Significant reduction in public debt recorded in Guyana, other countries – ECLAC

– Guyana also among countries with steepest reduction in inflation

The United Nations Economic Commission for Latin America and the Caribbean (ECLAC) released a new report on Tuesday that reveals that only a handful of countries in the region, including Guyana, have managed to significantly reduce their public debt over the past year.
The report in question, the ‘Economic Survey of Latin America and the Caribbean 2023’, states that the Caribbean had a gross central government debt that represented 77.9 per cent of the gross domestic product (GDP) as at December 2022.
There are even instances of countries – such as Barbados and Suriname – having debt that was more than 100 per cent of GDP. Guyana was one of the few exceptions – along with Belize, Barbados and Jamaica – that managed to significantly reduce its debt last year.
“As in Latin America, the upturn in economic growth generated a strong denominator effect, since public debt levels remained broadly stable in absolute terms during the year. In this regard, there were significant reductions in Belize, Barbados, Guyana and Jamaica.
“In Guyana, GDP is expected to grow by more than 60% in real terms following the start-up of offshore oil production. In Suriname, by contrast, the level of debt has risen, owing to the effect of the devaluation of the national currency on the balance of foreign-currency debt,” the report states.
Further perusal of the report shows that Guyana’s Central Government gross public debt was recorded as 24.7 per cent of GDP in 2022. It has been steadily falling over the past few years, going from 47.5 per cent in 2020 to 40.5 per cent in 2021.
The report further points out that despite the relative decline in the subregional debt average, debt levels in the Caribbean remain very high compared to those of other regions with similar income levels.
“Although Central Government debt levels in the region have declined relative to GDP, they remain well above a healthy level that would ensure the sustainability of the region’s public debt, so they constitute a source of vulnerability in the currently prevailing macroeconomic conditions,” ECLAC said in the report.
When it comes to individual countries, the report notes, 25 had inflation rates that were lower in June 2023 (or the latest month for which information is available) than at the end of 2022. Guyana was among the countries to record the steepest reductions in inflation, along with Chile, Costa Rica, Guatemala, Honduras, and Trinidad and Tobago. These countries, according to ECLAC, had their inflation rates fall by more than 4 percentage points.
Back in July, Vice President Bharrat Jagdeo had cause to debunk claims that Guyana’s future generations will be burdened with debt, noting that the facts show Guyana has one of the lowest debt-to-gross domestic product (GDP) ratios in the world.
He explained that from the 90s to now, Guyana’s capacity to carry debt has been vastly enhanced, and its capability for servicing such has also grown, to the point where, in 2028, a year’s revenue would be equivalent to almost the total outstanding debt.
“We’re careful in our management of debt,” Jagdeo had affirmed during a press conference, also explaining that in the 90s, Guyana’s debt was over 900 per cent of its GDP.
“…debt was nine times the size of our economy, and we were using over 100 per cent of revenue to service debt; so that meant every cent we collected in revenue was going to service debt, mainly external debt. effectively, our country was bankrupt,” he said.
He explained that it had got to a stage where Guyana was declared uncreditworthy, and as a last resort, the Government was involved in an International Monetary Fund (IMF) programme to deal with the issue.
Fast forward to 2015, pre oil discovery, Guyana’s debt had come down to 45 per cent of its GDP. Jagdeo said this could be attributed to a combination of factors, including the fact that some debts were written off, some were paid off through an aggressive programme that he himself had led, and the country’s economy had expanded.
In July, the People’s Progressive Party/Civic (PPP/C) Government had also increased the debt ceiling, in line with its commitment to maintaining transparency and prudent debt management by reducing the dependency on utilizing the Consolidated Fund overdraft as a means of financing. this was something that occurred under the former a Partnership for National Unity/Alliance For Change (APNU/AFC) administration. (G-3)