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We have to be careful not to once again fall into the debt trap
DEAR EDITOR,
I note with concern a recent Bank of Guyana Report which highlighted the significant increase in Guyana’s external debt and as a consequence higher interest payments to service such debts. While I understand the need to resort to external borrowing in order to facilitate major infrastructural works, it is our ability to sustainably manage our debts in the face of declining exports that is of concern to me.
One consequence of unrestrained borrowing is the high levels of revenues that are siphoned off to meet debt obligations, as happened during the pre-1992 period, when roughly ninety percent of revenues were utilized to service our debt payments.
It took considerable lobbying efforts by the new PPP/C administration before the country managed to incrementally free itself from the debt albatross, thanks to generous debt rescheduling and write-offs under the Heavily Indebted Poor Country (HIPC) Initiative.
Because of reckless borrowing, coupled with high levels of economic mismanagement, Guyana was ranked among the most highly indebted countries in the western hemisphere, and at one time was declared ‘uncreditworthy’ by the International Monetary Fund, after it consistently defaulted on its debt obligations.
We have to be careful not to once again fall into the debt trap, which could have a crippling effect on our ability to grow the economy in a sustainable manner. It would be reckless to start incurring debts in anticipation of higher revenues from the emerging oil and gas sector. Our past experience has demonstrated that the so-called Puerto Rican model, based on heavy external borrowing to facilitate major capital works such as roads and bridges without a corresponding increase in export earnings, could result in severe balance of payments crisis and skewed economic development.
Hydar Ally
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