Guyana can be forced to choose between welfare of citizens or repaying debt

Aug 13, 2023 ExxonMobil, News, Oil & Gas

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…as Jagdeo claims non-oil revenue can service loans

Kaieteur News – The economic decisions being made by government today can severely impact future generations. As the country relishes in the revenue stream from its blossoming oil and gas industry and enter into more loan agreements to finance projects to support the sector and develop the country, its people can be left to pay the price for an unsustainable debt policy. This can cost them their health and jeopardize their education.

This is the view of Shadow Finance Minister, Juretha Fernandes. In a recent interview with this publication, the Opposition Member of Parliament (MP) stressed the fact that while government claims the growth in Guyana’s non-oil sector would be sufficient to service the debts being incurred, future generations of Guyanese could have to face severe consequences with limited finances for health and education for example.

Vice President Bharrat Jagdeo at his weekly press briefing on August 3, 2023 assured that the non-oil economy alone can service the country’s debt.

The VP said, “Yes, because…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.”

Responding to this statement Fernandes said it is “absolute craziness”. She recalled that on August 3, 2023 when the Senior Minister in the Office of the President with Responsibility for Finance, Dr. Ashni Singh moved a Motion for the country’s debt ceiling to be increased, he told the National Assembly that Guyana’s revenue stream have been growing. To this end, Fernandes pointed out that the growth in revenue is largely driven by the oil sector.

According to the Bank of Guyana 2022 Annual Report, the Guyanese economy registered real and non-oil GDP growth of 62.3 percent and 11.5 percent respectively.

This year, Central Bank forecasts a real GDP growth of 25.1 percent on account of higher oil production at the Stabroek Block. Meanwhile the non-oil GDP is expected to grow by 7.9 percent.

As the petroleum sector continues to out-perform the non-oil economy Fernandes pointed out that growth outside of the oil industry is in some instances as a result of the oil and gas activities. She was referring to the growth in the construction sector for instance which has been expanding since 2016 to support the development of the industry.

As such, the Shadow Minister of Finance argued, “They can go out there and make this argument to persons who are gullible to whatever they are saying but anybody who is actually analyzing the way they are doing things right now will know that they are borrowing against projected oil revenue. There is nothing else they are borrowing against and if there is a crash (in oil prices), the country will suffer. We will be in tremendous trouble and we have to be very cognizant of that.”

The Opposition MP explained that while the VP is trying to convince the nation that a plummet in oil price would not affect the country’s ability to service its loans, the fact remains that the revenues generated from the non-oil sector would not be sufficient to service the debt being racked up by the administration without jeopardizing allocations to the health and education sectors for instance. The lack of financing for medicine and education can have potentially devastating impacts on the population.

Fernandes noted that this warning was recently sounded by the United Nations (UN) in a new report titled ‘A World of Debt’. The document noted, “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.”

To this end, Fernandes said, “Jagdeo is trying to make an argument that doesn’t hold water to say that the non-oil economy can service the loans because…if we are faced with that dilemma of a plummet in oil prices and we are left with these debt then with the very limited non-oil economy that we are gonna have, it’s gonna be whether or not we service debt against providing basic health and education and other services to the people and that is the big problem.”

Debt in Guyana

BoG reported that at the end of 2022, Guyana’s total stock of public and publicly guaranteed debt increased by 16.9 percent to US$3.6 billion and represented 24.6 percent of GDP.

During the first quarter of this year, the country’s total public debt increased by 2.3 percent or US$84.5 million. The Bank noted that this sum would take the nation’s total debt stock to US$3.7B from the end of December 2022 position.

Central Bank’s Annual Report for 2022 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.

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

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• GDP, Health, loans, non-oil, oil

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