The International Monetary Fund (IMF) has revealed that non-performing loans in Guyana are on the decline, with more people being able to meet their financial obligations with local lending institutions – consequences of an “improving economy”.
This observation was made by IMF staff in their concluding statement from their 2022 Article IV mission. According to the IMF, non-performing loans declined from 10.8 per cent at the 2020 yearend to 6.75 per cent in March 2022. This is on the basis of a financial sector being “well capitalised and stable,” the IMF described.
“Macro-financial risks are well monitored with eight indicators, including credit to GDP measures and the systemic risk matrix. The capital to risk-adjusted assets ratio – at about 29 per cent – is much higher than the regulatory minimum of 8 per cent,” the financial institution noted.
“The Bank of Guyana (BoG) has advanced in major reform areas, specifically in (i) revising the guidelines of asset quality reviews (including revised credit classification and provisioning for the loss category) and (ii) implementing some pillars of Basel II and III,” the IMF further explained.
It was also noted in the concluding statement that the Government’s goals to transform the economy and address Guyana’s developmental needs in an inclusive way were strongly supported by the Fund.
“Staff strongly support the authorities’ efforts to reduce electricity costs, improve transport infrastructure, diversify the economy, improve access to and quality of social services, and advance more broadly towards the Sustainable Development Goals,” the statement read.
When President Dr Irfaan Ali took office in August 2020, he had met a situation where non-performing loans in the housing sector had increased by 34 per cent in 2019 when compared to the 2018 level.
One of the President’s initial policies had been to arrange a moratorium on mortgage payments until the end of 2020. This came about after the President had initiated talks with the Bank of Guyana and the Guyana Bankers’ Association, on measures that would ensure the average Guyanese could remain solvent even if they are unable to pay their bank loans due to the pressures brought on by the COVID-19 pandemic.
Besides the Government reaching the agreement with the local banking sector to extend the moratorium on loan payments, it had also been agreed to cut interest rates.
This meant that customers with mortgages and other loans would be spared the financial burden of servicing these loans during the pandemic. In addition, their loans would not be classified as non-performing, ensuring that they do not default.
The Bank of Guyana’s 2019 report had described the rise in non-performing loans as a major threat to the expanding housing market.
“Total housing market loans expanded by 3.8 per cent as the market rebounded towards its long-term trend. However, non-performing housing loans also increased by 34 per cent over the 2018 level and remains the main threat to heat up the housing market,” the report had said, though it noted that the housing market still had an overall lower level of stress compared to 2018.
The report had also noted that total credit expanded by 8.5 per cent above the December 2018 level, which it noted is the largest annual increase spanning the previous four years. Besides housing loans, other private sector loans also added to the total credit figure.
Overall, the Bank of Guyana had reported that the level of non-performing loans deteriorated by 1.3 per cent and was recorded at $30.1 billion at the end of 2019, while total loans grew by 8.2 per cent.