Guyana’s indebtedness to China set to surpass Sri Lanka- Former Auditor General

Jan 04, 2023 News

…warns Govt. to be weary of volatile oil prices and exercise restraint in spending

Kaieteur News – “While Guyana’s medium-term economic prospects appear very favourable due to anticipated oil revenues, the Authorities should nevertheless exercise restraint in Government spending, given the volatility of oil prices.”

This is the advice of former Auditor General (AG), Anand Goolsarran, in his Tuesday Column, published in the Stabroek News, on the 2021 Auditor General Report on the Public Accounts.

His counsel comes at a time when Guyana’s loans from China are set to surpass that of Sri Lanka, which stands at some 20 percent.

Former Auditor General, Anand Goolsarran

In drawing reference to that country, the former Auditor General pointed out that Sri Lanka is now in a state of severe economic crisis after years of economic mismanagement coupled with the impacts from the COVID-19 pandemic.

In 2020, Guyana had six loans with the Export Import (EXIM) Bank of China totalling US$240.451 million. This represented 17.5 percent of the country’s external loan portfolio according to Goolsarran.

To this end, the former AG wrote “Last week, the Authorities announced the signing of two loan agreements with the China (Bank) in the sums of US$192 million and US$172 million for the East Coast Demerara road expansion project and the construction of the New Demerara River Bridge respectively.

With these two loans, Guyana’s indebtedness to China is set to overtake the 20 percent incurred by Sri Lanka which is currently in a state of severe economic crisis after years of economic mismanagement combined with the COVID-19 pandemic.”

Goolsarran reminded that in December 2017, the Sri Lanka Government handed over the Hambantota Port to China which included 15,000 acres of land around it, for use for 99 years. The Port was constructed by China Harbour Engineering Company with financing from China’s Exim Bank. This development occurred after the State failed to make good on its commitment to repay the loan.

Goolsarran in his Column made the point that Sri Lanka’s experience has important lessons for Guyana since the incurrence of excessive debt; both internally and externally, can adversely affect the economy. It was on this note that he warned that while the country’s prospects seem favourable due to the anticipated revenue from oil and gas, government should exercise restraint given the volatility of petroleum prices.

Further, “with global warming and climate taking their toll worldwide as well as the effects of the war between Russia and Ukraine, who knows what the future holds for the oil industry,” he reasoned.

The former Auditor General was keen to note that Government needs to intensify efforts aimed at ensuring that the economy is sufficiently diversified as the performance of the non-oil economy makes “the real difference” in the lives of ordinary citizens.

As Guyana continues to ignore advice of Financial Institutions regarding “cheap loans” from Chinese Lending Institutions, the Bank of Guyana in its first quarter report of 2022 revealed that the country’s external debt is overtaken by money it borrowed from China.

It was noted that the China Exim Bank accounts for 39.5 percent of the country’s total external debt. Additionally, debt repayment to the China Exim Bank accounted for 82 percent of debt repayments to bilateral creditors. In the first three months of the year, US$10.6 million alone was paid to the Chinese Lending Institution, up by 1.4 percent. The increase, according to the Central Bank, was as a result of higher principal repayments during the review period.

At that time, Guyana’s total stock of public debt, which comprises both external and domestic debt stood at US$3.248 billion.