Monday, 20 September 2010

GUYANA: Constrained dependence on official external financing

Role of official external financing

As a rule, small relatively poor open economies that are highly dependent on the production and export sale of low-value added primary products and/or other natural resources-based products that are not presently enjoying a secular boom in world commodities markets, end up in a situation where debt-led and capital inflows-led processes become the key drivers of economic growth. Guyana and most of the wider Caricom represent classic examples of these processes at work. However, to be in a position to cope with exogenous external economic shocks, the authorities in such countries are constrained to rely on official external financing as both a lender of first and last resort. This is needed to provide cover against the pitfalls of debt and capital inflows-led growth. Read more

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