$7.9M in debt looms for each Guyanese household with new debt ceiling- Shadow Finance Minister

Aug 08, 2023 News

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Kaieteur News – Five days ago, when the National Assembly approved a new debt ceiling to facilitate greater borrowing, it also cemented a $7.9M debt for each Guyanese household.

This is according to Shadow Finance Minister, Juretha Fernandes.

Fernandes during her presentation at the 66^th Sitting of the 12^th Parliament on Thursday argued that Guyana has numerous examples of what not to do in an oil-dependent economy, yet the administration is doing exactly that.

In fact, she said, “The PPP [People’s Progressive Party] is operating as though there is no tomorrow, or more so, as if they are expecting to be out of office come 2025. They are spending all that we have, and now spending even more of what we don’t have. They are putting the country in a position that future governments will be faced with debt to service regardless of the economic viability.”

Fernandes described the government’s borrowing as “reckless” since she believes the administration is piling on more debt based on projected earnings from the oil and gas sector. As such, she urged that it should be condemned by all Guyanese.

According to the Bank of Guyana (BoG) in its 2022 Annual Report, the country’s total public debt when compared to December 2021 had increased by 16 percent to just over US$3.6 billion.

When the government’s borrowing was reassessed by Central Bank in the first quarter of 2023, it was revealed that the debt had further increased by 2.3 percent, taking the country’s total loans to US$3.7 billion.

Fernandes in her debate presentation pointed to the recent report issued by the United Nations, titled ‘A World of Debt’ which cautioned developing countries about increasing debt, citing the major underlying implication of being forced to choose between servicing debt and serving its people. Fernandes therefore highlighted that it is the citizens who would be forced to ultimately pay the price of an economy that is mismanaged through excessive borrowing.

The Opposition Member of Parliament (MP) nonetheless mocked that the administration expects Guyanese to “sit back and relax and allow them to borrow because they somehow have the illusion that they are in control of oil prices”.

She flagged that with the country’s major sectors such as gold, bauxite and sugar underperforming, the administration still wants its population to believe that the non-oil sector would suffice to service the loans being contracted and keep the economy afloat.

Presently, the Parliamentarian noted that public servants are struggling to feed themselves and families due to high inflation and minimal increase in wages and salaries- a phenomenon she believes would only exacerbate.

With a new debt ceiling set, Fernandes said the burden on Guyanese households will be even heavier. She explained, “The new debt ceiling at the end of this debate will be $750 billion for domestic debt and $900 billion for external debt. This will be $3.6 million per household in domestic debt and $4.3 million per household in external debt and when exhausted, and make no mistake, it will be exhausted, the collective debt per household will be $7.9 million dollars per household.”

To this end, the Shadow Finance Minister added, “One can just imagine the chaos that would unfold if or when oil-prices drops and we are left service such debt with increasing interest rates.”

In an interview with this publication on Monday, Fernandes clarified that she considered the 210,000 households in her analysis, as provided by the 2012 census, as updated statistics are not yet available.

She told this publication that the Opposition is particularly concerned that while government is increasing the country’s debt, it has not been instituting policies to directly empower households, especially as it regards wages and salaries.

The Shadow Finance Minister argued, “You cannot be adding a debt burden that is equivalent to $7.9 million per household when you are barely increasing wages and salaries to a point that is not even sufficient to offset expenses or even improve the standard of living.”

Fernandes argued that government previously claimed that putting more money in the hands of Guyanese through an increase in wages and salaries would cause inflation; however, she noted that government has pumped hundreds of billions of dollars into the economy through infrastructure development.

The MP highlighted that poverty is widespread in Guyana and affects every race and region in the country. To this end, she cautioned, “If you are to look at the amount of people living in poverty in this country you will understand the gravity of this $7.9 million per household because persons do not have the capacity for us to withstand any revenue shock if the oil prices go down because our non-oil sectors, and non-oil GDP is not in a position to withstand any huge plummet in the oil prices.”

Fernandes said that while there is a place for borrowing in every country, leaders must be “realistic and not reckless” adding that the latter best describes the administration since “no matter what they say, it is not the non-oil sector that they are borrowing against”.

 

 

 

 

 

 

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• Debt, Fernandes, household, oil, Parliament

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