US$3.9B debt hangs over Guyana

Sep 11, 2023 News

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…7.2% increase within 6 months

Kaieteur News – Within six months, Guyana’s debt has increased to US$3.9 Billion, which represents a 7.2% increase compared to the end of 2022.
The Ministry of Finance on Saturday published the Mid-Year Report, in which it was highlighted that at the end of June 2023, Guyana’s total stock of public and publicly guaranteed debt amounted to US$3,916.9 million, with total public debt accounting for US$3,914.5 million, and total publicly guaranteed debt for the remaining US$2.4 million.

When compared to the end of 2022, when debt stood at US$3,654.9 million, a 7.2% increase was recorded. To this end, Government said this was mainly attributed to a positive net flow from both the external and domestic debt portfolios.

In the recently published report it was stated, “As a result of Government’s continued effort to ensure that financing needs are met at the lowest possible cost with a prudent degree of risk, Guyana’s public debt remains sustainable with a moderate risk of debt distress.”

According to the Ministry of Finance, external debt grew by 3.8% from US$1,571.9 million at the end of last year, to US$1,631.1 million at end-June 2023. The ministry attributed the increase to positive net flows (disbursements less principal repayments) from bilateral creditors such as Eximbank of China, China CAMC Engineering Co., Ltd., and United Kingdom Export Finance.

Further, it was disclosed that at the end of June, multilateral creditors held 67.8 percent of the external PG debt portfolio, with bilateral creditors holding 30.3 percent. The remaining 1.9 percent was held by private creditors. External PPG debt is projected to increase by 31.6 percent from its mid-2023 position to US$2, 146.0 million at end-2023, on account of expected positive net flows from both multilateral and bilateral creditors.

In the first half of the year, total external disbursements amounted to US$99.9 million, representing a 290.1 % increase when compared with the first half of 2022.
It was stated, “This year-on-year expansion reflects higher disbursements from bilateral and multilateral creditors, which also totaled US$99.9 million in the first half of 2023, up from US$25.6 million in the first half of 2022.”

To this end, it was noted that the relatively high level of disbursements in the first half of 2023 was mainly due to substantial inflows under loans for new projects Government commenced at the end of 2022 and the beginning of 2023.

Notably, for the first half of this year, external disbursements were drawn down for projects such as the East Coast Demerara Road Project Phase 2, Guyana Pediatric and Maternal Hospital, and the Regional Hospitals Project.

At the end of June 2023, domestic debt totaled US$2,285.8 million, up 9.7% from the end-2022 position. This increase was driven by a 21.7 % expansion in the stock of treasury bills to US$1,336.6 million, reflecting the issuance of new fiscal instruments in the first half of 2023.

Total PPG debt service payments amounted to US$92.3 million in the first half of 2023. This was driven by growth in both domestic and external debt service payments.
A comparison of the two half-year positions, domestic debt service payments grew by 224.4%, while the growth in external debt service payments was about 16.6%. The increase in domestic debt service payments resulted from the commencement of the redemption of the Bank of Guyana debentures, which were issued in 2021 mainly to securitise the Consolidated Fund overdraft at the end of 2020.

On August 3, the National Assembly approved an increase to the country’s domestic public and external debt ceilings by some US$3 Billion, which allows the country to borrow more loans.
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.

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.

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• Debt, GDP growth, Guyana, Mid-Year Report

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