–as Government continues to maintain prudent debt management record
With a history of prudent debt management of the country’s economy beginning post 1992, the current administration, armed with its ambitious policies has been continuing this trend with the aim of improving the lives of citizens, while acknowledging that new financing is still required as the country’s economy expands at an exponential rate. However, even as new loans are contracted, the administration remains steadfast in maintaining its sterling record.
Noteworthy, has been the government’s effective debt management practices which have contributed to a large decline in the country’s debt ratios over a sustained period. Guyana’s debt-to-GDP ratio declined from over 600 percent in 1991 to 27 percent in 2023. Additionally, in 1992, about 90 cents of every dollar of revenue earned was used to make debt service payments and today this has been significantly reduced to about 6 cents of every dollar.
Additionally, the International Monetary Fund’s (IMF) 2023 Article IV Report for Guyana indicated that the risk of (overall and external) debt distress remains moderate, with debt dynamics improving significantly with incoming oil revenues. All external debt indicators remain well below the relevant indicative vulnerability thresholds under the baseline scenario, which incorporates the long-term effects of oil production. The IMF in its Article IV Report also commended the authorities’ commitment on maintaining debt sustainability and a balanced growth path through moderating fiscal impulses over the medium-term, while continuing to address development needs.
As the government continues to borrow externally, with efforts to do so in a responsible manner, loan agreements from time to time would require adjustments or improvements that would allow for government to reduce its risks and improve its benefits from the financing arrangements. To this end, the government has signed and today, Senior Minister in the Office of the President with Responsibility for Finance and the Public Service presented to Parliament, the following two amendatory loan agreements:
- The first Amendment Agreement is dated May 24, 2024. This Agreement amends the Export Finance Facility Agreement dated June 14, 2022, between the Co-operative Republic of Guyana, represented by the Ministry of Finance as the Borrower and UK Export Finance as the Lender, and the UniCredit Bank Austria AG as the Agent and Arranger, for an amount of EUR 161,016,949.15 for the Guyana Paediatric and Maternal Hospital Project. This Amendment Agreement is to facilitate the inclusion of a Climate Resilient Debt Clause into the original Agreement.
As the debt landscape evolves, both creditors and borrowers are pursuing innovative ways to mitigate debt burden crises associated with climate incidents, natural disasters, pandemics, or epidemics.
Guyana is one of the first countries to adopt the Climate Resilience Debt Clauses (CRDCs) directly as part of its loan agreement with the UK Export Finance. The adoption of CRDCs will support Guyana’s economic resilience by allowing the deferral of debt payments in the wake of climate crises.
In essence, should Guyana experience a severe environmental shock or health crisis, it will have more to spend on what will be most important: protecting its citizens’ lives and livelihoods as the deferral of repayments will provide for low income and developing countries that become severely affected by natural disasters to repurpose financial resources set aside for deferred payments to repair physical infrastructure damages. On the other hand, in the event of an epidemic caused by an environmental catastrophe, the deferred payment can be utilized for much-needed medical supplies and equipment.
- The second Amendment Agreement presented to Parliament today by the Senior Minister is dated July 4, 2024. This agreement amended the Term Loan Facility Agreement dated December 22, 2023, for an amount of CAD 120 million, between the Cooperative Republic of Guyana and Canada, for spending relating to combating human trafficking, gender-based violence and women economic empowerment. This Amendment Agreement incorporates changes to the “Repayment Schedule” which is necessary to facilitate the drawdown of the second tranche of CAD 39 million under the Term Loan Facility Agreement.
The government has continuously been reaffirming its commitment to ensure the fulfilment of all of its promises of a brighter and better future for all Guyanese, while maintaining its track record of transparent and prudent debt management.
