Fiscal space to expand with rising debt ceiling

– a capillary cap being reviewed to facilitate Guyana’s developmental trajectory

AHEAD of much-awaited economic ascent, the Government of Guyana is looking to expand its fiscal space and regulate financial designations, made under the former APNU + AFC Coalition Government, by increasing the current early-adjusted “debt ceiling” in the 1990s. The orders seeking to make the necessary adjustments to the domestic and external debt ceilings were laid in the National Assembly on Thursday, by the Senior Minister in the Office of the President with responsibility for Finance, Dr. Ashni Singh.
The People’s Party / Civic Progressive Party Government (PPP / C) proposes that the current domestic debt ceiling should be increased from $ 150 billion to $ 500 billion, and that the current $ 400 billion external debt ceiling should be increased to $ 650 billion .

This will, in effect, increase the Government ‘s fiscal space [budgetary room], but, according to Dr. Singh, the increase is also being sought in order to regulate the state of public finances, which was heavily affected by a major overdraft at Guyana Bank, which arose over the past five years by the first APNU + AFC Government.
“When we took office [August 2020] we tried to gauge the state of the public finances … this process is still ongoing, but as time goes by, you have heard you share some of the issues we have identified in stock take and the state of domestic finance. .

“It was discovered that the Government [APNU+AFC] has built up a very substantial overdraft in the Central Bank, and we have spoken publicly that this overdraft has been accumulated and raised steadily over five years, ”said Dr. Singh told reporters on the sidelines of a National Assembly sitting, on Thursday.
It was reported that the Government, having been elected to office in August last year, had met a net overdraft of G $ 93 billion in the Central Bank.
The Government is also bound by a $ 30 billion G $ 30 billion National Industrial and Commercial Investments Limited (NICIL) bond, of which G $ 17 billion has been drawn down, of which G $ 12 billion is owed to the Guyana Power and Light Incorporated (GPL).

“We inherited a huge overdraft. In addition, we also found that there was a lot of other money not paid to other agencies, mainly suppliers of goods and services, ”Minister Singh lamented, noting that the Government is still in the process of disclosing other obligations.
Had all those issues been handled in the “proper way,” the ceilings would have already been reached.
In explaining the situation, Dr. Singh said that the previous Government had tried to fund fiscal deficits through overdrafts to avoid the debt ceiling.
“If it had been funded by issuing Government guarantees, the ceiling would have been reached … we would have come in when the ceiling was already reached if you treated the overdraft in the way it was supposed to be,” ”The senior minister explained.
For this reason the Government is looking to regulate the status quo by increasing the debt ceiling.

The situation needs to be regulated because funding shortfalls are unavoidable, in that the Government would have to borrow additional funds to fund projects comparable to the nation’s development path.
Undoubtedly, additional debts combined with existing liabilities, which are still being disclosed, would push the ceiling to its current limit, so this requires an increase.
“We have outlined a comprehensive program for transforming Guyana’s economy … we are investing in infrastructure and social services that will require new funding to be contracted … so we need space to contract additional funding,” reasoned Dr. Singh.
The senior minister also explained that an increase was needed as the current ceiling provided for the size of the economy in the early 1990s and not the current and potential economy.
But, even as the economy grew, Dr. confirmed that Singh said that the Government will maintain the same commitment to ensure that the country stays on a path to sustainable debt while, at the same time, being able to invest in the required areas.