Borrowing should be the last resort not the default response

Feb 27, 2025 Features / Columnists, Peeping Tom

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Peeping Tom…

Kaieteur News- The business of borrowing, when defended with the conviction of divine law, is among the more absurd dogmas of modern times. The present PPP/C government, basking in the shame that the fastest growing economy in the world has to borrow to finance close to 40% of its Budget, wants us to believe that borrowing is a must. Their words not mine.

In defence of this absurdity, we are told, time and again, that borrowing is an inevitability, that it is an integral function of governance, a fiscal mechanism so natural as to be almost natural – all of us have borrowed and borrowing allows us to grow wealth. To resist this premise is to engage in the blasphemy of economic illiteracy, to be dismissed as a hopeless reactionary incapable of understanding the nuances of economics. Yet, the assertion that borrowing is a necessity rather than a consequence of mismanagement collapses under the weight of the facts.

A nation borrows not because borrowing is an existential prerequisite, but because its government has failed to derive sufficient revenue from its existing assets. A person who earns enough to cover his expenses does not take on debt unless his financial management is inept. Likewise, a country need not sink itself in the morass of international lending institutions unless it has failed to properly steward its resources. Consider, then, the absurdity of borrowing in a land where oil revenues ought to flood the treasury with a bounty sufficient to finance any conceivable infrastructural ambition. If the state is engaged in perpetual borrowing while simultaneously allowing itself to be fleeced by an unfavourable oil agreement, the problem is not revenue insufficiency but rather a willful abdication of financial prudence. When a government concedes billions in potential earnings by refusing to renegotiate an oil deal or to ring-fence its oil blocks, it does not suffer from an absence of wealth but from a dereliction of duty.

In this context, debt is not a function of necessity but of maladministration. It is not a requisite tool of economic advancement but an indictment of policy failure. Why should a nation whose natural resources are among the most lucrative in the world be forced to take on loans that burden future generations with interest payments? Why should a country pay a premium for capital when it need not contract those loans in the first place?

The standard counterargument arrives with the sterile language of the technocrat: that debt-to-GDP ratios remain low, that debt servicing as a percentage of revenue is sustainable, that borrowing is an investment in the nation’s future. These are comfortable phrases deployed to rationalise a behaviour that, stripped of euphemism, is nothing more than an exercise in fiscal recklessness. A low debt-to-GDP ratio is not an invitation to borrow more; it is, at best, a temporary comfort that should serve as an incentive to maximize revenue generation before resorting to debt financing. A manageable debt service burden today is no assurance against unsustainable obligations tomorrow, particularly when economic forecasts depend on a volatile commodity such as oil.

The notion that borrowing is justified because the country can afford to service its debt ignores the fundamental question: why assume the burden at all? Why should a government elect to saddle its people with debt when it has within its grasp the means to fund its own development? The per capita debt of a nation is not a mere abstraction on a balance sheet—it is a real and lasting liability imposed upon citizens who had no say in the agreements that placed them in arrears. To increase the debt burden simply because financial indicators suggest that it is presently sustainable is to ignore the elementary principles of responsible governance. The logic of the lender is, of course, predictable. It is always in the interest of financial institutions to persuade the borrower that debt is a necessity, that prosperity is contingent upon leveraging future earnings against present expenditures. But the logic of the borrower should not be so pliant, so willing to accept the inevitability of debt when avenues exist to circumvent it altogether.

This is not an argument for fiscal isolationism, nor is it a rejection of all borrowing as a matter of principle. There are instances where borrowing, properly deployed, can stimulate economic growth. But borrowing must be a last resort, not the default response to budgetary shortfalls that could have been avoided with competent resource management. A nation that abdicates its responsibility to extract fair value from its own assets cannot then feign helplessness when it finds itself compelled to seek loans to finance its obligations.

If the leaders of the state insist that borrowing is unavoidable, let them first explain why the revenue lost to exploitative oil deals does not constitute a greater national emergency than the purported funding gap they seek to fill with loans. Let them explain why the price of political complacency must be paid in interest-bearing loans rather than in the renegotiation of contracts that siphon wealth from the public coffers. Let them justify, in precise economic terms, why a country so rich in resources must continue to accumulate debt at the expense of its people’s future prosperity. If they cannot, then the fiction of necessary borrowing must be exposed for what it is: a convenient excuse for a failure of governance dressed in the language of financial prudence. It is not that borrowing is inescapable—it is that those in power lack the political will to ensure that it is unnecessary.

(Borrowing should be the last resort not the default response)

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

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• business of borrowing, financial management, grow wealth, Peeping Tom, PPP/C Government

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