Finance Minister announces: Govt. to raise debt ceiling to borrow more

Jul 21, 2023 News

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Kaieteur News – In order to be able to borrow more money to finance other projects in the pipeline, the Government of Guyana (GoG) has plans to increase the country’s debt ceiling. This is according to Minister of Finance, Dr. Ashni Singh.

During an interview with News Room, the Senior Government Minister said that the government has been making significant investments and managing the country’s finances responsibly. Dr. Singh explained, “given all of these heavy investments initiatives and also ramping up of social programmes, we have of course been incurring a fiscal deficit, this is publicly known. It’s reflected in our annual budget every year and so you finance the budget deficit by borrowing and we have been borrowing very prudently.”

Although Guyana has been repeatedly advised to keep watch on its ballooning public debt, the government believes it has the capacity to take on more loans thanks to the thriving oil and gas sector. The minister stated that as the economy grows, Guyana’s capacity to borrow increases, and noted that the government intends to use that capacity to finance an aggressive programme to modernise and transform Guyana.

Notably, this is the second time in two years the government will be increasing the country’s debt ceiling. In January 2021, the People’s Progressive Party/Civic Government had tabled two Orders at the National Assembly to raise the country’s debt ceiling. The Orders proposed that the domestic debt ceiling be increased to $500 billion from $150 billion and a new external borrowing ceiling of $650 billion from $400 billion. Both of these increases reflect a 233.3% and 65% increase, respectively. Both Orders were passed, following debates by the government and the opposition.

In this vain, the Finance Minister predicted that the opposition will object once again to the increase of the country’s debt ceiling. In fact, he said, “They will object …they will first of all present this borrowing more and characterise that as a bad thing or a negative thing… and the reason for this really is very simple, they are well aware that we are contracting this borrowing for the purpose of financing development programmes and they don’t want development programmes to be delivered as long as the People’s Progressive Party is in government.”

Debt increased by 2.3 %

Meanwhile, the Central Bank recently disclosed that Guyana’s total stock of public and publicly guaranteed debt increased by 2.3 percent or US$ 84.5 million in the first quarter of 2023, a recent Central Bank report said. The document noted that this sum would take the nation’s total debt stock to US$3.7B from the end of December 2022 position. According to Bank of Guyana, the stock of total domestic debt grew by 3.7 percent to US$2.2B. It said this is an increase over the US$2.1B recorded at the end of December 2022. It was also disclosed that the stock of external public debt increased by 0.5 percent to US$1.6B.

With respect to domestic debt, Central Bank said this increased mainly on account of growth in the stock of treasury bills at the end of the review period. This news agency understands that the stock of treasury bills increased by 7.1 percent mainly as a result of higher issuances of treasury bills for budgetary support. As for the increase in the stock of external debt, Central Bank said this resulted mainly from 1.0 percent or US$9.1M growth in multilateral debt stock from the end of December 2022 position. The financial regulator said this was largely due to increased disbursement from the International Development Association (IDA) by 10.6 percent to US$129.9M from the end of the December 2022 position.

Central Bank further noted that there was a 0.1 percent or US$0.5 million reduction in the stock of bilateral debt owed to Non-Paris Club creditors from end December 2022, which resulted from higher debt service payments.

Speaking to domestic debt service payments, Bank of Guyana said this increased by 49.8 percent or G$283.5M to G$852.9M from G$569.3 million in March 2022. Kaieteur News understands that principal payments increased by 12.3 percent or G$30 million, likewise, interest payments increased significantly by 78.0 percent or G$253.5 million.

In terms of external debt service payments, Central Bank said this increased by 27.9 percent to US$34.4 million primarily on account of higher principal repayments to bilateral creditors and higher interest payments to multilateral creditors. Expounding further, Central Bank said debt repayments to the Inter-American Development Bank which accounts for 74.9 percent of debt repayments to multilateral creditors and 39.8 percent of total external debt service, increased by 55.5 percent to US$13.7 million as a result of higher interest repayments during the review period.  Likewise, debt repayments to the Caribbean Development Bank (CDB) rose by 11.6 percent to US$3.4 million. Similarly, Central Bank said debt repayments to the EximBank of China, which accounts for 73.1 percent of debt repayments to bilateral creditors and 32.6 percent of total external debt service, increased by 5.0 percent to US$11.1 million as a result of higher principal repayments during the review period.  Looking ahead, Central Bank said total public debt is expected to expand to US$4.4B, due to increases in both domestic and external debt stock, while debt service payments are expected to rise.

UN warning

Only last week United Nations Secretary General, António Guterres disclosed that half the world is sinking into a development disaster, fuelled by a crushing debt crisis, noting that some 3.3 billion people – almost half of humanity live in countries that spend more on debt interest payments than on education or health. He made the comments as the UN launched a report titled: ‘A WORLD OF DEBT’ last Wednesday. The document was prepared by the UN Global Crisis Response Group and the five UN Regional Commissions: ECA, ECE, ECLAC, ESCAP and ESCWA. According to the report, public debt around the world has been on the rise over the last decades. Cascading crises in recent years triggered a sharp acceleration of this trend. As a result, global public debt has increased more than fivefold since the year 2000, clearly outpacing global GDP, which tripled over the same time.

In 2022, global public debt – comprising general government domestic and external debt– reached a record USD 92 trillion. Developing countries owe almost 30% of the total, of which roughly 70% is attributable to China, India and Brazil. The report said in Latin America and the Caribbean, developing countries are devoting more money to interest payments rather than to investment. The report noted that across the world, rising debt burdens are keeping countries from investing in sustainable development. “An increasing number of countries find themselves trapped in a situation where both their development and their ability to manage debt is compromised. Currently, at least 19 developing countries are spending more on interest than on education and 45 are spending more on interest than on health. In total, 48 countries are home to 3.3 billion people, whose lives are directly affected by underinvestment in education or health due to large interest payment burdens,” the report added.

Excessive borrowing

Notably, the Inter-American Development Bank (IDB) in a new report published earlier this year, cautioned Latin America and Caribbean (LAC) countries against ‘excessive’ borrowing and urged governments to bring their debts down to more prudent levels. The report was published some two weeks after Dr. Singh had announced that the country’s total public debt stood at US$3,654.9B an increase by 16.9 percent from last year.

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$5.8T 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 countercyclical 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. Moreover, the IDB said in its report, “This pattern of debt increases in the region points to the need for stronger fiscal institutions to establish credible and sustainable medium-term objectives to limit debt spikes, and where they are necessary, to promote periods of debt reduction…”

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• borrow, ceiling, Dr. Ashni Singh, Minister of Finance, Projects

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