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More debt
(Kaieteur News) – Poor countries experience great difficulties to get loans from the big banks, and other lenders, such as the World Bank, the Inter-American Development Bank (IDB Group), and the International Monetary Fund. On the other hand, a country that discovers billions of barrels of oil, or great fields of rich minerals, finds itself in the best of positions.
Today, banks race each other to get Guyana to sign on the dotted line of loan documents for anywhere from tens of millions of US dollars to as much as a billion US. Guyana’s President Ali went to Saudi Arabia to attend a global business summit, and approval for US$1B came like a bolt of lightning. Suriname is part of that US$1B loan deal alongside Guyana, with the Islamic Development Bank (IsDB) and the IDB Group as the happy lenders across the table. Lending one billion US to Guyana is almost a risk-proof decision on the part of the two banks, because Guyana has its rich collateral of 11 billion barrels of proven oil reserves, while Suriname counts its days to belong to the exclusive global oil club.
How much of that US$1B will be loaned to Guyana isn’t clear at this time? Guyana being a daily producer of over 600,000 barrels of oil is sure to get the bulk of that billion over the next five years, since Suriname has another two to three years before it arrives at its own First Oil day.
Meanwhile, this country has a sizable total debt of US$5.993B, but is relying on what the PPPC Government extols as a healthy debt-to-GDP ratio. Government leaders and experts conveniently ignore that over half of Guyana’s fantastic and world-beating GDP goes away from this country, which means that the benefits from it are not experienced here. When such a massive portion of GDP is not in Guyana’s hands, then what is sold as a robust debt-to-GDP ratio is not such a winner, after all. In effect, the so-called comfortable ratio is shaky and should induce some level of anxiety in Guyanese. It goes without saying, that as leaders go on a borrowing binge, the debt load increases, and the weight of it is felt by those responsible for paying it back. Guyanese taxpayers, already struggling to cope with a killing cost-of-living environment, are the ones who will have to make the sacrifices to honor the ballooning debt.
It is obvious that the PPPC Government’s thinkers and planners (and irresponsible borrowers) are betting on stable oil prices and more daily production. With all the expert oil watchers predicting that the oil markets are in for a period of oversupply, oil prices are seemingly heading downward, not staying where they are.
For sure, they are not heading higher, unless there is some major catastrophic development that interferes with oil supplies. We appreciate that a greater level of daily oil production is on the way in Guyana, and it could assist in cushioning rough times from oil price drops. This would be very meaningful in the contexts of dealing with debt service, and while more debt is added, in a seemingly cavalier manner by the PPPC Government. The precious oil is being depleted, is not replenishable, and news from ExxonMobil about fresh discoveries has entered a barren patch that is of several years’ duration presently.
Therefore, this new joint IsDB and IDB Group loan to Guyana and Suriname for US$1B over the next five years is referred to again. It has to be weighed again, and called out again. We focus on Guyana’s borrowing, while firm in the belief that more loans will have to be taken to fund some of those multibillion US dollar projects that have been mentioned in these first months of the PPPC Government’s second term.
More billions to repay by Guyanese means more burdens on their shoulders. Choices have to be made, with the result being that prioritization human infrastructure needs may again come out farther down the line. Whether oil prices fall or not, banks still come calling for their money. When prudent borrowing should be practiced, recklessness has been the norm. Regular citizens are the ones who will be left to feel the repayment pain.
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