In an attempt to regulate many issues revealed after taking office in 2020, as well as facilitate new funding for a transformational development agenda, the government has moved to increase the ceilings for domestic and external debt.
Earlier today, the Senior Minister in the Office of the President with Responsibility for Finance, Dr Ashni Singh, introduced two orders in Parliament proposing adjustments to both ceilings.
It was proposed that the domestic debt ceiling be increased to $ 500 billion, almost 3 decades after the last review up to $ 150 billion, in 1994. In addition, a new $ 650 billion external borrowing ceiling was proposed, three decades on its last increase to $ 400 billion.
The move to increase the domestic debt ceiling was influenced by several factors, one of which is the existence of a large Consolidated Fund overdraft in Guyana Bank, accumulated over the last 5 years. The Government is now seeking to rectify this situation by issuing appropriate instruments.
However, if the overdraft were addressed under the current ceiling for domestic debt, a cut would result. In addition, the government would require the issuance of new domestic instruments, in the future, to fund various policy initiatives, and stimulate the development of the domestic financial market. In the meantime, the step to increase the external debt ceiling is to provide for the current level of contracted external debt, along with projected new borrowing to fund the government’s development agenda.
Importantly, these reforms to the external and domestic debt ceilings do not threaten Guyana’s long-term debt sustainability, given the significant economic progress made since the early to mid-1990s (when the ceilings were last reviewed) and the firm’s economic outlook. country. At the time of the last reform in 1991, Guyana’s external debt ceiling was set at more than 1,000 percent of GDP. In contrast, the proposed new external debt ceiling would equate to less than 60 percent of GDP, using the latest GDP 2020 estimates.
On the domestic side, when it was last revised in 1994, Guyana’s domestic debt ceiling was set at almost 200 percent of GDP. In sharp contrast, the revised domestic debt ceiling would equate to less than 50 percent of GDP. The above comparisons make clear that the carrying capacity of Guyana’s existing debts could accommodate the proposed ceiling increases.
In summary, this important move serves to properly regulate and reflect significant liabilities built up over the past five years and harness Guyana’s debt-carrying capacity to fund the government’s transformational development agenda. This latest move is consistent with the titular administration’s excellent track record of prudent debt management while protecting Guyana’s fiscal and long-term debt sustainability.