Burnham and Jagdeo can shake hands

Jan 26, 2024 Features / Columnists, Peeping Tom

Kaieteur News – When the PPP/C took office in 1992, it lamented the country’s US$2.1B external debt which it said made Guyana one of the most highly indebted countries in the world, It pointed out that every Guyanese child born inherited a per capita debt of almost US$300,000.

Of course in those days the country also laboured under a high debt per GDP ratio and a crippling debt servicing. Now that these particular ratios are very healthy, Jagdeo and the PPP/C are overlooking the fact that Guyana’s per capita debt today is twice what it was when the PPP/C took office in 1992.

Jagdeo should tell the nation how much money the PPP/C borrowed since 1992 and whether the aggregate loans that it took was not more than the PNC took during its tenure in office. Jagdeo does not feel that the country has a debt problem. And he sees no reason to be worried about the excessive borrowing by his government since as he contends the country is not borrowing for consumption but as an investment in the future. Burnham was also borrowing for investment purposes when he began to build, the glass factory, the bicycle factory, GRECO and the host of other enterprises that flat-lined and pushed the country deeper into a debt crisis. Had Burnham done proper feasibility studies, those projects, pursued in the name of self-reliance, would not have been undertaken.

And this is what Jagdeo does not get. No one is questioning that Guyana now has a greater ability to borrow because it is flush with oil revenues and is backing its borrowing with future oil revenues. No one is disputing that the debt to GDP and debt to revenue ratios are extremely healthy. The concerns being raised are two-fold. The first is that had the PPP/C done the right thing and renegotiated the oil contracts or pressed for ring-fencing, there would have been no need for Guyana to borrow any monies. Guyana could have paid off its debt and have no need to borrow. Jagdeo get very agitated when asked about ring-fencing. He has made a lame excuse about future benefits which contradicts his own position that Guyana has a narrow window to exploit its oil resources.

Why is Guyana borrowing? And is it not too risky to be backing your borrowing against future oil revenues? What happens if oil prices collapse as they did during the pandemic? Is it not too risky a strategy to be raising the debt ceiling to try to borrow more money than perhaps the government can spend?

The IMF has warned about the risk of overheating. This is one of the main downside risks which the IMF had identified for both the short-term and medium term. The IMF has encouraged a policy of declining debt as one of the ways to avoid overheating. The government has tabled a US trillion-dollar Budget this year. The size of the 2024 Budget flies in the face of the caution, made by the IMF, for the government to moderate fiscal impulses, a euphemism for saying the government should be prudent in its spending and not embark on reckless expenditure.

The second concern is that many of the projects for which loans are being sought have huge question marks over them. Why do we need 12 new hospitals costing billions of dollars? What feasibility studies have been carried out on these projects? Has a specific feasibility study been done in relation to the gas-to energy project? After the fiasco with the Skeldon Sugar Factory, and the problems with the Amaila Falls Hydroelectric Project, the public has justification for being circumspect about these large-scale projects being proposed and undertaken by the PPP/C. Already a number of these projects are behind schedule. Like Jagdeo, Burnham did feel too that he was investing in the country’s future when he began setting up all manner of factories. Well, the bottom fell out of the sugar prices and oil prices rose throwing the country into a prolonged economic crisis which in turn created the debt crisis for Guyana. Guyana is not sitting comfortable with the large amount of loans that the PPP/C is contracting. And while Jagdeo says that it is an investment in the future, this was the same reason given for the now defunct Skeldon Sugar Factory.

(The views expressed in this article are those of the author and do not necessarily reflect the opinions and beliefs of this newspaper and its affiliates.)

GDP, Guyana, Guyanese, Peeping Tom, PPP/C

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Burnham and Jagdeo can shake hands

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