The Guyana Government is in talks with China to access as much as US$1.5b in loans to finance a number of big-ticket projects.
These discussions have occurred over months and if a deal materializes it could have a variety of implications.
Sources told Stabroek News that Georgetown is seeking financing through China’s Eximbank of around US$750m for a hydropower facility. This would most likely be the planned Amaila Falls Hydropower project. Funds are also being sought for a highway from Schoonord to Parika in Region Three. This project is pegged at US$200m.
Around US$200m is also being sought from Beijing for the upgrading of the Annandale to Mahaica stretch, Sheriff Street to Enmore and a new road from Enmore to Clonbrook. Also on the list of projects is the upgrading of hinterland connections to the tune of $100m. The request also covers US$100m for selected community roads.
The request to Beijing would underline the government’s determination not to be constrained to act within the spending framework that would be set under the still-to-be-activated Natural Resource Fund (NRF). A loan of this scale would significantly pump up external debt and raise concerns about debt sustainability.
On February 4th this year, the National Assembly approved an increase of the domestic debt ceiling. Minister with responsibility for Finance Ashni Singh on January 28 tabled in the Assembly “The Public Loan (Increasing of Limit) Order 2021” and the “External Loans (Increasing of Limit) Order 2021”.
Singh told the House, meeting at the Arthur Chung Conference Centre, that the two orders will allow the government to regularize the outstanding debt of the last administration while creating space to finance a robust development plan.
The Public Loan Order increases the amount that the Guyana Government can borrow from domestic lending agencies to $500 billion dollars from $150 billion.
Similarly the external debt threshold was increased from $400 billion to $650 billion.
Loans of this scale from China would not come with the type of concessionary terms that might be accessed from Western multilateral financing institutions. The financing could also be subject to a host of conditions. Countries in Africa and elsewhere have had to confront the reality of debilitating conditions attached to loans from China.
Approval of the loan would also see Georgetown draw closer to China’s orbit and an expansion of Beijing’s influence here via its ambitious belt and road initiative. It would also be seen as a rebuff to recent statements by Western countries on a range of matters including the need for the establishment of a NRF to moderate spending of oil revenues and ensure that the country is not at risk from the Dutch disease.
Sources say that Georgetown is increasingly confident that projected oil revenues in the coming years will enable it to service its debts.
