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Guyana paid US$34M in interest for 6 months to service debt – Bank of Guyana Report
Table showing Guyana’s external debt payments
…as multilateral lenders hike rates
Kaieteur News – As Guyana’s ballooning debt continue to spur concerns among stakeholders with government using the massive growth in the oil sector to justify more loans, the country’s debt service reached US$85.2M in the first six months of 2024, with a whopping US$34M alone paid in interest.
Although the country’s total debt climbed from US$4.5B at the end of December 2023 to US$5B at the end of June 2024, the Bank of Guyana (BoG) in its 2024 Half Year Report revealed that Guyana’s total debt service, during the period under review, decreased by 7.7 percent to US$85.2 million.
Notably, Central Bank explained that domestic debt service payments decreased by G$2,925.8 million to G$5,872.7 million (US$29.4M), while the external debt service payments rose by 13.8 percent to US$57 million. This increase was “on account of higher interest payments to multilateral creditors,” the report states.
The BoG explained that external debt payments accounted for 3.5% of Central Government’s current revenue and 0.8% of exports of goods and non-factor services. Principal and interest payments amounted to US$35 million and US$22 million, respectively. During the period, payments to multilateral creditors increased to US$36 million, which was 62.8% of total external debt service.
Meanwhile, payments to bilateral creditors increased by 11.6% to US$20 million, and accounted for 35.6% of total external debt service. The growth resulted from increased debt service payments to the Export Import (EXIM) Bank of China, according to the BoG. With regard to domestic debt service, the Bank’s Half Year Report indicates that payments decreased to G$5,873 million during the review period, due to the final debt service repayments on the Tranches 1 and 2 of the National Industrial and Commercial Investments Limited (NICIL) Bond.
“This outturn caused a decrease in the total principal payments to G$3,292 million from G$7,417 million at end-June 2023. Total interest payments increased by G$1,199 million to G$2,580 million, on account of higher interest payments on treasury bills and BOG Debenture,” the Bank revealed.
Table showing domestic debt payments
Additionally, interest payments on 364-day treasury bills increased by G$581 million when compared to June 2023.
Earlier this year, the government got the green light to increase the ceilings on both domestic and external debt. The domestic public debt ceiling has been increased to $1.5 trillion, up from $750 billion from its last revision. Meanwhile, a new external borrowing ceiling of $1.5 trillion has been approved, after its last increase to $900 billion. The Opposition has steadily warned that Guyana may be slipping into a debt trap that could see the nation failing to meet its loan obligations should oil prices collapse.
Economic Advisor to the Leader of the Opposition, Elson Low previously told Kaieteur News that the increase to the country’s debt ceiling paved the way for more loans to be contracted. In fact, he reminded that the Senior Minister in the Office of the President with Responsibility for Finance, Dr. Ashni Singh signaled that with the tripling of Guyana’s economy, the country is now in a better position to take more loans. Low said, “This implies that the reason we are able to take on more debt is because of the oil sector. As a result, our ability to repay these debts is dependent on the oil sector.”
Shadow Minister of Finance, Juretha Fernandes warned that future governments in this country will be faced with the grim reality of choosing between servicing its debt or servicing the needs of its people with the fiscal management strategy of this incumbent administration. Fernandes highlighted that servicing debt has taken precedence in many oil rich countries that fell prey to borrowing against oil revenues. She pointed out the danger in this principle, noting that oil revenues will not flow forever, and can be cut off by various factors, such as a spill. The Opposition Parliamentarian explained that Guyana will then be left to rely on its poorly performing non-oil sectors to fund development in the country. In fact, the Shadow Finance Minister said these resources may very well have to be directed to service this country’s ballooning debt rather than fund the needs of citizens.
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