Debt service pressures social services

Dec 19, 2025 Editorial, News

(Kaieteur News) – A short time ago, the question from the media was how well Guyana would do in servicing its US multibillion dollar in a falling oil price environment.

In 2022, Guyana’s debt service bill was US$150.2M, which then increased to US$177.3M in 2023, and last stood at US$220M for 2024. In two short years, Guyana’s debt service charge went up by 46 percent, a not-so-modest increase.

Vice President Jagdeo, Guyana’s chief oil and gas policymaker had his answer ready and waiting. “So if we say 37 percent of the budget comes from oil money so clearly it means that the rest have to come from somewhere else, so we pointed out that about another 30 something percent comes from revenue that is non-oil revenue right, so the rest comes from loans every year to fund the projects”. What Jagdeo was saying was that the contributions of the non-oil sector to the national economy would be enough for Guyana to manage its debt service obligations. Debt service could be met but it would be tough, with less available for the people.

We believe that the nation’s leading oil spokesman was up to his regular routine. He knew the weakness of his answer, but since he had nothing else to offer, presented it and hoped for the best. When oil prices are lower for an extended period, it isn’t only the oil sector that feels the pain. The nonoil sector in Guyana would also experience pain. The nonoil sector and oil sector are not mutually exclusive. In other words, Guyana’s nonoil sector is not housed in a silo, untouched by falling oil prices.

Developments that have negative impacts on oil transfer some of those impacts to nonoil businesses. When oil prices are riding high, the nonoil sector rides that wave. When oil prices start to slide, the nonoil sector starts its own slide, since they are so interlinked, which Jagdeo knows. Less business done by the nonoil sector usually means less tax collections, other contributions, from the businesses in that sector. When we factoring in Jagdeo’s “30 something percent comes from revenue that is non-oil revenue” this adds up to something significant relative to taxes paid. Guyana’s top oilman knows this, but persists with the fantasy that non-oil sector contributions to the economy would help this country to weather debt servicing challenges.

For one, the increase in pressure from debt service would squeeze social services, putting further strain on citizens struggling to manage with higher prices. Those looking to the government for support would end up disappointed. Should oil prices head south, the people already having it hard are in for more pain. One indication is how much those having a tough time were depending on a cash grant. With the president’s announcement about one coming early next year, and not now, the expectant is forced to lick their wounds, and wait it out.

Returning to Jagdeo, he noted that the PPPC Government’s revenue model is based on oil prices remaining at current levels. “Our future revenue, if we forecast based on oil production even for the approved projects and Whiptail which will be approved, if we only factor in production at those levels, at say current oil prices at the volume that we expect to produce from those projects, the revenue for the state in the outer years, that is maybe by 2028- 2030 we could be (receiving) US$5.7 to 6B.” Absorbing what Jagdeo said, we have this to say: annual debt servicing becomes challenging, when oil prices fall. Guyana could anticipate increased daily production volumes, but when oil falls, other countries usually have inventory on their hands. Most, if not all, of the oil producing countries are then in a fight to maintain their revenue levels from oil, through increased production. With so much more oil supplied to the market, Jagdeo knows what that could mean for still lower oil prices.

The reality is when things are bright with oil, good things happen for oil producing countries. Recklessly taking on more debt is unhealthy. When oil prices go the other way, the assumptions and models start to crack in different places. Rosy debt servicing predictions fall apart, the people feel more pain.

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Debt service, Editorial, oil price, social services

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