Guyana’s debt levels are much lower than 1992

Finance Minister, Dr Ashni Singh has described recent comments on Guyana’s public debt by AFC Member of Parliament Moses Nagamootoo as that MP’s latest attempt to mislead the Guyanese people.
He added the AFC MP has a rapidly accumulating track record of deviation from the truth and, on this occasion, painted a misleading picture in relation to Guyana’s indebtedness, either deliberately to score cheap political points by factual distortion or accidentally by venturing outside the boundaries of his competence.
In relation to Nagamootoo’s statements reported in the February 10 issue of Kaieteur News, the minister said these statements attempt to deceive the reader by blatantly misrepresenting the facts as they relate to Guyana’s debt and economic situation.
Nagamootoo’s assertion that Guyana’s debt is “at its highest” simply lacks substance and constitutes economic sabotage and slander, since it gives a negative impression of Guyana to investors and creditors alike.
The facts are clear as day. Guyana’s debt levels are much lower now than they were in 1992, and more importantly, the current debt levels are sustainable, meaning that Guyana is now able to repay its debt without economic strain which is in stark contrast to the debt in 1992 which was completely unsustainable, since the country could not afford to meet its debt payment obligations.
A simple comparison of the public debt in Guyana dollar equivalent is misleading since it does not take into account the movement of the exchange rate to the U. S. dollar over the years or the growth that has occurred in the economy over the years.
As such, a comparison of the debt using U. S. dollars amounts would be more accurate.
“It is an insult to the intelligence of readers for Mr Nagamootoo to claim that “the country’s debt is at its highest” despite recognising that the total public debt at September 30, 1992 amounted to US$ 2.1 billion and that this figure had been significantly reduced to US$ 1.7 billion as at March 31, 2012,” the finance minister declared.

Ignoring facts
“Moreover, Mr Nagamootoo ignores a critical fact that would be obvious to any reasonable and logical thinking reader, that is, one cannot assess level of indebtedness without making reference to wealth and income levels. In other words, higher wealth and income levels make debt payments easier. As a result, a person or country with greater income could borrow more without putting their financial situation in jeopardy.”
“Put simply, Guyana’s total public debt declined from US$ 2.1 billion in 1992 to US$ 1.7 billion in 2012. At the same time, Guyana’s gross domestic product increased from US$ 371 million in 1992 to US$ 2.8 billion in 2012. Similarly, Central Government revenue has increased from US$ 141 million in 1992 to US$ 637 million in 2012. Guyana’s exports increased from US$ 382 million (including Omai export proceeds) in 1992 to US$ 1.4 billion in 2012. Guyana’s external reserves increased from US$ 191 million in 1992 to US$ 872 million in 2012.”
“In other words, over the period 1992 to 2012, Guyana’s public debt in U. S. dollars declined by 22 per cent, while GDP, government revenue, exports, and external reserves increased by 666 per cent, 353 per cent, 266 per cent, and 356 per cent respectively.”
Put differently, in 1992, Guyana’s public debt to GDP ratio amounted to 602 per cent. By 2012, that ratio had declined to 64 per cent. In addition, in 1992, more than 90 per cent of government revenue was being used to service national debt, whereas by 2012, that ratio has declined to nine per cent.

Debt levels sustainable
In addition, Guyana’s debt levels today are sustainable according to the most recent Debt Sustainability Analysis conducted by the International Monetary Fund and the World Bank.
This analysis assesses the country’s debt by taking into consideration all debt payment obligations due in the future, not just those due in any single year. The concept of debt used in this analysis is termed the “Net Present Value (NPV) of Debt” and this NPV of Debt has, in recent years, stayed within the sustainable thresholds applied by the IMF.
“Clearly, Guyana’s economy and public debt is in a far better position today than when the PPP/ C assumed office in 1992,” the minister noted.
The Kaieteur News article also states that the public debt figures “suggests that Guyana has been borrowing more”, as if to suggest that the government should not borrow to finance public services and other projects.
Minister Singh stressed that should this principle be applied to everyone, then people should not take mortgages to build or purchase new and better homes, but rather remain in their current living situation. Similarly, by this logic, businesses should not borrow to invest and expand their operations.
The government of Guyana pursues an agenda of development and progress which includes responsible borrowing to finance some of the facilities and services to the people which improve the standard of living and support further investment and development, Dr Singh explained.
Further, it should be noted that a significant portion of the addition to the public debt in recent years has been the result of borrowing under the PetroCaribe arrangement with Venezuela.
This arrangement allows Guyana to repay a portion of the oil debt with Venezuela through barter terms. Since 2009, Guyana has utilised this facility to the benefit of rice farmers and millers by exporting local rice and paddy to Venezuela.
As at December 31, 2012, Guyana had exported a total value of US$ 280 million of rice and paddy to Venezuela.
During 2012, Guyana had completed the first round of debt compensation with Venezuela to reduce the debt owed by US$ 100.8 million, which is the value of rice and paddy shipped from December 2009 to July 2011. This would have to be deducted from the 2012 debt stock. The remainder of the value of rice and paddy shipped to Venezuela would be discounted from the debt stock once subsequent debt compensation agreements are concluded in 2013.