Pawning the country

Jan 21, 2011 Editorial

One of the crucial points in the budget was not surprisingly given short shrift by the Minister of Finance: the incredible growth of our national debt. After servicing that debt last year to the tune of US$28 million, our stock of foreign debt yet grew by 12 percent to US$1B by the end of 2010.
Imagine that – in Guyanese money we owe $200 billion dollars, mostly to the multilaterals. That works out to $266,666 for every man, woman and child. And that is not the end of it. According to the goodly Minister after paying $4.9B interest on the domestic debt, that ballooned by a whopping 15.4 percent to $100.5B.
What exactly is going on? One would have thought that a country that not so long ago was officially declared an international basket case because of its mountain of debt, would be a mite more cautious about the pitfalls of profligate borrowing.
We have been bombarded ad nauseum about the US$2.1 billion debt that was inherited by this administration in 1992. We can overlook the not so inconsiderable fact that more than half of that debt was actually accumulated interest because of our non-payment for years: the lenders can determine the value of their pound of flesh.
But we should not forget that it was that same motley crew that decided to cancel most of that debt. After a vigorous campaign by an international consortium of NGOs and some sympathetic countries, a number of indebted countries, including Guyana, qualified for relief if their debt burden was deemed “unsustainable”. On any number of benchmarks Guyana was eminently qualified. So much for those that trumpet the glory of those that “secured” debt write-off.
It might be a good point to settle the matter by quoting from the UNDP, which cannot be accused of being in the camp of the “new opposition”. “Guyana became the fourth country in the world to benefit from debt relief under the Highly Indebted Poor Countries Initiative (HIPC) in 1997 and subsequently qualified for the enhanced HIPC in November 2000. This reduced Guyana’s outstanding debt, in Net Present Value (NPV) terms, by 54 percent. Furthermore, due to the G-8 Initiative, Guyana received debt relief amounting to US$202 million in NPV terms in 2006.
Other bilateral debt relief and debt buy-backs have assisted in reducing Guyana’s external debt from 557 percent of GDP in 1992 to about 100 percent of GDP in 2006. Furthermore, in early 2007 the Inter-American Development Bank (IDB) announced it is providing a US$356.5M debt relief for Guyana, effectively removing the country from its ‘highly indebted’ status.”
What all of this translates into is from US$2.1 billion in 1992, by the end of 1999, Guyana’s debt stock was reduced to US$1.1 billion and in June 2006, to US$655 million.
So here we have it: between 2006 and the end of 2010 our external debt jumped from US$655 to US$1billion. We have borrowed over US$345 millions in 4 years even as we paid over US$100 million during that period to service the debt.
The question, of course, is what have we been doing with all this money? After all we will have to pay it off one day, and it will have to come from the pockets of the taxpayers of this country as it presently does.
It does not take a rocket scientist to figure out that if the borrowed money is not invested into projects that will produce jobs and profits (from which the government will get its increased cut through taxes) we will eventually end up right where we were in 1989. Effectively bankrupt and forced once again into the arms of the IMF/World Bank and its conditionalities.
The money has been going into infrastructural projects that benefit the contractor class and their sponsors. These shoddily built roads, dams and bridges routinely deteriorate so that the trough has to be filled up again with more borrowing. But where will we generate the money to pay off the US$1 billion?

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