Govt appropriates money budgeted to service debts for mysterious purposes
Government has used money which was set aside in 2019 for paying off Non-Paris Club bilateral creditors for mysterious purposes, a situation which contributed to its debt servicing payments falling short of the projected amount.
This is contained in the Ministry of Finance End of Year report, which was recently released. According to the report, the US$78.1 million spent on debt servicing for 2019 was actually 2.6 per cent less than what had been projected. One of the reasons was because money budgeted to pay Non-Paris Club bilateral creditors was appropriated elsewhere.
“This variance is largely attributed to a small difference between the actual and projected exchange rates used for debt service payments, and the partial utilisation of funds budgeted to pay Non-Paris Club bilateral creditors in arrears. Notably, excepting Kuwait, no other bilateral debt settlement agreement was finalised, in 2019. External debt service payments amounted to 6.8 per cent of total Government revenues,” the report states.
The Paris Club is a group which came together to find solutions to the debts faced by debtor nations, often those who are in developing status. The permanent members of the club are the United States, the United Kingdom, Switzerland, Sweden, Spain, Russian Federation, Norway, Netherlands, South Korea, Japan, Italy, Israel, Ireland, Germany, France, Finland, Denmark, Canada, Brazil, Belgium, Austria and Australia.
Meanwhile, the report also notes that as of the end of 2019, external public debt amounted to US$1.3 million. This, according to the Ministry, is 4.7 per cent lower than the projected amount of US$1.370 million. According to the Ministry, Guyana was able to negotiate a debt settlement with Kuwait.
“This difference was mainly due to a US$50.7 million debt reduction granted by Kuwait, after the finalisation and signing of a bilateral debt settlement agreement, in March 2019. This agreement culminated extensive bilateral debt negotiations between the two parties,”
“The debt relief received from Kuwait reduced Guyana’s outstanding debt to Non-Paris Club Creditors in arrears, significantly, by approximately 34 per cent. Efforts are currently in progress to negotiate and finalise mutually acceptable debt settlement agreements with the remaining Non-Paris Club bilateral creditors in arrears.”
According to the report, external debt accounted for 77.3 per cent of the total public debt as at December 31, 2019. Domestic public debt, on the other hand, was US$383.6 million, falling short of the US$412.8 million that had been projected.
“This variance was primarily attributable to principal repayments on some fiscal T-bills, which matured but were not reissued. The share of domestic public debt was 22.7 per cent of the total public debt stock, as at the end of 2019, 0.4 percentage points below the Budget 2019 projection,” the report states.
With A Partnership for National Unity/Alliance For Change’s (APNU/AFC’s) time in office waning after the General and Regional Elections showed the main opposition People’s Progressive Party/Civic (PPP/C) winning by 15,416 votes, Guyana is in uncharted financial waters. Not only has the country’s General Reserves been depleted to $0, but the account is also now running an overdraft to the tune of hundreds of billions of dollars.
This situation was illustrated in the Bank of Guyana’s statement of Assets and Liabilities, published in the May 23 Official Gazette, revealing that the General Reserve is -$290,667,332. Additionally, Public Deposits have also depleted to below $0, also recording a negative balance of -$88,629,401,855.
Guyana’s Contingency Reserve account also reflects an alarmingly low amount of $2.3 billion. When APNU/AFC took office in May 2015, Guyana’s General Reserve had in its coffers just about $6 billion while the Contingency Reserve held $4 billion.
While oil revenues are expected to drastically boost Guyana’s revenue, the onset of COVID-19 has led to a drop in demand for oil and consequentially, a drop in prices. ExxonMobil, which is producing oil offshore Guyana, was also forced to announce cutbacks to its global work plans back in April.