Guyana’s debt could reach 66% by 2020 – analyst projects
With increased borrowing, Guyana can see itself in a place where the debt will be 66 per cent of the Gross Domestic Product by 2020, former Executive member of the Alliance For Change (AFC) and overseas-based Guyanese financial analyst, Sasenarine Singh has projected.
The former AFC member told Guyana Times that this projection is based on the current Administration’s trend of spending in such a weak economy.
“The IMF in their Staff Report revealed in 2015 said that “the Debt to GDP ratio was 48.3 per cent. This is expected to skyrocket to 55.1 per cent by the end of 2017.”
To compound the issue, Singh pointed out that the traditional sectors of the economy – the six sisters – which include rice, sugar, bauxite and forestry, have been shrinking save and except for gold.
“If five of the six sectors are underperforming and only one is stable. Then, why would you, in that environment, go out and borrow so much money over the last two years. It is financially irresponsible and I believe that the civil society has a role to pull the Government in check,” he asserted.
While underscoring the potential Guyana has to become a wealthy nation based on the vast number of natural resources, the financial analyst said if this trend continues, this dream will never be realised. In fact, there could be a repeat of what happened in Guyana for 50 years gone by, in the next 50 years.
“You would be condemning the people to 50 more years of poverty if the Granger Administration does not change course and wake up. And do not tell me about oil,” Singh said, adding “just look at Equatorial Guinea and Nigeria and the way those economies were managed and why would you expect any difference from this Administration?”
In providing his views on the recent International Monterey Fund (IMF) Article IV Consultation Report for Guyana, Singh said the expectation that in 2017 the fiscal deficit is set to deteriorate indicates that Government’s operation is grossly inefficient and they are spending way more that is normal to achive tangible outcomes.
In 2015, Guyana also recorded a negative fiscal balance of 0.2 per cent, while in 2016 the figure was at negative 2.9 per cent and the expectation in 2017 it will be negative 7.2 per cent. “This basically means that the Government is spending way more than it’s earning and if it is spending way more than its earning, then how does it fill this financial gap?” he questioned.
“It means they will have to borrow more. It also means they will have to tax the people more in 2018 and one just has to look at the projection that the Administration has provided to the IMF, it shows that tax revenue as a percentage of GDP is set to increase in 2018 compared to 2017.
How does that happen – by taxing the people more. And these are very important discoveries because the Granger Administration has become very economical with the financial truth these days. The solution is to cut waste from the Public Sector,” he added.
Another point raised by the financial analyst was the fact that Government is constantly in both the domestic and international market looking to borrow.
This according to him will crowd out opportunities for the local Private Sector, which is also facing many issues since the slow up of the economy.
Speaking about the IMF report which also revealed that non-performing loans remain high remain high at 12.9 per cent of total loans, Singh said for persons to understand how this is affecting business, persons would have to first understand what is a non-performing loan.
“It is basically bank loans that are borrowers have not been servicing their instalments or interests for 90 days or more. It means bad debt. It means that the banks will have to put aside portions of their profits to write-off those loans if they fail to recover them by the courts” he explained.
According to him, the loan portfolio of commercial banks did not perform well during 2016 and this exposes the fact that business people and other private consumer borrowers are struggling to pay their loans.