APNU+AFC govt. determined to repeat PNC debt mistakes

May 01, 2018 Letters

---

DEAR EDITOR,
Another day, more bad news – APNU+AFC has borrowed more than $50B (US$250M) from the Bank of Guyana. This is in addition to spending almost US$200M from the national foreign currency reserve and about $23B in gold reserve. These are additional loans, separate from the increase of the foreign loans from US$1.1B to US$1.6B.
Clearly, APNU+AFC is spending what they do not have and they are borrowing internationally and locally as if there is no tomorrow. Even in this short period, they are making the horrendous debt crisis Guyana faced in the 1980s look like a plaything. Silence is not an option. We have to lift our voices to reject this orgy of borrowing. It is a recipe for overwhelming poverty.
Since 2015, a number of indisputable facts relevant to the economic and social welfare of our people have emerged – economic growth (GDP) has plummeted, taxation has increased, borrowing has ballooned and government spending has skyrocketed on questionable projects, with corruption at unprecedented levels.
In fact, increased government spending propelled by rampant corruption forced the American government to identify government corruption as the main source for money laundering now. The one indisputable outcome from this assault on our macroeconomic well-being is suffocating poverty.
After the virtual bankrupt state of the 1980s, Guyana carefully crafted a stable and progressive macroeconomic platform between 1992 and 2015. This saw Guyana improve its economy from about US$281 per capita to almost US$4,000 by May 2015. It reduced its debt from US$2.1B to US$1.1B.
The debt ratio was reduced from more than 900% of GDP in 1992 to less than 44% in May 2015. The debt servicing improved from an unsustainable 94% of the total earnings in 1992 to about 4% in May 2015. Foreign currency reserve at the Bank of Guyana went from almost zero in 1992 to about US$700M in May 2015 and gold reserve at the Bank went from almost zero in 1992 to more than $25B at the end of 2014.
The overall result was that poverty decreased from between 66 and 88% in 1990, (depending on whose data you use) to below 20% (2015) and the country’s social and physical infrastructure improved measurably. Hunger, widespread in 1990, was almost eliminated by 2015 and Guyana was recognized and awarded a gold medal by the Food and Agriculture Organization (FAO) for achieving a hunger-free state prior to the MDG 2015 target date. Guyana was one of only five countries recognized for this achievement.
Having inherited a solid economic and stable macroeconomic platform, APNU+AFC has already squandered it. The economy has stagnated since May 2015, with 2017 growth being just 2.1%, kept afloat by the continued success of rice. This is only about half of the projected GDP growth of 3.8% that Minister Jordan and APNU+AFC promised the Guyanese people.
Against that backdrop, taxation has significantly increased since May 2015, with either increases in existing taxes or newly introduced ones. Guyanese are now being taxed like never in the history of our country, taxed even for water and electricity, donkey carts, house-front vending and backyard cash crops. APNU+AFC even has the temerity to boast that it has increased its tax intake by more than $8B in the first quarter of 2018.
We know that the foreign debt today stands at about US$1.6B, a significant increase from the $1.1B in May 2015. We know also that the government, through NICIL, has borrowed $30B (US$150M) to invest in GuySuCo. Given all the borrowing, the foreign debt will undoubtedly surpass the PNC-led debt. It will move Guyana again towards the category of one of the most indebted nations on earth. As it is today, the debt to GDP ratio has already increased from about 44% in 2015 to above 60% today and the debt servicing has increased from about 4% in 2015 to almost 10% today, above the debt-sustainability target 7.7% that the government agreed with the IMF.
The remarkable turnaround from the PPP era in managing debt and in establishing a viable and envious macro-economic management scheme, one of the most favorable in CARICOM, in the Commonwealth and among developing countries is presently being squandered, courtesy of the Granger-led APNU+AFC. This government obviously has not learnt the lessons from the late 1980s when Guyana was moved towards debt disaster.
This worrisome debt story has menacing consequences and impact on the economic and social welfare of our country and our people. Oil cannot bail us out of the quagmire that APNU+AFC is sinking us into. Having visibly experienced the tragedy of high debts in the PNC-era, with some of the architects of that tragedy being major players in this APNU+AFC government today, one would have imagined that lessons were learnt.
APNU+AFC promised the people change. But given a chance since May 2015, it has pursued a perverted path – to outdo the PNC as an authoritarian “tax, borrow and spend” government. Given the evidence of the last three years, Granger and APNU+AFC will succeed in this endeavour. The problem is that the Guyanese people’s bold struggle to leave poverty behind is suffering another setback and oil will fail to bail us out.
Dr. Leslie Ramsammy

---

---