Guyana has gotten a US$35 million ‘Development Policy’ line of credit from the World Bank, but with the country already owing billions of dollars to external creditors, questions are being raised about exactly what Government is doing about lowering the debt.
According to Finance Minister Winston Jordan, who was recently interviewed on the sidelines of Parliament, Guyana’s public debt rate is actually nothing to worry about. Jordan contended that as the economy grows, it could actually take on more debt.
“You must stop looking at debt in absolute terms. Debt must be looked at in relative terms. You look at debt to GDP (Gross Domestic Product), debt to revenue or something. As the economy grows, it can take on more debt. So it’s not a question of the absolute amount of the debt. It’s the relative amount,” Jordan told this media group.
Pressed on exactly what the Government is doing to bring down the debt, Jordan would only allude to the international threshold of debt to GDP. The Finance Minister did not mention any steps Government was taking to mitigate the debt rate.
“The Government… the external debt at the moment is well below 60 per cent of GDP. It’s still below 50 per cent of GDP. So not bad… The international threshold… is 60 per cent. So don’t even bother…”
The World Bank group approved the US$35 million Development Policy Credit to support Guyana’s efforts to strengthen the financial sector. The money will also go towards improving fiscal management to better prepare the country to benefit from its newly-discovered oil and gas reserves and transform its oil wealth into human capital.
But during a press conference on Tuesday, Opposition Leader Dr Bharrat Jagdeo inquired as to the purpose of the loan.
Making a point that spending millions of US dollars and bringing in foreign experts for this purpose was unnecessary, Jagdeo, an economist, challenged the Government to provide him with a legislative drafter and he would develop fiscal policies for the oil sector within a month.
The Public Debt Annual Report released by the Finance Ministry last year had 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, increased to $330 billion as of December 2016.
But who does Guyana owe all this money to? The report notes that Guyana’s four main external creditors are the Inter-American Development Bank (IDB), the Caribbean Development Bank (CDB), the State-owned Export-Import Bank of China (China EXIM Bank) and Venezuela 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 behind the CDB with a 12.5 per cent share of external debt, while Venezuela’s PDVSA accounted for 10.6 per cent. Important to note is PDVSA has recently been declared to be in default of its debts by a Trade group in the US.
There is some amount of consolation, however, with the report noting that Guyana’s total debt to GDP ratio declined by approximately two per cent – from 48.4 per cent to 46.6 per cent. This is an indicator of how well a country, in this case Guyana, can repay its debts through its GDP without incurring more. (Jarryl Bryan)