Pres. Ali boasts of Guyana’s lowest debt to GDP ratio in Caribbean

Jul 04, 2023 News

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Kaieteur News – As the country’s public debt steadily increases, with at least $79 billion more in loans being added to the country’s existing arrears this year, President Irfaan Ali has assured that Guyana has the lowest debt to Gross Domestic Product (GDP) ratio in the Caribbean.

The Head of State gave this assurance on Saturday evening during an address at the La Primavera Banquet Hall in Ontario, Canada. He was focused on the country’s development and the investment opportunities that await the diaspora in Canada when he gave specifics regarding the state of the economy.

According to the President, even though there is chatter that Guyana is borrowing a lot, the country has made it clear that it would only borrow from institutions that are offering loans at a fixed interest rate of no more than 3.5 percent.

“Some people say we are borrowing a lot…although we are a country that is the fastest growing economy in the world, we have set ourselves an internal target in Guyana that we are only going to borrow fixed rates, less than 3.5 percent,” he explained.

Ali went on to tell the audience that he has often been asked where Guyana would access loans at a fixed rate and more so, at a low interest rate, especially when the world today lends at 5.5 percent variable rate. The president however pointed out that each of Guyana’s new projects was funded by loans at a fixed rate, less than 3.5 percent.

Ali boasted that Guyana was only able to do this because the country has set its own agenda. “We have said what we want, and we have said what we are willing to accept,” he said before shifting his attention to the country’s debt to GDP ratio.

The President received a resounding applause from the audience as he bragged; “Now our net international reserve has increased by 15.1 percent. And what is the reality in terms of our debt to GDP ratio? Both domestic and external today, even with the massive transformation and capital investment in Guyana, our combined debt to GDP ratio is 24.6 percent, the lowest in the Caribbean. And guess what it, is down from 39.6 percent.”

Since Guyana commenced oil production, its GDP has tripled, which according to the Minister with responsibility for Finance, has placed Guyana in a better place to take more loans. With the country’s increase in GDP, triggered by its oil sector, Guyana has been adding more loans with the hopes servicing its debt from the finance that would come in from its newfound wealth.

In the meantime, the President said he has seen “special journalists” doing Youtube features and news items on Guyana, who seem to believe that Guyana is not “sophisticated enough” to manage its resources. He however noted that the country has been using a tiny fraction of its revenue to service its debt. “Our external debt service ratio, and this is the percentage of revenue you are using to service external debt, is 4.1 percent.”

The President also pointed out that the non-performing loans in the banking sector fell from 7.8 percent to 4.6 percent. He explained, “and when you speak about bureaucracy, you have to look at an equation that is called the transfer ratio- in my own head- that is how much money are you taking to implement your capital programme, that’s why we have the current expenditure and the capital expenditure. In the last five years, as I speak to you, to implement $1B of capital expenditure, we have reduced the cost of implementation by 160 percent. That points to greater efficiency, that points to results orientation.”

While Guyana has been using its success in the oil sector as a guarantee to support its borrowing spree, the country finds itself in a similar situation that many other oil producing states, around the world, also fell prey to.

Former Auditor General, Anand Goolsarran had warned that while Guyana’s medium-term economic prospects appear very favourable due to anticipated oil revenues, government should nevertheless exercise restraint in spending, given the volatility of oil prices. Goolsarran had made the comments in his Column, published in the Stabroek News.

Opposition Member of Parliament (MP) Volda Lawrence and former Health Minister during this year’s Budget Debates expressed worry over the nation’s growing public debt. She said that the country was falling into a dangerous trap, quite similar to the one that ensnared oil-producing states like Nigeria and Ghana.

She told the House, “Sir, the government’s eschewing the use of the burgeoning natural resource funds, in preference to borrowing from any and all sources, on the assumption that oil prices will remain high, thus allowing easy repayment of loans taken today, is falling into the same trap as did Ghana and Nigeria, for example.”

Lawrence pointed out that external public has grown steadily since the People’s Progressive Party (PPP) took office in August 2020. Finance Minister, Dr. Ashni Singh during the presentation of Budget 2023 announced that the country’s total public debt stood at US$3,654.9M an increase by 16.9 percent from last year.

Volume One of the 2023 Budget Estimates indicate that the latest loan estimates in 2022 was $14,968,838. This year, government plans to borrow a whopping $94,080,000. This amounts to an increase of $79,111,162. It also means that the country’s loans this year to finance capital expenditure is six times greater than the previous year.

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• Caribbean, Debt, GDP, loans, oil

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