Govt. signals intention to further increase debt ceilings

Aug 04, 2023 News

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…as house approves US$3B hike 

Kaieteur News – The National Assembly on Thursday approved an increase to the country’s domestic public and external debt ceilings by some US$3 Billion following a contentious debate by members of the government and opposition.

At last week’s sitting of the National Assembly, Senior Minister in the Office of the President with responsibility for Finance, Dr. Ashni Singh had tabled the Orders to increase the country’s debt ceiling to allow for accessing more loans to accelerate its development agenda.

Guyana’s domestic public debt ceiling was increased to $750 billion, up from $500 billion, and a new external borrowing ceiling of $900 billion, after its last increase to $650 billion. Guyana’s previous debt ceilings were last increased in by the Government back in January 2021.

According to the Ministry of Finance, given Guyana’s economic outlook, these revisions to the external and domestic public debt ceilings are consistent with the country’s long-term debt sustainability. Dr. Singh argued that with Guyana’s economy rapidly growing, the country’s ability to borrow more loans increases. “Every loan that we have contracted there are available for all to see the evidence of what that loan was invested in, the gas to energy project, hospitals, schools or roads,” the minister said.

Notably, fuelled by a ramping up of oil production and the resurgence of the non-oil economy, Guyana registered real GDP growth of 62.3 percent in 2022, making it the fastest-growing economy in the world. As such, it was noted that this appreciable growth performance and the country’s robust economic outlook underpin Guyana’s sustainable absorption of the new debt. In sum, the Government said it is committed to harnessing Guyana’s debt-carrying capacity to accelerate its development agenda.

Opposition MPs, Juretha Fernandes, Ganesh Mahipaul and Amanza Walton-Desir put forward their arguments objecting to the motion.

In her argument, Fernandes stated that the rate at which the Government is going to incur more debt, it adds a burden on future generations and will be felt the hardest on the working class.

“They (Government) believe the more money Guyana has, the more Guyana should borrow, what is even sad is that the PPP (People’s Progressive Party) is borrowing based on projected figures from oil revenues…One of the most significant dangers faced by our oil-dependent country is its vulnerability to oil price fluctuations, if oil price plummets like we have seen in the past, we will be struck by a severe revenue shock,” MP Fernandes said.

The Opposition MP added, “Mr. Speaker it is evident that between 6th March and 6th June (2023) the PPP came to this house and racked up more than double of the second quarter’s revenues garnered from oil.”

She added: “the 2023 budget is already being carried by the oil and gas sector, we cannot keep adding debt to this country.” Fernandes said too, “It leaves questions, for the PPP to come to this House and operate as if there is no harm to what they are doing…It is simply reckless for the PPP to continue borrowing in the manner in which they are doing.”

The MP highlighted that according to the Bank of Guyana (BoG) first quarter report for 2023, public debt increased by 2.3%.  She said too that after passing the country’s largest budget ever, the Government within two weeks has approached the House for billions in supplementary spending, yet public servants are still waiting to on an increase for living wage. She underscored that the Government approached the House to increase the debt ceilings, while failing to do basic things like raising wages for public servants.

According to Fernandes, “Financial stress can weaken the economy; this approach will be highly detrimental. The PPP is doing exactly what they should not be doing operating as though there is no tomorrow…They have spent all that we have, and all that we don’t have. There is nothing prudent about the way PPP manage debt it is reckless.”

For his part, MP Mahipaul requested that the Government submits the list of the projects that need to be funded under its “ambitious developmental agenda” which is the reason for the increase in the debt ceilings.

“We have never held to the position that borrowing is bad, what we are saying is borrowing is necessary on the revenue you have, not on the revenue you are anticipating.”

Mahipaul argued, “They draw comparison with ordinary Guyanese citizens. Mr. Speaker, if somebody in this country is working for below 100,000 if they go to the bank to borrow a loan the bank would not lend them a loan anticipating that they will get higher earnings in the years to come. It would be based on their salary and their ability to repay, what we have is an attempt by the PPP to borrow and borrow and borrow because we are expecting a higher revenue income in the years to come but that becomes a burden to future generations.”

Minister of Public Works, Juan Edghill, in supporting the increase to the debt ceilings said, “We are not borrowing to pay salaries, or to pay old age pension, or to pay nurses and teachers… even though we are earning money from oil, we have to take advantage of this opportunity to catapult this nation. We want to be able to facilitate the engagement with China Exim bank, the Inter-American Development Bank (and other banks)…”

In his closing arguments, Dr. Singh reiterated that Guyana’s growing economy has produced a unique opportunity for the country to borrow more loans, because the country will be able to service it. “It’s called sustainable borrowing,” the Finance Minister said.

In responding to the arguments made by MPs Fernandes, Dr. Singh said, “You can’t selectively cherry-pick some sections of the report (BoG) and hold it up as gospel, and when the sections that don’t agree with your narrative you dismiss it.”

He added that Guyana is at a stage where it is the place to do business more than it has been in any time in its economic history.

“We will invest it into things that will earn us a greater income, like infrastructure… We will ensure we do so in a manner we can afford to do.,” the minister added.

The Finance Minister said, “Today we have multilateral, bilateral and private lenders from around the world, who are not naïve, who are not incompetent people they are the most sophisticated… we have the capacity to borrow today because these lending agencies have rigorously assessed Guyana’s economic potential that we have the capacity to repay whatever the loan we borrow.”

To this end, the minister noted that as Guyana’s ability to borrow more increases the Government will return to the National Assembly to further increase the debt ceilings. Following the minister’s concluding argument, the National Assembly approved the motion to increase the country’s debt ceilings.

Recently, Kaieteur News reported on United Nations Secretary General, António Guterres highlighting 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. Also, the Inter-American Development Bank (IDB) in a new report published earlier this year, cautioned Latin American and Caribbean (LAC) countries against ‘excessive’ borrowing and urged governments to bring their debts down to more prudent levels.

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• domestic, Dr. Ashni Singh, finance, Minister of Public Works, National Assembl, public

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