The National Assembly on Thursday affirmed the External Loans (Increasing of Limit) Order 2021 which increases Guyana’s external debt threshold from $400 billion to $650 billion.
In presenting the motion to the House, Minister with responsibility for Finance Ashni Singh stressed that there exists significant external loans that were contracted and that are currently undisbursed.
“Were they to have been fully disbursed at the time the last administration demitted office, they would have utilised a significant amount of the room remaining within the prevailing statutory ceiling on external debt,” he said, adding that the remianing space would not be enough for government to secure the external financing necessary to pursue its ambitious programme of development aimed at transforming Guyana and delivering an improved quality of life to all Guyanese.
The Minister was keen to point out that the revision of the debt ceiling would accommodate the prevailing economic reality and assure that investments can be made for the required level of growth.
With the ceiling now set at 29.9% of non-oil GDP, Singh told the House that the adjustment has been set at a prudent and responsible level.
“The proposed ceiling is a mere 2.85 times current revenue…which means it would take only 2.85 years to pay it off if government spent on nothing else,” he intoned.
The Opposition was predictably unimpressed with Singh’s argument, according to MP Khemraj Ramjattan a revision of the ceiling is welcomed but the current increase was too liberal.
“Ceilings must be raised conservatively…it is important that we appreciate that things can go wrong,” the former Minister of Public Security warned.
Ramjattan maintained that the tremendous confidence creating this liberal attitude is the fact that Guyana has oil but warned that it was dangerous to place too much confidence in that one sector.
“This year we got some money from oil coming in and last year we had some money coming in but don’t put all your chickens in that basket…oil prices can come down. It could also have competition from renewable energy sources. External debt can rise to the very high level of the 1990s if we don’t watch what we are doing….this is wrong,” he stressed.
The opposition MP cautioned the House against giving carte blanche to the same finance minister who had previously made a series of bad investment decisions such as in realtion to the investment in CLICO, the Marriott Hotel, the Skeldon Sugar factory, the Speciality Hospital and the Berbice Bridge.
“We have to ensure we are far more conservative in our approach,” he reiterated.
Minister of Public Works Juan Edghill however countered this argument by reminding that international financial institutions are unlikely to allow reckless borrowing.
“You would not be able to draw down a dime because they would have to ascertain your level of indebtedness as it related to the size of your economy; your ability to generate income; your long term projections and sectors that are bringing in revenue before they even give you a dime,” he argued, while reminding the House that international loans come with conditionalities for disbursement.
“To argue that the ceiling could be reached is an admission that international financial institutions have confidence in the PPP and are willing to lend money for Guyana’s development,” Eghill stressed.
The more than two-hour debate ended with a vote which on division saw 32 votes for the motion and 29 against. The Assembly therefore in accordance with Section 3(7) of the External Loans Act, Chapter 74:08, confirmed the Order which was made on 27th January, 2021, under Section 3(1).
Earlier in the day, the lifting of the domestic debt ceiling had been approved by the National Assembly. It increases the amount that the Guyana Government can borrow from domestic lending agencies to $500 billion dollars from $150 billion.
