Dear Editor,
I have seen that Mr Sasenarine has been Singh writing in several newspapers agreeing with the observation of Mr Moses Nagamootoo, that today Guyana is a very indebted country and our current debt is unsustainable and will heap a host of economic problems on our people. On the contrary, the PPP/C government has returned creditworthiness to our country and has incurred debt that is very manageable.
As I said in Parliament during my 2012 budget contribution, Mr Nagamootoo was speaking of nominal figures, and also there is the time value of money which must be taken into account.
I also said that what is very applicable is our ability to service the debt. I have repeated from time to time that we should not fight over the faces, but with the facts.
Are we more indebted today than in 1992 to the international community?
US $ Billion G$ Billion ROE
External Debt 1992 2.1 262.0 125
External Debt 2012 1.2 248.3 206
Our foreign debt today is $248.3 billion as against $262.0 billion in 1992 – some 5% lower. In terms of US dollars, in 1992, the external debt was US$ 2.1 billion and today it is US$1.2 billion, some 42.6% lower. It is noteworthy that the projection for 2012 is some US$75 million lower than in 2011.
I will now look at the domestic debt. This has grown from $18.7B to $105.3B, but this domestic debt is not used to fund government projects or the deficit; these resources are used to ensure prudent monetary policies such as the mopping up of excess liquidity in the system and thereby controlling inflation. I have said before in answer to Mr Ravi Dev, who has recently made the same call, that if we allow excess cash in the economy it will drive inflation to double digit numbers and affect every dollar in the system. If the $50 billion that we have taken out of the system by the use of Treasury Bills is left in the system, then one can expect our exchange rate to depreciate by some 40 to 50 dollars, using very crude calculations. This will wreak havoc in the economy and will bring a heavy burden on our people. We have been down this road before.
I have also been looking at the deficit and the criticism that it is growing and will have severely adverse implications once it is unsustainable.
The deficit is normally computed as a percentage of GDP. Countries run deficits for a number of reasons. Today the developed countries run deficits in excess of 10%. Guyana’s deficit as a percentage of GDP has been below 5% for a number of years, and yes, moved from 3.4% in 2009, to 4.4% in 2011 and is projected to be 4.6% in 2011. This would not have any adverse impact on our economy, but will add to further stimulating economic growth.
If a country was a home going to the bank for a mortgage, the banker would feel safe granting a loan with a periodic repayment of up to 30% of the home’s income. Guyana will spend about 7.7% of current revenue in debt servicing this year, and the percentage has been in this vicinity for a while now.
I have chosen to use the government revenue from taxes and duties alone. If I take aid influences and divide, it would be even lower at 6.8% of revenue. This shows how the PPP/C, over the past 20 years, have been prudently managing our economy so that our debt levels and servicing are sustainable. It is thus not surprising that the international community has continued to work with Guyana to keep us on this positive growth path to development. It is interesting to note that in 2010 we had US$34.7 million in debt forgiveness, in 2011 it was US$37.7 million and the 2012 projection is US$40.2 million. They have in fact rewarded us for good performance.
The PPP/C has managed the economy so that the environment is favourable for attracting investment; the private sector has been responding and this partnership has worked to the benefit of all of our people.
As the National Assembly deals with the estimates we will get a very clear picture of who is committed to ensuring growth and development and who is not.
Yours faithfully,
Manzoor Nadir
