Non-oil economy can service loan repayments- Jagdeo

Aug 05, 2023 News

Kaieteur News – The recent increase in Government’s borrowing has sparked concerns regarding the country’s ability to repay in the absence of oil revenue that is responsible for the new economic status it has been elevated to.

Vice President, Bharrat Jagdeo

With Guyana now deemed a high-income country, Vice President Bharrat Jagdeo has laid fears to rest, assuring that the revenue generated from the non-oil economy alone can service the country’s debt.

Jagdeo on Thursday during his weekly press conference at Freedom House was asked by Kaieteur News whether the country’s current borrowing could be sustained by the non-oil sector. He responded in the affirmative.

“Yes, because as I pointed out now that, and I don’t wanna go back through that again, our debt to GDP (Gross Domestic Product) ratio and our debt service to revenue ratio are among the lowest in the world today as I speak in spite of all the borrowing,” Jagdeo said.

According to government statistics, the country saw a 62 percent growth in GDP last year with oil accounting for 50.8 percent. Meanwhile, the non-oil economy recorded a growth of 11.5 percent for 2022.

It was revealed during the Budget presentation in January that real GDP is projected to grow by 25.1 percent this year, positioning Guyana among the top five fastest growing economies in 2023. Growth in the non-oil sector is at 7.9 percent this year.

Earlier last month, President Irfaan Ali said that the debt to GDP ratio is 24.6 percent. He also noted, “Our external debt service ratio, and this is the percentage of revenue you are using to service external debt is 4.1 percent.”

Meanwhile, the Bank of Guyana in its 2022 Annual Report highlighted that the country paid a total of $31,444,000,000 – approximately US$150M to service its total stock of domestic and external debt, amounting to some $13,552,000,000 and $17,892,000,000, respectively. Notably, US$43.4 million of the US$150 million paid by Guyana went towards interest.

According to the 2022 report, “The total stock of government’s public and publicly guaranteed debt increased by 16.9 percent to US$3,655 million and represented 24.6 percent of GDP (Gross Domestic Product).

During the first quarter of this year, the country’s total public debt increased by 2.3 percent or US$84.5 million. 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.

This means that the country’s annual loan payments will also increase significantly to reflect the climbing public debt.

Only on Thursday, the National Assembly cleared the path for government to contract higher loans. At last week’s sitting of the National Assembly, Senior Minister in the Office of the President with responsibility for Finance, Dr. Ashni Singh tabled the Orders to this effect.

On Thursday when the Assembly reconvened, Guyana’s domestic public debt ceiling was increased to $750 billion, up from $500 billion, and a new external borrowing ceiling of $900 billion was set after its last increase to $650 billion. Guyana’s previous debt ceilings were last increased 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.

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Debt, loans, non-oil, oil, repay

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