13 13 11 9 9 6 6 5 4 4 C2. Natural disaster n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. C3. Commodity price 22 13 14 13 11 11 8 7 6 5 5 C4. Market Financing n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. Threshold 40 40 40 40 40 40 40 40 40 40 40 PV of debt-to-exports ratio Baseline 56 24 24 17 12 12 11 11 11 11 11 A. Alternative Scenarios A1. Key variables at their historical averages in 2019-2029 2/ 56 49 53 48 48 53 70 91 114 134 158 0 56 51 58 49 45 46 55 59 59 55 51 B. Bound Tests B1. Real GDP growth 56 24 24 17 12 12 11 11 11 11 11 B2. Primary balance 56 25 25 18 14 14 13 13 13 13 13 B3. Exports 56 148 277 190 138 133 124 131 138 140 148 B4. Other flows 3/ 56 44 62 42 31 30 28 29 30 31 32 B5. Depreciation 56 24 22 16 12 12 10 11 10 10 10 B6. Combination of B1-B5 56 200 96 186 135 130 121 129 136 138 147 C. Tailored Tests C1. Combined contingent liabilities 56 25 25 18 13 13 12 13 13 12 13 C2. Natural disaster n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. C3. Commodity price 56 27 29 20 15 16 15 16 16 16 17 C4. Market Financing n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. Threshold 180 180 180 180 180 180 180 180 180 180 180 Debt service-to-exports ratio Baseline 5 2 2 1 1 1 1 1 1 1 1 A. Alternative Scenarios A1. Key variables at their historical averages in 2019-2029 2/ 5 3 3 3 2 3 3 4 5 6 7 0 5 3 4 3 3 3 4 6 8 9 11 B. Bound Tests B1. Real GDP growth 5 2 2 1 1 1 1 1 1 1 1 B2. Primary balance 5 2 2 1 1 1 1 1 1 1 1 B3. Exports 5 5 8 7 5 5 5 5 5 6 6 B4. Other flows 3/ 5 2 2 2 1 1 1 1 1 1 2 B5. Depreciation 5 2 2 1 1 1 1 1 1 1 1 B6. Combination of B1-B5 5 4 9 7 5 5 4 5 5 5 6 C. Tailored Tests C1. Combined contingent liabilities 5 2 2 1 1 1 1 1 1 1 1 C2. Natural disaster n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. C3. Commodity price 5 2 2 1 1 1 1 1 1 1 1 C4. Market Financing n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. Threshold 15 15 15 15 15 15 15 15 15 15 15 Debt service-to-revenue ratio Baseline 6 5 5 4 4 3 3 2 1 1 1 A. Alternative Scenarios A1. Key variables at their historical averages in 2019-2029 2/ 6 9 9 10 11 10 12 8 7 8 8 0 6 9 10 11 13 11 13 11 12 12 12 B. Bound Tests B1. Real GDP growth 6 16 16 15 13 11 10 6 5 5 5 B2. Primary balance 6 5 5 4 4 3 3 2 2 1 1 B3. Exports 6 5 7 8 7 6 5 3 3 2 2 B4. Other flows 3/ 6 5 6 7 6 5 4 2 2 2 2 B5. Depreciation 6 6 6 5 5 4 3 2 2 2 2 B6. Combination of B1-B5 6 18 31 33 29 24 20 12 10 9 9 C. Tailored Tests C1. Combined contingent liabilities 6 5 5 4 4 3 3 2 1 1 1 C2. Natural disaster n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. C3. Commodity price 6 5 5 5 4 4 3 2 2 2 1 C4. Market Financing n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. Threshold 18 18 18 18 18 18 18 18 18 18 18 Sources: Country authorities; and staff estimates and projections. 1/ A bold value indicates a breach of the threshold. 2/ Variables include real GDP growth, GDP deflator (in U.S. dollar terms), non-interest current account in percent of GDP, and non-debt creating flows. 