President Irfaan Ali has assured that Guyana has the lowest debt to Gross Domestic Product (GDP) ratio in the Caribbean, even as the country’s public debt steadily increases.
Guyana has at least $79 billion more in loans being added to the country’s existing arrears this year, but Ali gave this assurance on Saturday evening during an address at the La Primavera Banquet Hall in Ontario, Canada, that he was focused on the country’s development and the investment opportunities that await the diaspora in Canada when he gave specifics regarding the state of the economy.
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According to the President, the country would only borrow from institutions that are offering loans at a fixed interest rate of no more than 3.5 percent.
“Some people say we are borrowing a lot…although we are a country that is the fastest growing economy in the world, we have set ourselves an internal target in Guyana that we are only going to borrow fixed rates, less than 3.5 percent,” he explained.
Naturally, since Guyana started producing oil, its GDP has tripled, which according to the Minister of Finance, has placed Guyana in a better place to take more loans.
Sharing the numbers based on reality, he said, “Now our net international reserve has increased by 15.1 percent. And what is the reality in terms of our debt to GDP ratio? Both domestic and external today, even with the massive transformation and capital investment in Guyana, our combined debt to GDP ratio is 24.6 percent, the lowest in the Caribbean. And guess what it, is down from 39.6 percent.”
The President also pointed out that the non-performing loans in the banking sector fell from 7.8 percent to 4.6 percent. He explained, “and when you speak about bureaucracy, you have to look at an equation that is called the transfer ratio- in my own head- that is how much money are you taking to implement your capital programme, that’s why we have the current expenditure and the capital expenditure. In the last five years, as I speak to you, to implement $1B of capital expenditure, we have reduced the cost of implementation by 160 percent. That points to greater efficiency, that points to results orientation.”
Volume One of the 2023 Budget Estimates indicate that the latest loan estimates in 2022 was $14,968,838. This year, government plans to borrow a whopping $94,080,000. This amounts to an increase of $79,111,162. It also means that the country’s loans this year to finance capital expenditure is six times greater than the previous year.
While Guyana has been using its successful oil ventures to support its borrowing, Opposition Member of Parliament (MP) Volda Lawrence has expressed worry over the nation’s growing public debt. She said that the country was falling into a dangerous trap, quite similar to the one that ensnared oil-producing states like Nigeria and Ghana saying:
“Sir, the government’s eschewing the use of the burgeoning natural resource funds, in preference to borrowing from any and all sources, on the assumption that oil prices will remain high, thus allowing easy repayment of loans taken today, is falling into the same trap as did Ghana and Nigeria, for example.”
