Finance Minister Dr Ashni Singh yesterday disclosed plans for a revision of the Natural Resource Fund (NRF) withdrawal rule and a hike in the domestic and external debt ceilings.
Presenting his 2024 budget, he announced that US$1.15b in oil proceeds will be available for budget 2024. The figure for the 2023 budget was $1b.
Singh then spoke about optimizing the financing mix and said that the government will be proposing the following for the consideration of the House.
An increase in the domestic and external debt ceilings to “provide the flexibility needed to optimize on the financing mix while at the same time safeguarding our domestic sustainability”.
If approved this would be a further hike on the aggressive borrowing posture taken by this government.
On August 3rd last year, the government approved massive hikes in the external and domestic debt ceilings – the second time in 30 months – signalling an aggressive borrowing campaign for infrastructural and other spending.
After heated debate, the current limit on external loans was lifted from $650,000,000,000 to $900,000,000,000 and domestic debt from $500,000,000,000 to $750,000,000,000.
In February of 2021, the government pushed through an increase in the external debt ceiling from $400b to $650b and the domestic debt ceiling from $150b to $500b. It means that in the span of 30 months, Guyana’s external debt ceiling had more than doubled and its domestic ceiling has been increased five-fold.
In relation to the NRF, the government is proposing a revision to the withdrawal rule which if approved “will result in an upward revision to the NRF withdrawal amount to take effect from this fiscal year. The revised withdrawal rule will retain the important feature that, as production and revenue ramp up further, an increasing share of the inflows in the NRF will be saved relative to the share transferred to the Consolidated Fund to finance national development priorities”.
Critics have already argued that the current withdrawal rule is excessive and should be lowered to allow more intergenerational savings.
The formula in the National Resource Fund Act for withdrawals from the Fund sets out the total that could be applied to the next year’s budget. According to the First Schedule of the Act, 100% of the first US$500m paid into the fund in the immediately preceding year can be tapped; 75% of the second US$500m and 50% of the third US$500m.
