$9B less public debt service nothing to boast about – Jagdeo

Government paying $9 billion less in debt servicing is being touted as an achievement, but Opposition Leader Bharrat Jagdeo has said that achievement has nothing to do with good financial management, but is rather due to a change of arrangements which brought about that; and it really is nothing to boast about.
Jagdeo told a recent press conference that if one were to look at the public debt report, one would see precisely how this achievement came about. “It happened largely because the PetroCaribe Agreement and the Guyana Rice Trade Agreement came to an end. So, in the last three years, we had a ballooning of principal payments because we retired those loans by clearing and writing off the promissory notes,” he explained.
The Opposition Leader noted that the achievement didn’t result from prudent management on the part of the Government, but has been occasioned because the PetroCaribe arrangement is no longer available to Guyana. He has said that if Government is claiming that the country’s debt service is down by $9 billion, it means then that $9 billion more is available and can be used to pay public servants.
“You can’t have it both ways; you can’t want to say that we reduce debt service by $9 billion in a single year, and then claim that there is no fiscal (space) to do wage increases…or to fund the budgets of the constitutional agencies; because you have $9 billion of additional fiscal space,” Jagdeo declared.
He noted that the reason why Government can’t utilize this additional fiscal space is because it is just a ‘headline’ used to excite people and to say how well Guyana is doing economically. But if one were to look beyond that and take a closer look at the Auditor General’s (AG’s) Report, one would find far more interesting things.
He pointed to Table One of the AG’s Report which he noted has revealed the coalition Government’s pattern of doing things. “The current revenue has increased from 2014 to 2016 by $31 billion more; they’re collecting — in 2016 — $31billion in taxes more than we were collecting in 2014. They’ve expended — in 2016 — $37.7 billion more than we did in 2014, and this is only the current expenditure, not on the capital,” he pointed out.
Jagdeo said speaks of the pattern — that they are taxing more and collecting more from people.
“…taking more out of their pockets; and they are spending more, $37.7billion more than we spent in 2014.” Touching on the Consolidated Fund, the Opposition Leader said the overdraft on the Consolidated Fund has increased from 2015 to 2016 alone by some $25 billion more in credit from the Consolidated Fund.
“But that number — the overdraft on the Consolidated Fund — is not reflected as yet in the debt numbers, because that’s credit to the Government… So, assuming you have to finance this now, you have to issue another $25 billion of debt to finance the budget, because they overdrew the Consolidated Fund by $25 billion between 2015 and 2016; it’s an overdraft,” he argued.
Jagdeo said it is therefore important not to look only at the growth in debt over 2016 when compared to 2015, because it overgrew by about 4.1 per cent more.
“So we had an increase in overall debt and we had a significant increase in domestic debt, and we’ve had $25 billion overdraft on the Consolidated Fund in that single year. And this leaving out the extraordinary financing they brought in to finance the budgetary deficit,” he explained
The Finance Ministry’s recent Public Debt Annual Report has highlighted that since 2015, there has been a 4.1 per cent rise in Guyana’s indebtedness to creditors. The report details that Guyana’s total debt, inclusive of external and domestic, increased to $330 billion as at December 2016.
The Finance Ministry has attributed this to disbursements from the Export/Import Bank of China to the Cheddi Jagan International Airport (CJIA) expansion project, as well as sums of money received from multilateral creditors.
A breakdown of the figures shows that total external debt amounted to $240 billion, a 72.6 per cent bite out of the total public debt. On the other hand, domestic debt stood at $90.6 billion, or 27.4 per cent of the total.
The report noted that Guyana’s four main external creditors are the Inter-American Development Bank (IDB), the Caribbean Development Bank (CDB), the State-owned Export-Import Bank of China (China EXIM Bank) and Venezuela’s State-owned oil company (PDVSA).
Together, they constitute some 77.7 per cent of Guyana’s public external debt stock as at end December 2016, with the IDB being the most dominant creditor.
According to the report, the IDB has an average share of 42.0 per cent of the debt portfolio.
The CDB is Guyana’s second largest creditor, accounting for 12.6 per cent of total public external debt. The Export-Import Bank of China follows closely behind the CDB with a 12.5 per cent share of external debt, while Venezuela’s PDVSA accounted for 10.6 per cent. Important to note is PDVSA has recently been declared to be in default of its debts by a trade group in the US.