3/ Includes official and private transfers and FDI. 14 Table 4. Guyana: Sensitivity Analysis for Key Indicators of Public Debt, 2019 −2029 Projections 1/ 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 PV of Debt-to-GDP Ratio Baseline 46 24 22 18 13 12 8 7 7 6 6 A. Alternative Scenarios A1. Key variables at their historical averages in 2019-2029 2/ 46 44 44 43 41 41 41 42 42 42 41 0 #N/A #N/A #N/A #N/A #N/A #N/A #N/A #N/A #N/A #N/A #N/A B. Bound Tests B1. Real GDP growth 46 122 160 164 158 180 182 211 237 261 283 B2. Primary balance 46 27 29 23 17 15 11 10 9 8 7 B3. Exports 46 38 53 43 33 31 22 20 18 17 15 B4. Other flows 3/ 46 34 41 34 26 24 17 15 14 13 12 B5. Depreciation 46 25 22 17 12 10 7 5 4 2 1 B6. Combination of B1-B5 46 44 41 43 43 49 49 58 64 70 75 C. Tailored Tests C1. Combined contingent liabilities 46 28 26 21 15 14 10 9 8 7 7 C2. Natural disaster n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. C3. Commodity price 46 68 107 122 126 152 160 192 219 245 268 C4. Market Financing n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. TOTAL public debt benchmark 55 55 55 55 55 55 55 55 55 55 55 PV of Debt-to-Revenue Ratio Baseline 156 123 116 100 83 68 57 32 27 24 21 A. Alternative Scenarios A1. Key variables at their historical averages in 2019-2029 2/ 156 228 225 240 256 237 279 181 165 160 159 0 69 83 70 59 48 38 29 30 31 32 33 B. Bound Tests B1. Real GDP growth 156 599 789 916 965 1,052 1,235 923 939 1,005 1,086 B2. Primary balance 156 142 151 129 105 87 75 43 34 30 27 B3. Exports 156 201 276 247 210 179 150 87 72 65 59 B4. Other flows 3/ 156 178 217 193 163 138 116 67 56 50 45 B5. Depreciation 156 133 117 99 77 58 45 22 14 8 4 B6. Combination of B1-B5 156 224 213 246 268 289 333 251 255 270 287 C. Tailored Tests C1. Combined contingent liabilities 156 149 138 118 97 80 68 39 32 28 25 C2. Natural disaster n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. C3. Commodity price 156 375 587 736 826 906 1,107 838 868 941 1,027 C4. Market Financing n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. Debt Service-to-Revenue Ratio Baseline 69 66 58 51 38 28 19 12 11 10 10 A. Alternative Scenarios A1. Key variables at their historical averages in 2019-2029 2/ 69 118 106 109 99 77 71 48 45 45 47 0 69 83 70 59 48 38 29 30 31 32 33 B. Bound Tests B1. Real GDP growth 69 209 373 496 542 606 782 534 547 598 657 B2. Primary balance 69 66 74 78 58 43 34 19 16 14 13 B3. Exports 69 66 60 55 41 30 21 13 12 11 11 B4. Other flows 3/ 69 66 60 53 40 29 20 13 11 11 11 B5. Depreciation 69 62 55 44 36 26 18 11 10 9 9 B6. Combination of B1-B5 69 111 100 88 119 145 194 142 153 173 194 C. Tailored Tests C1. Combined contingent liabilities 69 66 79 67 50 37 28 16 14 13 12 C2. Natural disaster n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. C3. Commodity price 69 69 264 411 486 553 745 502 517 568 628 C4. Market Financing n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. Sources: Country authorities; and staff estimates and projections. 1/ A bold value indicates a breach of the benchmark. 2/ Variables include real GDP growth, GDP deflator and primary deficit in percent of GDP. 3/ Includes official and private transfers and FDI. 15 Figure 1. Guyana: Indicators of Public and Publicly Guaranteed External Debt under Alternatives Scenarios, 2019−2029 PV of debt-to GDP ratio PV of debt-to-exports ratio 200 300 180 Most extreme shock: Combination 250 160 140 Most extreme shock: Exports 200 120 100 150 80 60 100 40 50 20 0 0 2019 2021 2023 2025 2027 2029 2019 2021 2023 2025 2027 2029 Debt service-to-exports ratio Debt service-to-revenue ratio 16 35 14 30 Most extreme shock: Combination 12 Most extreme shock: Combination 25 10 20 8 15 6 10 4 2 5 0 0 2019 2021 2023 2025 2027 2029 2019 2021 2023 2025 2027 2029 Baseline Historical scenario Most extreme shock 1/ Threshold Borrowing assumptions on additional financing needs resulting from the stress Customization of Default Settings tests* Size Interactions Default User defined Shares of marginal debt No No External PPG