GUYANA’S EXTERNAL DEBT CEILING TO INCREASE TO $650B – Finance Minister Dr. Ashni Singh

GUYANA’S EXTERNAL DEBT CEILING TO INCREASE TO $650B 

HGPTV News – Jan 30.2021

According to senior minister with responsibility for finance, Guyana’s domestic and external debt ceilings are expected to be increased to a whopping $650B, Dr. Ashni Singh. Find out more from Wendell Badrie

Raising the debt ceiling – Kaieteur News Editorial

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  • guyaneseonline  On 02/02/2021 at 12:13 am

    Raising public debt ceiling spells danger for future and current generations – Former Finance Minister, Winston Jordan.

    Kaieteur News – Following the tabling of two orders yesterday in the National Assembly by Senior Minister with responsibility for Finance, Dr. Ashni Singh to raise the debt ceiling for domestic and external debt by $500 billion and $650 billion respectively, several members within the political opposition have expressed great concern about the implications of this decision for the nation’s taxpayers.

    During an invited comment yesterday with Kaieteur News, former Finance Minister, Winston Jordan, was keen to note that the raising of the debt ceiling essentially spells danger for the current and future generations who would be made to service the ballooning debt.
    Jordan recalled that the reasoning proffered by Dr. Singh for the raising of the domestic debt ceiling was to remedy the existence of a large Consolidated Fund overdraft at the Bank of Guyana which accumulated over the last five years. Dr. Singh had also said that the increase of the external debt ceiling is to accommodate the existing level of external debt contracted, plus anticipated new borrowing to fund the government’s development agenda.

    Jordan was quick to note however that this is simply an attempt by the Senior Minister to pull the proverbial wool over the eyes of the discerning public since the evidence will show that over the last five years, the APNU+AFC regime had only racked up a deficit of $92B. In contrast to the PPP/C, Jordan said that it has racked up the same amount for 2020 alone.

    The former Finance Minister said, “…The deficit for 2020 under PPP was projected at $75B before they went to the Parliament on December 28, last, to extract another $17B. So if you assume that they collected all the revenues, which they claim they collected in 2020 and they spent all the money they claimed they did, then in one year, their deficit in 2020 is equivalent to the accumulated deficit of the APNU+ADFC regime in five years…”
    Jordan added, “…So his attempt to deflect won’t hold. What you are seeing is a clear mismanagement of the nation’s resources in a short space of time relative to the former regime.”

    Further to this, Jordan said that the PPP/C is constantly in the habit of saying that the APNU+AFC had a proclivity for overtaxing the nation and spending. Jordan said that while this continues to be one of the ‘erroneous mantras’ that it has an affinity for repeating, the PPP has now replaced it with a love for borrowing and spending. He warned once more that this approach will leave a huge burden on current and future generations.

    The former Minister said, “The PPP will essentially be expanding and borrowing massively instead of putting in quality domestic policies that would negate the need for such type of borrowing. In the 2020 budget, for example, a range of tax collecting measures were removed and as a result of doing that, the deficit ballooned.”

    He continued, “So what we ended up with is the worst deficit this country has ever seen in its history in a single year. What kind of policy is that? Is that sound macroeconomic policy? …”

    Jordan also bemoaned the fact that the PPP/C continues to criticize the Natural Resource Fund and its governing legislation while the account which is being held at the Federal Resource Bank in New York continues to collect millions of dollars from the sale of the nation’s oil. Instead of making use of this money, Jordan said that Guyana’s new government has taken the decision to “borrow like there is no tomorrow, like we are drunken sailors.”

    At the end of the day, the economist said that the raising of the debt ceiling is without question, a frightening development, especially at a time when one would have expected that part of the new oil bounty would not only negate the need for new borrowing but retire some of the existing debt. “…It is as if we have taken one step forward and 10 steps backward,” the former Minister concluded.

  • kamtanblog  On 02/02/2021 at 2:19 am

    Welcome to the world of “borrowing” beyond belief…..one does not borrow to fund indebtedness….do what Brazil or ex CIC USA do…..default on IMF WB debt or file for bankruptcy !
    Brazil defaulted twice in as many decades ?
    USA is bancrupt ?

    Google FMI

    USA/UK/EU printing presses have been printing
    24/7 for over a decade ? Will Guyana begin printing guyd$ ?
    Will digital money be replacing/supplementing
    paper/plastic ones ?

    Will gaze into my crystal balls for some answers ???

