THE GUYANA ECONOMY

With a per capita gross domestic product of only $766 in 1996, Guyana is one of the poorest countries in the western hemisphere. The economy made dramatic progress after President Hugh Desmond Hoyte's 1989 economic recovery program (ERP). As a result of the ERP, Guyana's GDP increased 6% in 1991 after 15 years of decline. Growth was consistently above 6% when it dipped too 56.1%. The Government reported that the economy grew at a rate of 7.9% in 1996, and 6.3% in 1997. It is estimated that the 1998 growth will fall to 4.3%.

Development in conjunction with the World Bank and International Monetary Fund (IMF), the ERP significantly reduced the government's role in the economy; encouraged foreign investment; enabled the government to clear all its arrears on loan repayments to foreign governments and multilateral banks; and brought about the sale of 15 of the 41 state-owned businesses.

The Telephone company and assets in the timber, rice, and fishing industries were divested. International corporations were hired to managed the huge state owned sugar industry, (GUYSUCO), and the management of the largest state bauxite mining company, LINMINE, was contracted to an Australian firm, MINPROC. Renolds, an American company was granted permission to open a Bauxite company in the Berbice region, and two Canadian companies were permitted to develop the largest open-pit gold mine in Latin America. The mining operation is known as Omai Gold Mines Limited.

Most price controls were removed, the laws affecting mining and oil exploration were improved, and an investment policy receptive to foreign investment was announced. Tax reforms designed to promote exports and agricultural production in the private sector were enacted.

Agriculture and mining are Guyana's most important economic activities, with sugar, bauxite, rice and gold accounting for 75% to 80% export earnings. Ocean shrimp accounted for another 15%, in 1990, but declining catches reduced shrimp exports in 1994. Other exports include timber, diamond, garments, and locally assembled stoves and refrigerators. The value of these other exports is increasing.

Since 1986, Guyana has received its entire wheat supply from the United States on concessional terms under the PL480 Food for Peace program. It is now on a grant basis. The Guyanese currency generated by the sale of the wheat is used for purposes jointly agreed upon by the U.S. and Guyana governments.

Guyana's external debt of 2.1 billion US$ was more than four times its GDP. A Paris Club rescheduling under the Naples terms has reduced the debt to 1.5 billion. Guyana hopes to benefit from the newly proposed IMF and World Bank assistance programs but it is unclear when Guyana will qualify. Debt service payment obligations were equal to 40%b of its earnings from exports. About half is owed to the multilateral development banks and 20% to its neighbor, Trinidad and Tobago, which until 1986 was its principal supplier of petroleum products. Almost all debt to the U.S. Government has been forgiven. Net international reserves had improved too US$246 million by the end of 1993. Guyana's extremely high debt burden to foreign creditors has meant limited availability of foreign exchange and reduced capacity to import necessary raw materials, spare parts, and equipment, thereby further reducing production. The decline of production has increased unemployment. Although no reliable statistics exist, combined unemployment and underemployment are estimated to about 30%. Emigration, principally to the U.S. and Canada, is substantial.

After years of state-dominated economy, the mechanisms for private investment, domestic or foreign, are still evolving. The shift from state-controlled economy to a primarily free market system began under the then President, Mr. Hugh Desmond Hoyte's administration, and was continued by the proceeding president, the late Dr. Cheddi B. Jagan. The new Jagan. administration recognized the need for foreign investment to create jobs, enhance technical capabilities, and generated goods for export.

The foreign exchange market was fully liberalized in 1991, and the Guyana Dollar is now freely traded without restrictions. The rate of exchange is subject to change on a daily basis, however the dollar continues to slide and is trading at an approximate rate of 160 to 1US$.

In 1994, the real Gross Domestic Product (GDP) of Guyana grew by 8%, the highest recorded growth performance in the Caribbean Community (CARICOM), and the fifth consecutive year that the economy has achieved growth in excess of 6 percent.

The multilateral financial agencies and bilateral donors are satisfied with Guyana's economic progress, and in 1993, at a meeting organized by the World Bank in January of that year, they pledged to raise over US$320 million to support developmental projects to the year 1996.