GUYANA: Avoid borrowing for projects from future oil sales – Former Minister warns

Geoffrey Da Silva

He said that Guyana ought not to meet a point at which it is so over-dependent on oil income for its revenues that its public spending becomes unrestrained and it is betting on the arrival of money from oil it plans to sell.       

He acknowledged the need to build resilient public infrastructure, but explained that as Guyana is currently the sixth poorest of South American and Caribbean nations, it must plan its economy carefully, as a failure to do so could yield disastrous consequences.

He noted low foreign debt and a decreasing debt-to-GDP ratio as one of the hallmarks of good governance.

Da Silva’s comments come at a time when Guyana’s non-oil economy is suffering.
Vice President Bharrat Jagdeo had revealed earlier this month that Guyana’s non-oil economy is in recession, registering a shrinkage this year of 4.9 percent. He had said that the Government would look internationally for assistance to revitalise the economy.

Guyana has constantly been bombarded by international banks and other financiers with offers of loans. The situation was noted in January by former Finance Minister, Winston Jordan, who told Reuters that international entities would talk at meetings of how much they can lend.

“At the IMF meetings, I was bombarded, at the IDB meetings, I’m bombarded with people telling you how much money they can lend you,” he is quoted as saying, in reference to the International Monetary Fund (IMF) and Inter-American Development Bank (IDB).

Jordan had said that the offers go as high as US$500B and US$2B. Commenting on the situation, Da Silva noted and concurred with statements by Jagdeo on Kaieteur Radio that the country must not be a victim of the “Dutch Disease”.

Da Silva added that one of Guyana’s greatest challenges will be to build a diversified economy with its oil industry.

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Comments

  • kamtanblog  On August 27, 2020 at 3:59 am

    Borrowing is not the question.
    Rates of interest charged by IMF IDB
    is ?
    Brazil defaulted twice in as many decades
    on IMF loans on interest rates of 30%+
    Google FMI (for more info)…

    Today in UK interest free loans are easily
    available to consumers repaid over 1-5years.

    Google Central banks interest rates FMI

    Japan -0%

    Borrow what you can afford to repay
    interest free way forward.

    Am no economist or financial consultant
    but am a money consumer.

    Most of my shopping is done “on line” today
    interest free and delivered free to my home.

    All on my iPhone
    My other info storage facility.

    Kamtan

  • brandli62  On August 27, 2020 at 5:39 am

    “Da Silva added that one of Guyana’s greatest challenges will be to build a diversified economy with its oil industry.”

    I could not agree more with Mr. Da Silva’s assessments. If money is raised on the capital market, it should be done taking advantage of the record low interest rates. The money raised should be used for projects with a long-term perspective in mind, like infrastructure improvements, which includes improving the roads that run from the Suriname boarder to the Essequibo, protection of the coast from raising sea levels, updating of the drainage systems, improving the harbours, and investing in renewable energy. Regarding the sugar industry, it can only be saved by investing in mechanisation to remain competitive with other producers. Some has to be done with the rice industry. I mechanisation will cut costs and make both sectors internationally competitive. The freed labor force needs to be retrained for the infrastructure projects mentioned above.

    • kamtanblog  On August 27, 2020 at 6:24 am

      Great vision except the capital city re-location
      on higher ground upriver nearer CJ international
      airport.
      Agree there is still a future for agriculture
      /other industries supplementary.

      GT is below sea level ..high tides or tsunami
      will make it another Venice with wooden houses
      very likely.

      Early days

      Decisions decisions !

      Kamtan 🙏

      Not holding my breadth!

      • brandli62  On August 27, 2020 at 7:20 am

        Wow, we largely agree on these issues. I am ambiguous about relocating the capital. GT could be an architectural jewel, if the colonial building were restored to their old glory. Once completed, GT could apply for having the historic downtown listed as an UNESCO world heritage site. This would be a huge assess for the tourism industry. Call in the Dutch to work out a concept to protect the costal regions from sea rise. They are still the best in the world!

      • Imran Hack  On August 27, 2020 at 1:19 pm

        Is there any adjustment to the Guyana dollar against the US dollar soon?

      • brandli62  On August 27, 2020 at 2:08 pm

        Good point, Imran. I was wondering about this myself recently and I checked the exchange rate (USD to GYD). It has stayed largely constant with a 52 Week Rang of 0.0048 – 0.0051.

        https://finance.yahoo.com/quote/GYDUSD=X?p=GYDUSD=X&.tsrc=fin-srch

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