    Cynically

    Kamtan uk-ex-EU

  • brandli62  On 02/02/2021 at 10:18 am

    I was from the beginning of the Ali administration critical about VAT cuts and exemptions that were introduced to please their constituents. In addition, I is a big mistake to grant sweeping and indefinite tax exemptions to the oil sector. At best tax exemptions for the oil sector should be limited in time and scope, for example a maximum period of ten years and only limited to hardware expenses. No tax exemption should be granted to expat staff. The Guyanese employees of Exxon still have to pay taxes on their incomes. If you do not fix these issues, you’ll generate inequalities between the oil sector and the others who have to pay regular taxes. In general, it is good practice to reduce VAT or tariffs, if you have a plan who to recover the lost revenue. I have so far not seen any case where the he Ali administration communicated how the will make good for lost revenue. This is a recipe to accumulate huge debts down the road.

    • Peter De Abreu  On 02/04/2021 at 2:47 pm

      Compton,

      Check this out

      Debt by Year Compared to Nominal GDP and Events
      End of Fiscal Year Debt (in billions, rounded) Debt-to-GDP Ratio
      2017 $20,245 104%
      2018 $21,516 104%
      2019 $22,719 106%
      2020 $26,477 (at end of Q2) 136%
      88 more rows

      US National Debt by Year Compared to GDP and Major Events

      Compton,
      Nowhere in this article does it say US$.
      WE have to clarify first before discussing.
      G$650 IS only US$3.25
      You also have to Express borrowing as a % of GDP.
      What is Guyana’s annual GDP??
      2020 projected = US5.41 Billion
      SO that is only 60% of GDP

      AS A COMPARISON;

      The SVG 2019 Debt to GDP RATIO WAS 75.2%
      SVG has no oil, gold, timber or other mineral deposits.
      As a banker would I lend Guyana?? I sure would.

      My 2 cents

      Bro Pete

  • wally n  On 02/02/2021 at 1:28 pm

    Ordinary people do not have the “Kick it down the road option” incompetent Governments do this all the time, because people forget this burden will be left on their children/grandchildren..
    Major Corporations ask for the sky, that’s business, responsible Governments are expected to object, greedy,criminal “leaders” cut deals without consideration for the people they were elected to serve.
    People buy nicely wrapped empty packages, and constantly vote for these idiots no questions asked.
    SAD SO SAD

  • wally n  On 02/02/2021 at 3:27 pm

    gimme some time…..so I can frame this?

  • wic  On 02/02/2021 at 4:30 pm

    I may have missed it, but can someone inform me what currency is being discussed here?

    • brandli62  On 02/02/2021 at 4:56 pm

      Guyanese dollars, hence local currency.
      1 USD = 209 GYD or 0.048 GYD = 1 USD

  • wic  On 02/02/2021 at 8:29 pm

    Thanks Dr. B. Come to think of it, that’s a lot of debt even in GYD. It seems as if a large portion of the future oil revenue is already spent.

    • brandli62  On 02/03/2021 at 9:03 am

      The current oil reserves of the Stabroek block are estimated to be at 9 billion barrels. By 2024, Exxon expects to produce at least 500’000 barrels per day or 180 million barrels per year using three FPSOs. Hence, the currently known oil reserves will last for at least 50 years. Given that large off shore areas remain to be explored, it’s probably not too wild to speculate that Guyana will be in the oil production business for the next 100 years.

      With a production of 180 million barrels per year at a price of USD 50, this will amount to an annual gross revenue of 9 billion USD to be shared between Guyana and Exxon (and its partners Hess and CNOOC). That’s a lot of money and we are not even considering that the other oil blocks might harbor a similar amount of oil reserves.

      Nevertheless, it will be important that Guyana keeps its national budget balanced and the oil money should be put into the Natural Resource Fund. Guyana should only use the returns, ideally up to 5% on the NRF assets, to supplement the national budget. The returns will initially be small but they will steadily grow with more oil revenue accumulating the NRF year by year. It takes patient politicians to implement this policy but it will be a huge reward for the Guyanese people down the road as the NRF will grow to hundred billion USD or more and will provide revenue for the nation long after the oil reserves have been depleted. The slow increase of oil revenue becoming available for national spending will also prevent the Guyanese from overheating.

      The NRF strategy follows essentially Norway’s example, which has benefited the Norwegians nicely over the years. Hence, let’s be patient and make sure the Ali administration respects and strengthens the NRF strategy to the benefit of all present and future Guyanese.

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