Apr 18, 2017 Source

– a 5.6% decrease from previous year

Finance Minister, Winston Jordan

To service its external public debt, the Government in 2016 expended US$53.8M, which is US$0.1M lower than was projected. This is according to the End of Year Outcome report for 2016 which was presented to parliament on Thursday by Minister of Finance, Winston Jordan.
The report was done to provide information to parliament concerning fiscal performance and the accuracy of economic forecasting. It is an update to a number of projected data used in the 2017 budget.
According to the report, the reasons for the amount used to service the debt being lower than projected were the variances in exchange rates used at the time of the budget versus the actual exchange rates applied at the time of the payments. External public debt denotes money which the country owes to international lending agencies.
The amount spent in 2015 to service external public debt was $20B or US$96M. This reduction is explained by the fact that in 2015, 11.1 per cent of total revenue was spent towards servicing the external public debt. However, for 2016, only 5.6 per cent of total revenue was used in this regard.
In June 2016, it was reported that Guyana’s external debt declined by 2.7 per cent, or from US$1.175B at the end of June 2015 to US$1.143B at end of June 2016. The decline was due mainly to repayments of the oil debt to Venezuela in the form of rice and paddy shipments.
External principal and interest payments totalled US$27.1M during the first half of the year, of which central government payments totalled US$24.5M. The total external debt service payments decreased by 46.9 per cent as compared to 2015.
The Ministry of Finance had said that this reduction was a direct result of the decrease in debt service payments to Venezuela. The PetroCaribe Agreement and the Guyana-Venezuela Rice Trade Agreement (GVRTA) ceased in July 2015. The effect of this was that there were no more shipments of rice and paddy to compensate for the oil debt to Venezuela.
The document said that for 2016, 5.6 per cent of total revenue earned went towards servicing the external public debt, which was roughly the same as the 5.5 per cent projected at the time of the 2017 budget presentation. It was noted that this was a significant decrease compared with 11.1 per cent of total revenue being used back in 2015.
As it relates to domestic public debt, the report said that as of December 31, 2016, the domestic public debt stock stood at US$438.6M. This is said to be marginally lower than the US$439.4M which was projected.
Further, the report stated that Guyana’s total public debt totalled US$1.601B, which is US$1.6M higher than projected at the time of the 2017 budget. This marginal increase, according to the Ministry, was mainly attributed to disbursements from the Export Import Bank of China.
These payments were made in December 2016 and as a result were not included in the revised 2016 total public debt position at the time of the 2017 budget presentation. However, the change in the total public debt to Gross Domestic Product (GDP) ratio remained as projected at the time of the budget presentation, with a decline from 48.6 per cent in 2015 to 46.4 per cent in 2016.
In addition, as of December 2016, external public debt stock stood at US$1.162B, which was described in the report as being marginally higher than the projected 2016 figure of US$1.159B. This particular debt accounted for 72.6 per cent of total public debt stock at the end of the year.
According to the 2017 budget, Guyana’s external public debt unfunded principal for some of its major creditors for 2016 was $1.488B to the Caribbean Development Bank; $97M to the European Economic Community; $56M to the International Development Association; $2.072B to the Inter-American Development Bank (IDB); $334M to India (Line of Credit, Tata Rescheduled and Eximbank); $1.068B to the China Eximbank and $71M to the Caribbean Development Fund.
In November of last year, Minister Jordan had said in his Annual Public Debt report that Guyana’s debt profile continues to remain stable and sustainable over the medium-term. He had said that Guyana is in a position where it has to face the challenge of maintaining debt sustainability in a volatile and uncertain global economy.
Notably, he said that borrowing has also become uncertain for Guyana caused by recent increases in the country’s income. According to him, this will have far-reaching effects as it relates to Guyana accessing financing.
He said that as a result of the nation’s higher GDP, concessional lending would become scarcer. To this end, he explained that to access affordable financing, Guyana has sought alternative sources of funding, particularly from South-South partners such as EXIM Bank of China, EXIM Bank of India, the Mexican Agency for International Cooperation and Development, and the Islamic Development Bank.
According to him, it is imperative for Guyana to strengthen its institutional framework for public debt management which includes establishing a sound and modernised legal framework for debt management and implementing a comprehensive medium-term debt strategy that is not only cost- and risk-focused.