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Debt Service
Kaieteur News – A simple definition of debt service is the amount needed annually to repay lenders. It consists of the total of principal paid back and the interest charged on all loans outstanding. According to Bank of Guyana figures, this country’s debt service in 2022 was approximately US$150 million (GY$30 billion). Also, the interest component in Guyana’s 2022 debt service was US$43.5 million, or about GY$9 billion. These skyrocketing debt service figures are related to the PPPC Government’s continuing addiction to borrowings that pushup the country’s debt stock, leading to more Guyana billions needed annually for debt servicing.
We assure the public of this fact: debt has its uses, and helps to make many things possible. But, as with most things, too much of it, can cause more than constipation, it can result in a hernia. Too much debt taken too quickly can lead to choking, especially if the underlying revenues needed for debt service encounter trouble, and start to slowdown. In Guyana’s case, a world of dependency is placed on oil prices staying at the level where it is currently, or above. There is optimism to the point of blind religious faith in the camp of the PPPC Government that it is, and will be, a most helpful oil price horizon. Wiser political leaders and better run national governments have made the same mistake and paid bitter prices for long stretches of time. It is more accurate to assert that the citizens who have to repay the suddenly overwhelming debt loads are the ones living with the bitterness.
Oil is a commodity that seesaws violently on world markets, and it does not take much to trigger it rising and falling wildly. Leading members of the PPPC Government are fully aware of this, but some of them take comfort in the low debt to GDP ratio of this country, considering that same ratio of other countries in the region. GDP (Gross Domestic Product), or the total output of the economy, can turn on a dime and deliver into nosebleed territory, should geopolitical conditions change in some distant part of the world, or there is a steep drop in demand for the precious energy commodity. All the rosy forecasts, and all the expressions of political confidence to service the national debt, then undergo a sharp reversal, with much tightening (stringencies) following, and being the only way to cope with new realities. The people who felt pain during the time of plenty are now faced with newer, more unbearable pain.
For when the economic going was on the bright side, those same masses of citizens came in for the paltry here, and a pittance there, and not a penny more. We at this paper have been against binge borrowing from the beginning. Our position has been clear: borrow more slowly, and borrow less. We do not have to be in this mad rush to initiate every public works project (infrastructure) that is found appealing, and run ahead with getting them done, regardless of how much they add to the overall debt overhang. Debt mania normally fuels squander-mania. Meanwhile, we have too many hopeful citizens stuck at the bottom of Guyana’s economic ladder, who count themselves lucky if they get a taste of a few crumbs from their patrimony that is the delight of the world. Their sorry lot just should not be, not in this country, of all places, and not at this time in our history.
Our accompanying position has been even clearer: get ExxonMobil to the table of renegotiation, and get into a battle royal there for more for Guyana. More for Guyana means more for Guyanese. More in the national treasury means that less has to be borrowed, or should be, given prudent management of our economy. This facilitates a better balance between borrowing and spending on projects, and responding to the plights of so many people hungry and needy in this country. Tens of billions of Guyana dollars have to be set aside for debt service due to runaway borrowing, while dependent Guyanese are yoked to the repayment of loans taken in their name. This debt picture is too skewed; it also reeks of much political underhandedness, incompetence and selfishness.
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