Money Talk: How have we been serving our debts?

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Like most countries, Guyana generally finds itself in the position of borrowing money from other nations or regional and/or international organizations. This borrowing occurs when a nation has found itself in a state of having scarce financial resources which are not enough to meet its annual needs.
These can be in the form of needing new schools constructed and other important infrastructure.
But when the money is borrowed from either regional or international nations or lending agencies, it has to be repaid within a certain time frame that is agreed upon by both parties.
The nation also has to be very watchful of not borrowing too much, lest it lands into a position of having more than half of its annual revenue being absorbed by debt, which must be repaid.
Managing the nation’s debt portfolio for decades is the Bank of Guyana.
According to its latest statistical bulletin, “The outstanding stock of government’s domestic bonded debt, which consisted of treasury bills, bonds, debentures and the CARICOM loan, increased by 10.9 percent to GYD$90,572 Million, due mainly to higher issuance of treasury bills to sterilise excess liquidity in the financial system.”
In addition, a non-negotiable debenture was issued to the National Insurance Scheme (NIS), valued at GYD$4,882 Million, to assist with offsetting its investment loss in CLICO.
Furthermore, the total outstanding stock of treasury bills rose by 5.2 percent to GYD$81,468 Million, mainly as a result of higher issuance of the 182-day treasury bills during the review period.
Central Bank, in its report, said that the volume of outstanding 182-day and 364-day bills increased by GYD$6,898 Million and GYD$20 Million to GYD$7,152 Million and GYD$68,319 Million respectively.
“Conversely, the volume of 91-day bills fell by GYD$2,887 Million to GYD$5,998 Million. The maturity structure of treasury bills revealed that the share of 364-day bills represented 75.4 percent of the outstanding stock. The share of the 182-day bill was higher at 7.9 percent while the share of the 91- day bill was lower at 6.6 percent.”

Domestic Debt Service
According to Central Bank, Guyana’s total domestic interest charges rose by 9.8 percent to GYD$1,885 Million. It said that higher interest payments on treasury bills were attributed to greater redemption of the 91-day and 364-day bills compounded with higher yields during the review period.
The Bank also went on to state that interest costs on treasury bills redeemed increased by 10.1 percent to GYD$1,795 Million, resulting primarily from a 11.4 percent or GYD$164 Million increase in interest charges on the volume of 364-day bills redeemed during the year.

Outlook for Domestic Debt for 2017
According to Central Bank, total domestic debt stock is projected to decline marginally as a result of a reduction in the debt outstanding for the non-negotiable debenture to NIS, while domestic debt service payments are projected to increase at the end of 2017.
Bank officials said that debt service payments are expected to increase by 17.8 percent to GYD$2,200 Million at the end of 2017, resulting from a 455.4 percent expansion in interest payments for the 182-day treasury bills.
Additionally, the Bank said that debt service payments for debentures are estimated to grow considerably by 445.1 percent at the end of 2017, due mainly to principal and interest payments for the NIS Non-Negotiable Debenture.

External Debt
The stock of outstanding public and publicly guaranteed external debt increased by 2.1 percent to US$1,167 Million from US$1,143 Million in 2015. This outturn amounted to 33.9 percent of GDP at purchaser price, which is below the solvency indicator threshold.
The increase in the outstanding stock reflected greater loan disbursements by the Export-Import Bank of China, as well as the Caribbean Development Bank for project financing.
Obligations to multilateral creditors, which accounted for 59.9 percent of the total outstanding debt, increased by US$7 Million to US$699 Million. Liabilities to the Inter-American Development Bank increased marginally by 0.7 percent to US$493 Million, reflecting a change in the debt stock of US$4 Million during 2016.
Indebtedness to the Caribbean Development Bank increased by 2.2 percent or U$3 Million to US$147 Million and obligations to the International Development Association expanded by 22.4 percent or US$5 Million to US$25 Million.
Conversely, commitments to other multilateral creditors decreased by 2.0 percent to US$34 Million. Total bilateral obligations, which represented 38.6 percent of total external debt, increased by 4.2 percent to US$451 Million.
Indebtedness to the Export-Import Bank of China increased by 17.2 percent or US$21 Million to US$146 Million. Obligations to Venezuela, under the previously terminated PetroCaribe initiative increased by 1.8 percent or US$2 Million to US$123 Million.
Liabilities to Trinidad & Tobago and the Export-Import Bank of India decreased by 24.7 percent and 8.0 percent to US$19 Million and US$18 Million in debt respectively.

External Debt Service
According to Central Bank, external debt service payments fell by 45.4 percent to US$54 Million from US$98 Million in 2015. This represented 3.7 percent of export earnings and 6.3 percent of current revenue, significantly below the threshold for liquidity indicators. Principal and interest payments amounted to US$36 Million and US$18 Million respectively.
Furthermore, Central Government’s debt service declined by 44.2 percent to US$50 Million from US$89 Million one year earlier, primarily due to the suspension in principal payments made to the Guyana Rice Development Board for rice and paddy previously supplied to Venezuela under the Debt Swap Agreement.
Similarly, debt service by the Bank of Guyana decreased to US$4 Million from US$9 Million at the end of 2015. The Bank of Guyana, as at November 2016, has fulfilled principal repayments to the International Monetary Fund (IMF) for the loan obtained in 2006 under the Poverty Reduction and Growth Trust.
Payments to multilateral creditors decreased by 6.2 percent to US$36 Million, and represented 67.4 percent of total external debt service. Conversely, payments to bilateral creditors accounted for 32.6 percent of external debt service payments, contracting by 70.7 percent or US$ 42 Million.

Outlook for 2017
Central Bank projects that total external debt service payments are projected to increase by 19.0 percent to US$64 Million during 2017, compared with US$54 Million in 2016, due mainly to the increase in principal and interest payments to bilateral creditors.
It said that principal payments are expected to increase by 14.7 percent to US$41 Million while interest payments are projected to increase by 26.5 percent to US$23 Million.
Payments to multilateral creditors are likely to rise by 0.9 percent to US$37 Million, while payments to bilateral creditors are expected to increase considerably by 56.2 percent to US$27 Million.
Central Government’s debt servicing is expected to amount to US$64 Million compared with the US$50 Million in 2016.
Debt service payments by the Bank of Guyana are estimated to decline significantly by 99.4 percent to US$0.02 Million at the end of 2017.

Information and statistical data provided by Central Bank


(Article taken from the Guyana Inc. Magazine Issue 27)

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