Government to adjust debt ceilings to repair inherited obligations, provide for future development – Guyana Times
HomeTop StoriesGovernment to adapt debt ceilings to repair legacy obligations, provide for the future …
With the aim of regulating many issues revealed after taking office, as well as facilitating new funding for its transformational development agenda, the PPP / C Government has moved to increase ceilings for domestic and external debt.
The Senior Minister at the Office of the President, with Responsibility for Finance, Dr Ashni Singh, introduced two orders in the National Assembly, proposing to lift both debt ceilings. It was proposed that the domestic debt ceiling be increased to $ 500 billion, almost three decades after the last review up to $ 150 billion in 1994. In addition, a new $ 650 billion external borrowing ceiling was proposed nearly three decades after 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 the Bank of Guyana, accumulated over the past five years under the APNU / AFC regime. Minister Singh told the media that the Government is now trying to remedy this situation by issuing appropriate instruments. “Given the situation we inherited in the case of the domestic debt ceiling, it would have gone beyond it; at the moment we came into office, there would have been no place to borrow. And on the outside, there would have been room, but there would be a relatively modest place if one had assumed that the existing portfolio of external debt was to be exhausted, ”he said. At the time when the PPP / C took office in August 2020, the Public Account at the Central Bank had a net overdraft of $ 93 billion, and according to Dr Singh, this does not take into account billions of dollars in issued checks by the State but have not yet been enclosed. “As you know, if the Government writes and publishes a check and doesn’t hit the bank balance, it wouldn’t be reflected in the overdraft… Needless to say, the overdraft has, of course, been is increasing. First of all, a large stock of checks had been issued which would have increased the overdraft. That would have had a heavy impact. Then there was the 2020 Budget that we would have enacted; that needed funding itself, ”the Finance Minister explained. It was noted that if the overdraft were addressed under the current ceiling for domestic debt, a cut would have resulted. More so, eventually, the Government would require the publication of new domestic instruments in the future, to fund various policy initiatives and stimulate the development of the domestic financial market. In terms of the move to increase the external debt ceiling, this is to provide for the current level of contracted external debt, together with anticipated new borrowing to fund the Government’s development agenda. Dr Singh went on to say, “Upon returning to the office, we maintain the strong commitment to ensure that we manage the Government’s fiscal operations, and that we manage the public finances in a way that will ensure we stay on the path of sustainable public finance and sustainable public debt; but, at the same time, we are able to invest in the areas required. ” Further, it was noted that 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, together with the limits of the country. the current robust economic outlook. 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. At the time of the last reform, in 1991, Guyana’s external debt ceiling was set at more than 1,000 percent of Gross Domestic Product (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. These comparisons clearly show that Guyana’s existing debt carrying capacity could provide for the proposed ceiling increases safely. The Ministry of Finance has said that this landmark move is a means of properly regulating and reflecting significant liabilities built up over the past five years, and harnessing Guyana’s debt-carrying capacity to fund the Government’s transformational development agenda. He added that this is further consistent with the PPP / C Ministry’s excellent track record of prudent debt management while protecting Guyana’s fiscal sustainability and long-term debt.