New IMF report: Oil-rich Guyana among five countries in the Region listed as “heavily indebted poor countries”

Apr 14, 2023 News

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Kaieteur News – Oil-rich Guyana is among five countries in the Latin America and Caribbean (LAC) Region that were listed as heavily indebted poor countries (HIPC) in an April 2023 report by the International Monetary Fund (IMF).

In the report titled, “World Economic Outlook: A Rocky Recovery,” several tables were published showing emerging market and developing economies by Region, net external position, heavily indebted poor countries, and per capita income classification.

Under the LAC table, Guyana along with Bolivia, Haiti, Honduras and Nicaragua were listed as HIPC countries.  Indicated in the table are stars and dots. Under HIPC all five of the LAC countries were placed in the dot category. According to the report, a dot instead of star indicates that the country has reached the completion point, which allows it to receive the full debt relief committed to at the decision point.

According to the report, the HIPC group comprises of countries that are or have been considered by the IMF and the World Bank for participation in their debt initiative known as the HIPC Initiative, which aims to reduce the external debt burdens of all the eligible HIPCs to a “sustainable” level in a reasonably short period of time. It was noted in the report that many HIPC countries have already benefited from debt relief and have graduated from the initiative.

Notably, on February 10, 2023, during his remarks at a Regional Panel Discussion forum facilitated by the World Bank, alluding to Guyana’s economic history, Guyana Senior Finance Minister, Dr. Ashni Singh had reminded that three decades ago the country underwent economic hardship and was a HIPC country with debt to Gross Domestic Product (GDP) ratio at one time exceeding 600 percent.

“We were spending more than 100 percent of our revenue to service debt. We set about a task of restructuring the economy, opening and liberalizing the economy, diversifying the productive sector and in particular, implementing a series of fiscal reforms aimed at restoring fiscal solvency to the country and restoring our status as a credit worthy country. We went through the whole HIPC process. This was not at all easy by no stretch of the imagination,” the finance minister recalled. He noted that in many cases it took mobilizing of international advocacy to help Guyana’s case.

“When we started the HIPC process, a fiscal window for HIPC eligibility didn’t exist and if you look at our debt vulnerability indicators….the debt vulnerability indicators in those days were defined based on external sustainability or balance of payments and our balance of payments did not meet the thresholds that were specified. They didn’t indicate that we would have qualified for HIPC but our fiscal position was so bad that we simply were not in a position to service these debts even if the external accounts indicated a slightly less fragile situation,” Dr. Singh said adding that it took technical work and advocacy to convince the international community that something called the fiscal window under the HIPC debt relief initiative should be introduced in order to measure debt sustainability or unsustainability not only from the external perspective but also from the fiscal perspective and Guyana subsequently qualified for HIPC debt relief under that fiscal window.

Moreover, Dr. Singh, during his 2023 budget speech had disclosed that the country’s total public debt stood at US$3.6 billion, an increase by 16.9 percent from last year. This publication had pointed out that almost all of its recently announced public infrastructural projects government has been borrowing money to finance them despite earning over US$1 billion in the oil account for last year.

Additionally, this publication had reported that in January, the Inter-American Development Bank (IDB) had released a report cautioning LAC countries against ‘excessive’ borrowing and urged governments to bring their debts down to more prudent levels.

In its report titled, ‘Dealing with Debt – Less Risk for More Growth in the Latin America and the Caribbean’ the IDB disclosed that debt has risen and stands at some US$5.8 trillion which is 117 percent of the Gross Domestic Product (GDP) in the region. “Given the dangers of excessive debt, the current situation in Latin America and the Caribbean is worrisome,” the IDB said.

IDB said public debt serves a critical role for countries to pursue public investment projects, implement counter cyclical policies, and provide support to economies in the face of negative shocks. However, the IDB warned that if public debt becomes too large or is not managed with sufficient caution, interest costs may balloon, growth prospects may suffer, and in the limit, a costly debt crisis may be provoked.

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• Bolivia, Guyana, Haiti, Honduras, International Monetary Fund (IMF), Latin America and Caribbean (LAC)

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