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 World Bank. 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.