External debts have shown increases for 2018, as Guyana’s indebtedness to various international institutions continues to grow. This is contained in the Bank of Guyana’s annual report, which was recently released.
The report states that Government’s total public debt increased by 1.5 per cent in 2018. The report notes that this is an increase that represents 43.9 per cent of the Gross Domestic Product (GDP). In the case of external debt, there was an increase to US$1.3 billion.
The increase to external debt was 5.5 per cent and accounted for 33.9 per cent of GDP. According to the report, higher disbursements primarily from the International Development Association (IDA) and the Inter-American Development Bank (IADB) for project financing were chiefly responsible for this increase.
The report further explains that IDA and IADB’s disbursements were mostly targeting citizen security strengthening, sanitation improvement, economic diversification, education sector improvement and fiscal stability.
“Obligations to multilateral creditors, which accounted for 58.5 per cent of total external debt, increased by 8.6 per cent or US$62 million to US$788 million,” the report states. “Liabilities to the IADB increased by 4.3 per cent to US$525 million, reflecting a change in the debt stock of US$22 million during 2018.”
“Indebtedness to the IDA expanded by 112.2 per cent or US$40 million to US$75 million. Commitments to the ‘Other’ category of multilateral creditors rose by 4.5 per cent to US$38 million. In contrast, obligations to the Caribbean Development Bank (CDB) decreased slightly by 0.5 per cent or US$1 million to US$150 million.”
According to the report, total bilateral debt obligations which represented 37.2 per cent of total external debt increased by 1.5 per cent to US$487 million. Specifically, Guyana’s debt to the Export Import Bank of China (Exim) increased by 10.7 per cent or US$19 million to US$201 million.
“Liabilities to Kuwait and Libya rose by 2.9 per cent and 0.7 per cent to US$80 million and US$44 million respectively. Conversely, obligations to Venezuela, the Exim Bank of India and Trinidad and Tobago declined by 4.7 per cent, 6.9 per cent and 64.4 per cent to US$115 million, US$16 million and US$4 million respectively.”
Meanwhile, external debt service payments increased by 27.7 per cent to US$78 million from US$61 million in 2017. This, the report says, represented 5.1 per cent of export earnings and 7.5 per cent of Central Government’s current revenue.
“Principal and interest payments amounted to US$55 million and US$23 million respectively. Payments to multilateral creditors rose by 14.2 per cent to US$40 million, and represented 51.3 per cent of total external debt service,” the report says.
The US$50.2 million East Coast Road Expansion project is one project for which monies had to be disbursed from the Exim Bank of China. This project has two components. One features a four-lane expansion of the road from Better Hope to Annandale. On the other hand, the other caters for an upgrade to the existing two-lane road from Annandale to Belfield.
Guyana had received a US$45.3 million concessional loan from the China EXIM (Export-Import) Bank to finance the road project, and that agreement was signed in January last year.
Initially, the People’s Progressive Party/Civic Government had tried to secure financing for the road expansion project, but the money was not readily available.
Hence, the then Administration decided to use local funds for preliminary works, while it awaited the release of funds from the Chinese to complete the works.
The preliminary works for the four-lane upgrade were completed at the end of 2014. With the China EXIM Bank putting up most of the finances for the road expansion, Guyana had awarded the contract to China Railway First Group for some US$42.7 million. The Chinese construction company reportedly put in the lowest bid of US$46.994 million.
In light of the increase in Guyana’s current account balance cause by a drop in exports which brings in foreign exchange, the servicing of this increased debt load will become problematical since it must be done with foreign exchange. It was for this reason the PPP had kept sugar going since it generates foreign exchange.