Guyana has 2nd lowest debt-to-GDP ratio when compared to G20 countries – VP

…borrowing to invest is a “good thing”

Guyana sports the second lowest debt-to-GDP (Gross Domestic Product) ratio when compared to G20 countries, Vice President Dr Bharrat Jagdeo is contending in light of repeated contentions that Government is borrowing too much.
Speaking during his weekly press conference, Vice President Jagdeo – an economist by profession – sought to further simplify the fact that the country is on a steady pace, and borrowing to finance key projects would only expand the economy further. He iterated that borrowing to invest in the country is a good thing, given the spinoff positives that would be generated in the future.
The G20 consists of 19 of the largest economies in the world, producing 80 percent of the world’s Gross Domestic Product and 75 percent of global trade. Drawing comparisons with Guyana, he shared, “If you look at their debt-to-GDP ratio, only one country is lower than Guyana, and that’s Russia; it has a debt-to-GDP ratio of about 17 percent. Greece is like 165 percent. In Guyana’s case, it’s 22 percent. We have the lowest debt-to-GDP ratio in the G20, excluding Russia.”

Borrow to invest
According to Jagdeo, many of the world’s developed countries have utilised borrowing mechanisms to build strong economies. He said, “If you borrow to invest, it’s a good thing, because you expect that the investment would yield a return far greater than the cost of the credit to you in the future. Once that happens, that is how countries grow wealthy…
“If that didn’t happen, we didn’t need banks; people wouldn’t have borrowed. But I suspect your capacity to repay is often assessed when you’re going to borrow, your creditworthiness,” he explained.
Guyana’s external debt stands at some US$1.8 billion currently in a US$22 billion economy. In 1990, it stood at US$2.1 billion in a US$300 million economy, Jagdeo explained. As such, he said, “It’s not a massive accumulation of debt, because we repaid a lot and we got a significant amount written off in the 20-odd years…
“It’s significantly lower in nominal dollars, because US$2.1 billion in 1990 in today’s dollar would probably be US$5 billion, when you look at time value of money,” he explained.
The VP has posited that Guyana is borrowing to add to its productive economy. He said this is a different picture when compared to the 1990s, when debt service was 94 percent of revenue.
Jagdeo had previously insisted that the economy would not be harmed by borrowing, because it is projected to continue down a path of rapid growth: at 34.3 per cent this year, on the heels of an incredible 33 per cent expansion is 2023.
“Most of our recurrent budget is self-financed; that is, from revenue. The capital budget, we borrow mainly for capital expenditure; and anyone who knows, if you have a business, you borrow to invest in the future, for future income. And all of these investments that we’re making will enhance our capacity to have greater income in the future as a country; more revenue, so we can get wealthier…the investments are made so we can reduce costs…,” Jagdeo had explained in relation to the gas-to-energy project, which is calculated to save Guyana about US$100 million each year when electricity rates are slashed. (G12)