Economic adjustment programmes and the export sector of Guyana 1962-83.
Efforts to diversify the colonial economy in Guyana after 1966 were
unsuccessful. With the oil shock of 1973, and falling commodity prices
after 1975, the economy became unstable. This instability is expressed
in large balance of payments deficits, deficit financing, lower export
levels and a rise in inflation. Policies to restore economic stability
involved the implementation of stabilisation and structural adjustment
programmes between 1977-84, with the participation of the IMF and
The objective is to investigate factors affecting economic
stabilisation of both domestic prices and the balance of payments Emphasis is placed on the study of aggregate supply, which examines .
the behaviour of exports and inflation. These two factors are linked
to the balance of payments. The assumption is made that exports are
influenced by supply variables, such as domestic output, international
prices, labour costs and movements in the exchange rate.
The analysis of exports reveals that their response is delayed and
inelastic to changes in price and other factors. This is consistent with
estimates for primary commodity exports from small low income
countries. The partial adjustment/adaptive expectations model
provides satisfactory evidence for the behaviour of commodity exports,
except in the case of sugar. For sugar an export supply function is
estimated. The analysis of inflation reveals that external influences
are more dominant than domestic factors in the inflationary process.
The results suggest that the supply response for all commodities
is slow in the short run, but may be faster in the long run. This
implies that the implementation of appropriate stabilisation policies may
be able to improve the deficit in the balance of payments, but that
lags may exist in the adjustment process. The constraining factors
would be increased labour costs in the export sector and higher import
prices for industrial inputs.