Guyana’s debt portfolio and the risks associated with it are becoming increasingly more complex and it is in this vein that the coalition A Partnership for National Unity/Alliance for Change (APNU/AFC) Government has proposed a menu of measures including the introduction of a Debt Management Act.
Finance Minister Winston Jordan
These are among the pertinent proposals in the Guyana Public Debt Report for 2015—the first of its kind in the nation’s history—which pegs the nation’s debt at almost half of its annual Gross Domestic Product (GDP).
According to the 2015 Report compiled by the Debt Management Division of the Ministry of Finance, Guyana’s national debt declined by a mere three per cent during 2015.
Guyana’s total debt at the end of 2014 was 51.9 per cent of the nation’s total earnings and according to the Ministry of Finance report, this declined to 48.6 per cent by the end of 2015.
The report however, documents a series of potential exigencies and local factors that could adversely affect Guyana’s effective management of its total public debt.
According to Finance Minister, Winston Jordan, in his executive summary of the report, “it thus becomes a policy imperative for us to strengthen the institutional framework for public debt management, including establishing a sound and modernised legal framework for debt management and implementing a comprehensive medium term debt strategy that is not only cost but risk focused.”
Jordan in his report said managing operating risks have also been assigned much higher priority in ensuring effective debt management operations.
Compounding the situation, the report documented that “in 2015, Guyana’s economy, perhaps for the first time in recent history, found itself in a precarious situation where most of the country’s key agricultural commodities, including sugar, rice and forestry faced headwinds.”
The report found that given the nation’s excessive reliance on its traditional sources of foreign exchange, including remittances—which also declined in 2015—will continue to expose the economy to volatile external developments, “and make us more susceptible to external shocks.”
Borrowing
Speaking of Guyana’s dwindling sources of borrowing, the Ministry’s Public Debt Report points to the nation’s overall increased GDP saying, “this has far reaching implications for the terms at which Guyana can access financing.”
As a result, the Ministry said that in order to access favourable loans, government has been turning more and more to South-South partners such as the Indian and Chinese Export Import (EXIM) Banks, the Mexican Agency for International Cooperation and Development and the Islamic Development Bank.
The report said government will however continue to maintain ties with traditional multilateral agencies such as the Inter-American Development Bank (IDB) and the Caribbean Development Bank (CDB).
Speaking of proposals to the internal and external factors that could adversely affect Guyana’s management of its public debt, the Ministry has pointed to a six-pronged approach.
According to the Minister of Finance, “government must continue to invest in a consistent capacity building plan to develop the skill-set necessary in understanding public debt management and implementing a comprehensive debt strategy.”
He disclosed that, “to remedy some of the challenges facing the debt management division and supporting our national development, the Guyana Government is committed to building a comprehensive plan to develop the skill-set required to understanding public debt linkages.”
As such, the report has identified at least six areas where government is looking to improve on the nation’s debt management capacity.
These include: “institutional and legal frameworks, debt strategy formulation, self-assessment, operational risk management and debt negotiations.”
The report highlights that “in this regard, a major thrust expected in 2017 is a modern consolidated debt Management Act.”
