IDB warns region about ‘excessive’ borrowing - as

Guyana’s public debt increases by 16% last year

Amid growing concerns reduction…”theIDBsaid. percent at end-2021 to 24.6 standsatsome20percent.In here about the country’s According to the report, percent at end-2022. This drawing reference to that ballooning public debt, the governments can bring outcome is testament to our country, the former Auditor I n t e r - A m e r i c a n down their debt levels by judicious contracting of General pointed out that Sri Development Bank (IDB) in improving spending development financing, at a Lanka is now in a state of a new report has cautioned efficiency,expandingthetax level well within Guyana’s severe economic crisis after L a t i n A m e r i c a a n d base, and seeking wider debt carrying capacity,” y e a r s o f e c o n o m i c Caribbean (LAC) countries reforms to enhance fiscal Singh told the National mismanagement coupled against ‘excessive’ balancesandboostgrowth. Assembly with the impacts from the borrowing and urged The IDB said that there He added that at the end COVID-19 pandemic In governments to bring their aremanyreasonswhypublic of 2022, Guyana’s external 2020, Guyana had six loans debts down to more prudent debt levels should be lower debt totalled US$1,571.9M, with the Export Import levels. than they currently are, representing a 12.9 percent (EXIM) Bank of China Finance Minister, Dr highlighting that there are increase compared to end- totalling US$240 451M Ashni Singh announced two several ways to reduce that 2021, mainly as a result of This represented 17 5 weeks ago that the country’s debt. positive net flows from both percent of the country’s total public debt stood at “An analysis of past debt bilateral and multilateral external loan portfolio US$3,654.9M an increase reduction episodes around creditors. according to Goolsarran. To by 16.9 percent from last the world points to countries Meanwhile, domestic this end, the former AG year Almost all of its that have reduced debt-to- d e b t a m o u n t e d t o wrote “Last week, the recently announced public GDP ratios by increasing US$2,080.6M at end-2022, Authorities announced the infrastructural projects growth and improving fiscal up from US$1,731.5M at signing of two loan government has been balances,”itwasstated. end-2021. This increase is agreements with the China borrowing to finance them

Notably, it was disclosed attributed to Government’s (Bank) in the sums of despite earning over US$1B that the region has more issuance of new fiscal US$192M and US$172 in the oil account for last cases in which significant treasury bills. Total public million for the East Coast year debt reductions have been debt service rose from Demerara road expansion

In its report titled, achieved through low real US$121 9M in 2021 to project and the construction ‘Dealing with Debt – Less interest rates or higher US$150.2M in 2022. This of the New Demerara River Risk for More Growth in the inflation,althoughtheyhave increase was driven Bridgerespectively Latin America and the typically not been as smooth primarily by domestic debt Caribbean’ the IDB orresultedinasgoodgrowth service payments, which disclosed that debt has risen performance. totalledUS$65Min2022,up and stands at some US$5.8T

Meanwhile, delivering from US$41 2M in the which is 117 percent of the his budget presentation, Dr preceding year The growth Gross Domestic Product Singh sought to allay the of domestic debt service (GDP)intheregion. fears of Guyanese by payments was, in turn,

“Given the dangers of claiming that Government l a rg e l y d u e t o t h e excessive debt, the current has “maintained its long- commencement of principal situation in Latin America standing practice of prudent repayments on debentures and the Caribbean is debtmanagement.” issued in 2021 to securitise worrisome,”theIDBsaid. He argued that Guyana an inherited overdraft at the IDB said public debt continues to enjoy strong Central Bank. Compared serves a critical role for d e b t s u s t a i n a b i l i t y with the previous year, countries to pursue public fundamentals, “even as we external debt service investment projects, expand investments in payments increased by 5.5 implement countercyclical public infrastructure, social percent to US$85 2M in policies,andprovidesupport services and other initiatives 2022, mainly on account of to economies in the face of geared at ensuring improved higher principal and interest negative shocks. However, standards of living for all payments to multilateral theIDBwarnedthatifpublic Guyanese This delicate creditors. debt becomes too large or is balancing act hinges on our Only recently former not managed with sufficient time-honoured debt Auditor General, Anand caution, interest costs may management strategy of Goolsarran warned that balloon, growth prospects contracting development while Guyana’s mediummaysuffer,andinthelimit,a financing and meeting debt term economic prospects costly debt crisis may be service obligations at the appear very favourable due provoked. lowest cost, within prudent to anticipated oil revenues,

It was stated that public riskparameters.“ g o v e r n m e n t s h o u l d debt had risen before the To t h i s e n d , h e nevertheless exercise pandemic, with sudden debt announced that total public restraint in Government spikes accounting for much and publicly guaranteed spending, given the of theincrease.Accordingto (PPG) debt amounted to volatility of oil prices the IDB, “that spikes US$3,654.9M at end-2022, Goolsarran had made the occurred largely during up 16.9 percent from end- comments in his Column, times of stress, fueled by a 2021, on account of growth published in the Stabroek combination of low growth, in external and domestic News. high fiscal deficits, debt. “Notwithstanding, the His counsel comes at a ballooning interest ratio of total PPG debt-to- time when Guyana’s loans payments, currency GDP declined substantially fromChinaaresettosurpass d e p r e c i a t i o n s , a n d over the past year, from 38.9 that of Sri Lanka, which significant off-budget and unfundedliabilities.”

“This pattern of debt increasesintheregionpoints totheneedforstrongerfiscal institutions to establish credible and sustainable medium-term objectives to limit debt spikes, and where they are necessary, to promote periods of debt