…says Guyana extremely selective, strategic with external loans
With a current debt to Gross Domestic Product (GDP) ratio of 24.6 per cent, Senior Minister in the Office of the Presidency with responsibility for Finance, Dr Ashni Singh has cited this as the result of the Government being extremely selective and strategic in how it borrows externally.
During his presentation at the recently concluded Guyana Energy Conference and Expo, Dr Singh revealed the debt-to-GDP ratio of 24.6 per cent to the applause of those present. This figure, according to the Finance Minister, is a regional best.
“We’ve been able over the years to bring public debt down. And today, Guyana’s public debt-to-GDP ratio stands at 24.6 per cent. I didn’t put a chart up with international comparisons, but many of you are familiar with these numbers.”
“You track them all around the world. You will no doubt recognise that a debt-to-GDP ratio of 24.6 per cent in fact, places Guyana ahead of almost every economy, certainly in this hemisphere. And puts us in a position where we have fairly significant legroom to borrow,” Dr Singh said.
While Guyana is likely to have more opportunities to borrow, however, Dr Singh noted that the Government is being very strategic in its borrowing and focused on ensuring that these are good loans that will serve the country’s interest.
“But notwithstanding that, recognising the importance of maintaining a strong public sector balance sheet and very strong debt dynamics going forward, we’re extremely selective and careful about the new borrowing that we contract. Borrowing only for the purpose of making strategic investments,” the Finance Minister said.
“And good quality borrowing, so we still have in fact a strong portfolio with the multilateral and regional development institutions. We still have a strong pipeline of official borrowing, which means we are able in fact to finance our fiscal programme without recourse to expensive or uncompetitive borrowing.”
By comparing what a country owes with what it produces, the debt-to-GDP ratio indicates its ability to pay back its debts. A high debt-to-GDP ratio may make it more difficult for a country to pay external debts, and may lead creditors to seek higher interest rates when lending (or what is known as a bad loan).
The higher the debt-to-GDP ratio, the less likely the country will pay back its debt and the higher its risk of default. A specific debt-to-GDP ratio demonstrates an ideal position has not been agreed to, but instead, it is typically focused on the sustainability of certain debt levels.
According to information contained in the Public Debt Annual Report of 2017, Guyana’s total public debt-to-GDP had increased from 45.7 per cent, in 2016 to 46.2 per cent in 2017. The report had noted that the increase in the debt-to-GDP ratio was mainly caused by an increase in public debt stock as a result of increased disbursements from Guyana’s external creditors such as the Inter-American Development Bank (IDB); International Development Association (IDA); Caribbean Development Bank (CDB) and China Eximbank. At the end of 2020, the ratio of public debt-to-GDP was 47.4 per cent. However, it began to drop by 2021.
The United Nations, in an Economic Commission for Latin America and the Caribbean (ECLAC) report titled, “Preliminary Overview of the Economies of Latin America and the Caribbean 2021,” had hailed Guyana’s gross public sector debt-to-GDP ratio of 36.6 per cent (at the time) as the lowest in the Region.
According to the commission report, this was 11 percentage points lower than the debt-to-GDP ratio at the end of 2020 and far lower than the regional average debt level of 90.3 per cent of GDP.
According to the ECLAC report, Barbados’s debt-to-GDP ratio of 145.6 per cent was the highest in the Region, followed by Suriname (121.8 per cent), Belize (120.3 per cent) and Dominica (100.4 per cent). (G3)
