…hike attributed to disbursements from multilateral banks
Guyana’s public debt is on the rise, with the 2017 end-of-year outcome report detailing that for the year 2017 the stock of public debt and the public debt to Gross Domestic Product (GDP) ratio have increased.
Bank of Guyana, Georgetown
According to the report, total public debt was recorded at US$1.6 billion, exceeding the projected amount by US$8.4 million. The public debt-t- GDP ratio actually increased by 0.9 per cent to be recorded at 46.1 per cent.
According to the report, higher disbursements of money from the Export-Import Bank of China (China Exim Bank); the Inter-American Development Bank (IDB) and the Caricom Development Fund (CDF), as well as delayed debt service payments, are to be blamed.
The report notes that debt service payments to Venezuela were delayed “due to sanctions imposed by the United States on debt and securities transactions related to that country. As a result, Guyana’s international correspondent banks have been unwilling to transfer payments to Venezuela”. It adds, however, that “in early 2018, Government opened an account with Bank of Guyana into which payments are being posted”.
Meanwhile, external public debt was US$1.2 billion, accounting for 74.3 per cent of the total debt stock, as of 2017 year-end. In terms of the domestic side, the domestic public debt stock was US$430.1 million, exceeding the budget projections by US$2.3 million.
“This was primarily due to the issuance of a new 91-day treasury bill. The share of domestic public debt accounted for 25.7 per cent of the total public debt stock as at December 31, 2017,” the report explained.
Servicing debts
When it comes to servicing these debts, the report states that total public debt service amounted to US$71.7 million for 2017. This was, in fact, lower by 2.5 per cent than the projected 2017 sum of US$73.5 million.
“External public debt service for 2017 amounted to US$60.8 million, US$1.9 million less than projected at the time of Budget 2018,” the report notes, adding that for 2017, 6.8 per cent of total revenue earned went towards servicing the external debt.
According to the report, this is a marginal increase from the 6.7 per cent projected at the time of the 2018 Budget. Domestic debt service payments of US$10.9 million, however, remained in line with projections.
At least one of the reasons behind the increase in the debt profile can be laid at the feet of the East Coast Road expansion project. In January of last year, the Guyana Government had received a US$45.3 million concessional loan from the China Exim Bank to complete the expansion project.
This concessional loan was inked less than two months after the formation of the Framework Agreement between the Governments of the Cooperative Republic of Guyana and the People’s Republic of China that took place on November 23, 2016. Works have since commenced.
The ECD Road expansion project entails a four-lane extension from Better Hope to Annandale, and a two-lane upgrade from Annandale to Belfield, with a total length of 16,998 kilometres of roads and 33,996 kilometres of drains to be built.
Apart from the road expansion, residents were also going to benefit from the project, which included improved drainage since the East Coast is usually susceptible to floods. Initially, the People’s Progressive Party/Civic (PPP/C) Government had tried to finance the road expansion project, but the funding was not readily available; hence, the Administration decided to use local funds for preliminary works and use the funds from the Chinese to complete the works.
The preliminary works for the four-lane upgrade were completed at the end of 2014. This included the widening of the roads and installation of drainage facilities. The project was divided into seven lots which were awarded to different contractors.
With the China Exim Bank putting up most of the finances for the road expansion, Guyana had awarded the contract to China Railway First Group for some US$42.7 million. The Chinese construction company reportedly put in the lowest bid of US$46.994 million.