MLT debt 100% Tailored Stress Terms of marginal debt Combined CL No Avg. nominal interest rate on new borrowing in USD 1.2% 1.2% Natural disaster n.a. n.a. USD Discount rate 5.0% 5.0% Commodity price 2/ No No Avg. maturity (incl. grace period) 26 36 Market financing n.a. n.a. Avg. grace period 5 15 Note: "Yes" indicates any change to the size or * Note: All the additional financing needs generated by the shocks under the stress tests interactions of the default settings for the stress tests. are assumed to be covered by PPG external MLT debt in the external DSA. Default terms "n.a." indicates that the stress test does not apply. of marginal debt are based on baseline 10-year projections. Sources: Country authorities; and staff estimates and projections. 1/ The most extreme stress test is the test that yields the highest ratio in or before 2029. The stress test with a one-off breach is also presented (if any), while the one-off breach is deemed away for mechanical signals. When a stress test with a one-off breach happens to be the most exterme shock even after disregarding the one-off breach, only that stress test (with a one-off breach) would be presented. 2/ The magnitude of shocks used for the commodity price shock stress test are based on the commodity prices outlook prepared by the IMF research department. 16 Figure 2. Guyana: Indicators of Public Debt Under Alternative Scenarios, 2019 −2029 PV of Debt-to-GDP Ratio 300 250 200 150 100 Most extreme shock: Growth 50 0 2019 2021 2023 2025 2027 2029 PV of Debt-to-Revenue Ratio Debt Service-to-Revenue Ratio 1400 900 800 1200 700 1000 600 800 500 600 400 300 400 Most extreme shock: Growth 200 Most extreme shock: Growth 200 100 0 0 2019 2021 2023 2025 2027 2029 2019 2021 2023 2025 2027 2029 Baseline Most extreme shock 1/ TOTAL public debt benchmark Historical scenario Borrowing assumptions on additional financing needs resulting from the Default User defined stress tests* Shares of marginal debt External PPG medium and long-term 10% 10% Domestic medium and long-term 0% 0% Domestic short-term 90% 90% Terms of marginal debt External MLT debt Avg. nominal interest rate on new borrowing in USD 1.2% 1.2% Avg. maturity (incl. grace period) 26 26 Avg. grace period 5 5 Domestic MLT debt Avg. real interest rate on new borrowing 0.0% 0.0% Avg. maturity (incl. grace period) 1 1 Avg. grace period 0 0 Domestic short-term debt Avg. real interest rate -6.9% -6.9% * Note: The public DSA allows for domestic financing to cover the additional financing needs generated by the shocks under the stress tests in the public DSA. Default terms of marginal debt are based on baseline 10-year projections. Sources: Country authorities; and staff estimates and projections. 1/ The most extreme stress test is the test that yields the highest ratio in or before 2029. The stress test with a one-off breach is also presented (if any), while the one-off breach is deemed away for mechanical signals. When a stress test with a one-off breach happens to be the most exterme shock even after disregarding the one-off breach, only that stress test (with a one-off breach) would be presented. 17 Figure 3. Guyana: Drivers of Debt Dynamics - Baseline Scenario External Debt Gross Nominal PPG External Debt Debt-creating flows Unexpected Changes in Debt 1/ (in percent of GDP; DSA vintages) (percent of GDP) (past 5 years, percent of GDP) 40 25 Current DSA 80 Residual Previous DSA 20 proj . 