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Guyana’s borrowing debt ceiling capacity to increase by $1.35 trillion
Kaieteur News – The government is poised to dramatically enhance its debt borrowing capacity by $1.35 trillion, a move outlined in the recently tabled Fiscal Enactments (Amendment) Bill 2024 in the National Assembly. This move, part of a broader financial strategy, is purposed to increase the nation’s capacity to finance its $1.146 trillion 2024 budget, including several large-scale infrastructure projects.
The proposed amendment will affect both external and domestic debt ceilings. The External Loans Act, with the ceiling currently capped at $900 billion, will see an increment to $1.5 trillion. Similarly, the Public Loan Act (concerning domestic debt) will witness an increase from the existing $750 billion ceiling to the $1.5 trillion. This adjustment in the debt ceilings would represent a total increase of $1.35 trillion in the nation’s borrowing potential.
Dr. Bharrat Jagdeo, Vice President of Guyana, has provided a rationale for this decision. He stated, “the debt ceiling is largely raised to facilitate some of these big projects we have because they will temporarily push up the debt, like the Gas-to-Energy project.”
The government is seeking a loan of US$660 million from the United States Export Import Bank to help fund the project. Jagdeo said funding for projects like this will “temporarily push up the debt” but that this is crucial for the country’s economic growth and infrastructure development.
Dr. Jagdeo further explained the financing structure of the budget, listing diverse sources of revenue, including the Natural Resource Fund (NRF), the Guyana REDD+ Investment Fund (GRIF), and the recent sale of forest carbon to Hess Corporation. He said 60% of the budget would be financed from these resources. The government’s plan outlines that debt will account for approximately 40% of the $1.146 trillion budget for 2024, equating to around US$2.2 billion.
Importantly, Dr. Jagdeo addressed concerns regarding the increase in debt ceilings. He assured that raising the ceilings does not reflect the extent to which government intends to borrow. “Even with us raising the debt ceiling, it doesn’t mean that we are going to actually borrow that sum to the level of the ceiling,” he said.
However, the proposal has not been without criticism. Volda Lawrence, an Opposition Member of Parliament, critiqued the government’s continued pursuit of debt financing, especially in light of the increased liquidity bring provided by oil revenues. She noted that this would be the third time the government has raised the debt ceilings since taking office between 2021 and 2023.
However, Jagdeo has also argued for a mix of debt financing and oil revenues to form part of the list of sources for budget financing. He said that government projects much more revenues will be available to it in the future from oil production and that this will increase the capacity of the government to service its debts. He has also explained that the debts being taken on are for projects that will have long term benefit, rather than borrowing for current expenses.
“We see this intense period of build-out of a lot of our infrastructure that are urgently needed to support continued growth in the economy too,” Jagdeo stated. “But once they are completed, you would see a steep fallout in the budget. The budget would be reduced significantly in the outer years because once you finish building the hospitals, the 12 hospitals and the bridges and the power plant, then you don’t need to expend anymore.”
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