IDB has largest share of Guyana’s debt

Oct 29, 2021 News

…as exchange rate leaves country at risk of higher repayments

Kaieteur News – The Inter-American Development Bank (IDB) has the largest share of Guyana’s external debt and according to the government’s mid-year report on the country’s finances, its greatest worry is that fluctuations in the exchange rate of the U.S. currency could place the country at the risk of servicing a higher debt burden.
This is since all of Guyana’s external debt service payments require the use of the U.S. dollar, either for direct payments or indirect, to purchase other foreign currencies to facilitate repayment of other debts incurred.
Consequently, “this currency represents the greatest source of exchange rate risk in Guyana’s debt portfolio,” the report said.
It was noted, however, that in order to alleviate the interest risk, interest rate conversion options are continuously being explored with the IDB for consideration where appropriate.
This publication had reported yesterday that for the first half of this year loans from the IDB increased 10 fold compared to the corresponding period last year.
According to the information contained in the Mid-Year Report for 2021, monies received from the IDB in loans increased 10 fold, from US$5.2 million in the first half of 2020, to about US$55.5 million for the corresponding period in 2021.
The report stated, about 75.2 percent of the latter amount was allocated to combating the economic and social ramifications of the pandemic.
Addressing the nation’s total debt stock, the report highlighted that the increase “was largely due to positive net flows (disbursements less principal repayments) from the IDB, driven by disbursements, under two loans agreements geared at combating the COVID-19 pandemic.”
According to the report, at the end of June 2021, multilateral creditors held 64.2 percent of external Public and Publicly Guaranteed (PPG) debt, bilateral creditors 33.4 percent, and private creditors 2.4 percent.
The report cautioned that the entire external PPG debt portfolio is denominated in foreign currencies.
As such, “exchange rate fluctuations may have a considerable impact on the value of the external debt stock in Guyana dollar terms, as well as debt service costs.”
The U.S. dollar, the report said, remained the most dominant currency in the external PPG debt portfolio, comprising 72.3 percent as at June 30, 2021.
It was noted however that, “exchange rates are closely monitored by the Bank of Guyana and, as necessary, monetary policy actions and administrative measures are instituted to maintain exchange rate stability.”

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