70 DSA-2013 20 15 Price and 60 exchange 10 Interquartile rate range (25-75) 50 0 5 Real GDP growt h Change in PPG 0 debt 3/ 40 -20 Nominal -5 30 interest rate Median -1 0 20 -40 Current -1 5 10 account + FDI -2 0 -60 Contribution of 0 Change in 5-year 5-year -2 5 unexpected 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 PPG debt 3/ Distribution across LICs 2/ historical projected changes change change Public debt Gross Nominal Public Debt Debt-creating flows Unexpected Changes in Debt 1/ (in percent of GDP; DSA vintages) (percent of GDP) (past 5 years, percent of GDP) 20 Current DSA Residu al 20 Previous DSA proj. DSA-2013 80 15 Other debt 0 creatin g flows 70 Interquartile range (25-75) 60 Real 10 Exchange 50 rate -20 Change in debt depreciation 5 40 Real GDP growth 30 -40 Median 0 Real interest 20 rate 10 -5 Primary deficit -60 0 5-year 5-year Contribution of 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 unexpected Distribution across LICs 2/ historical projected -10 changes change change 1/ Difference betw een anticipated and actual contributions on debt ratios. 2/ Distribution across LICs for w hich LIC DSAs w ere produced. 3/ Given the relatively low private external debt for average low -income countries, a ppt change in PPG external debt should be largely explained by the drivers of the external debt dynamics equation. 18 Figure 4. Guyana: Realism Tools 3-Year Adjustment in Primary Balance Fiscal Adjustment and Possible Growth Paths 1/ (Percentage points of GDP) 90 5 14 Distribution 1/ 80 4 12 Projected 3-yr adjustment 3-year PB adjustment greater 70 In percentage points of GDP 10 than 2.5 percentage points 3 60 of GDP in approx. top quartile In percent 2 8 50 40 6 1 30 4 0 20 2 -1 10 0 0 -2 more 0.0 0.5 1.0 1.5 2.0 2.5 3.0 3.5 4.0 4.5 5.0 5.5 6.0 6.5 7.0 7.5 8.0 -4.5 -4.0 -3.5 -3.0 -2.5 -2.0 -1.5 -1.0 -0.5 2013 2014 2015 2016 2017 2018 2019 2020 Baseline Multiplier = 0.2 Multiplier = 0.4 Multiplier = 0.6 Multiplier = 0.8 1/ Bars refer to annual projected fiscal adjustment (right-hand side scale) and lines show 1/ Data cover Fund-supported programs for LICs (excluding emergency financing) approved since possible real GDP growth paths under different fiscal multipliers (left-hand side scale). 1990. The size of 3-year adjustment from program inception is found on the horizontal axis; the percent of sample is found on the vertical axis. Public and Private Investment Rates Contribution to Real GDP growth (percent of GDP) (percent, 5-year average) 26 30 24 22 25 20 18 20 16 14 15 12 10 10 8 6 5 4 2 0 0 Historical Projected (Prev. DSA) Projected (Curr. DSA) 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 Gov. Invest. - Prev. DSA Gov. Invest. - Curr. DSA Contribution of other factors Priv. Invest. - Prev. DSA Priv. Invest. - Curr. DSA Contribution of government capital 19 Figure 5. Guyana: Qualification of the Moderate Category, 2019 −2029 1/ PV of debt-to GDP ratio PV of debt-to-exports ratio 45 200 40 180 Threshold 35 160 140 (1-X)*Threshold 30 120 25 (1-Y)*&Threshold 100 20 80 15 60 10 40 5 20 0 0 2019 2021 2023 2025 2027 2029 2019 2021 2023 2025 2027 2029 Debt service-to-exports ratio Debt service-to-revenue ratio 16 20 18 14 16 12 14 10 12 8 10 8 6 6 4 4 2 2 0 0 2019 2021 2023 2025 2027 2029 2019 2021 2023 2025 2027 2029 Some Substantial Threshold Baseline Limited space space space Sources: Country authorities; and staff estimates and projections. 1/ For the PV debt/GDP and PV debt/exports thresholds, x is 20 percent and y is 40 percent. For debt service/Exports and debt service/revenue thresholds, x is 12 percent and y is 35 percent. 20