The Center for Latin American Monetary Studies (CEMLA) is one of the key international agencies which has been assisting Guyana with its debt
management for more than 20 years.
With CEMLA’s help, Guyana has made notable progress. Among the notable achievements to date have been:
1) The formulation of a National Sustainable Funding Strategy in 2015, inclusive of a Debt Sustainability Analysis and Public Debt Strategy;
2) A comprehensive Public Debt Management Procedures Manual which has improved and ensured consistent debt management operations whilst reducing operational risk; and
3) The first National Workshop on Debt
Management Self-Evaluation and Improvement (DMSAI) in 2016, using the World Bank Debt
Management Performance Assessment (DeMPA) Methodology to assess our debt management operations, and chart a course for improvement and achievement of international
best practices.
These achievements are tangible indications of the Government’s redoubled efforts to ‘raise the bar’ in the management of public finances, including the public debt, in order to heighten transparency and accountability, value for money and efficient and effective allocation of our resources.
Further to this, Guyana is well acquainted with the harsh consequences of an onerous debt burden; the painful process of structural adjustment; and the acrid outcomes of weak and impudent management of the public purse by previous administrations. And, in spite of many unhelpful comments and misguided actions, since the presentation of the last budget, our Government remains firm in its stance to do all that is required to prevent the recurrence of such situations.
Some of our policy measures may be bold in their intent, leading to unpopular reactions. However, while governments are often swept into power on a wave of popularity, they are similarly swept out ignominiously when they succumb to demands, especially by special interest groups, to implement policy measures that have short term gain for these groups, but long term pain for the mass of the population.
To date, the Government has managed to reduce the debt further to 46 percent of GDP at the end of 2016, relative to 2015. But it cannot become complacent. In fact, it does not have the luxury of sitting on its laurels, for the lower debt ratio was achieved at the expense of the unsatisfactory implementation of the Public Sector Investment Programme (PSIP), where it failed to achieve an exemplary disbursement rate of foreign funded projects. This led to the unacceptable situation of negative net inflows by Guyana’s major donor, at a time when foreign exchange supply was challenged because
of underperformance in critical sectors and areas of the economy.
One also has to be cognizant of the impact on the public debt, of the many loans contracted by the previous administration (for example, CJIA Modernization Loan of US$135 million and the East Coast Road Widening Loan of US$50 million from China Exim Bank), several of which remained largely undisbursed at the time this Government came to Office; and the ill-advised and/or poorly conceived projects (Skeldon Sugar Factory, Marriott Hotel, Widening of Sheriff Street) and investments (NIS investment in CLICO and Berbice Bridge) embarked upon by the previous administration, which do not contribute to the Treasury, but the repayment of whose debts, nevertheless, are being met by the Government and, by implication, the citizens of this country – at least those who pay taxes.
With an outer debt ceiling limit of 60 percent of GDP, these loans have restricted the fiscal space and reduced room for maneuver, at a time when the new government is seeking to implement a new generation of transformative projects such as the DemeraraHarbour Bridge and the Georgetown-Lethem Road.
Undoubtedly, the hard work must continue to ensure that debt levels remain sustainable, within prescribed parameters. Even with past fiscal consolidation and oil revenues on the horizon, we must be cognizant of the new challenges that confront us, such as dwindling sources of concessional financing and vulnerability to external shocks.
Over the last two years, the government has sought to widen the range of multilateral partners, from which it can access concessional or near concessional resources, given its new status of upper middle income country.
In this respect, Guyana has joined the Islamic Development Bank and is renewing its relationship with the OPEC Fund for International Development (OFID).
Further to this, it is critical that adequate attention be paid to the internal debt as moves are made to mobilize domestic resources, both as a means of reducing Guyana’s exposure to external risk factors and to support development goals. In fact, a team of experts from another development partner, Caribbean Regional Technical Assistance Centre (CARTAC), was in Guyana, on a mission to aid the government in developing its domestic bond market. In the context of debt sustainability, this gives the government more flexibility to respond to external shocks, while reducing Guyana’s reliance on external borrowing.
As part of this exercise, the government made efforts to improve the country’s rating on the DeMPA scorecard, in particular, on Debt Performance Indicators (DPI) 3 and 6, where Guyana has obtained relatively low scores. These indicators cover the establishment of a formalized Debt Management Strategy and Coordination with Fiscal Policy
