…as Guyana’s total debt in 2016 grew to $330B
By Samuel Sukhnandan
As Guyana’s debt continues to rise, there have been some concerns in several quarters of society that the coalition Government’s spending is spiralling out of control and should be better managed, or the country could be faced with insurmountable challenges in years to come.
Russia-trained economist and political commentator Ramon Gaskin is one of those persons who believe that the current Administration needs to do a better job at handling its financial affairs. Although debt has been an issue for many years, Gaskin considers this Government to be responsible for adding to the burden.
“This Government loves to borrow all the time. They love to borrow everything. They should just stop it. The problem is not the revenue (collection), it’s the expenditure,” the outspoken economist told this publication.
According to him, one of the best examples to show the David Granger-led Government has to take blame is the massive increase of the Disciplined Services payroll from $4.2 billion to $7 billion.
Gaskin noted that the increase was close to 60 per cent and included all the contract workers who have been employed to work within or advise on the Disciplined Services.
While the coalition Government has broadened its revenue collection base by implementing several new measures since taking office, the economist said that focus now needed to be placed on broadening this base, to include royalties for Guyana’s natural resources, particularly bauxite.
“We have to start to get royalties that are being shipped out of Guyana. There is no country in the world that allows you to ship out natural resources or non-renewable without charging you royalties,” he advised, noting that locals were already overburdened by heavy taxation.
According to Gaskin if certain measures were not implemented soon, Guyana’s debt could spiral out of control and this could have a negative impact on the local economy. He also noted that Guyana’s debt has been increasing steadily over the years, at both the domestic and external levels.
“It is easier to service the debt now, because the economy is much bigger. But we are going back to the phase in 1992 where the per capita debt hasn’t changed much over the years,” he explained. He said 75 to 80 per cent of the old debt from 1992 which is about US$1.9 billion has been written off.
“So, although we’ve had many debts written off, we keep incurring more debt and adding to it…We borrow for everything. You want to do something, we go to the IDB (Inter-American Development Bank) and they give you money …And we are creeping back up to the US$2 billion mark we had in 1992,” Gaskin warned.
The Finance Ministry’s recent Public Debt Annual Report has highlighted that since 2015, there has been a 4.1 per cent rise in Guyana’s indebtedness to creditors. The report details that Guyana’s total debt, inclusive of external and domestic debt, increased to $330 billion as of December 2016. The Ministry attributed this to disbursements from the Export-Import Bank of China towards the Cheddi Jagan International Airport (CJIA) expansion project, as well as monies from multilateral creditors.
A breakdown of the figures shows that total external debt amounted to $240 billion, 72.6 per cent of the total public debt. On the other hand, domestic debt stood at $90.6 billion, or 27.4 per cent of the total. Multilateral creditors continued to be the predominant creditor category.
In 2012, the public external debt was $277.8 billion, but by early 2015, that had been reduced to $236 billion. In similar manner, the domestic debt had been reduced from $93.4 billion in 2012 to $81.6 billion in 2015 before a sudden surge in the figures after the new Government took office.
The report noted that Guyana’s four main external creditors are the IDB; the Caribbean Development Bank (CDB); the State-owned Export-Import Bank of China (China EXIM Bank) and Venezuela’s State-owned oil company (PDVSA).
Together, they constitute some 77.7 per cent of Guyana’s public external debt stock, as at end-December 2016, with the IDB the most dominant creditor. According to the report, the IDB has an average share of 42.0 per cent of the debt portfolio.
The CDB is Guyana’s second largest creditor, accounting for 12.6 per cent of total public external debt. The Export-Import Bank of China follows closely with a 12.5 per cent share of external debt, while Venezuela’s PDVSA accounted for 10.6 per cent. Of significant note is the fact PDVSA has recently been declared to be in default of its debts by a trade group in the US.