Last Wednesday, the authorities in New York charged Asia’s second richest man and Indian billionaire, Gautam Adani, for his involvement in a US$250 million bribery scheme to develop a major solar power plant in India. Prosecutors alleged that Adani and seven other business executives were part of schemes to pay bribes to Indian government officials in exchange for contracts, unknowing to U.S. investors and banks from whom they sought to raise money. It is also alleged that these executives were involved in a conspiracy to conceal the bribery schemes and to prevent the government’s investigation into the matter. According to the Deputy Assistant Attorney General Lisa Miller, ‘[t]hese offences were allegedly committed by senior executives and directors to obtain and finance massive state energy supply contracts through corruption and fraud at the expense of U.S. investors’. Adani is a key ally of Indian Prime Minister Narendra Modi. The political opposition in India have renewed calls for a parliamentary investigation into Adani’s companies. See: https://edition.cnn. com/2024/11/20/business/gautam-adani-indicted/index.html; and https://www.justice.gov/usao-edny/pr/billionaire-chairman-conglomerate-and-seven-other-senior-business-executives-indicted.
In our three previous articles on the above-captioned subject, we stated that there are eleven sets of statements constituting the consolidated financial statements of the Government. We discussed ten of these statements and noted several shortcomings in the Auditor General’s certification of them. We also noted that there was no certification of the more than 200 accounts of Ministries, Departments and Regions, which is also a significant shortcoming in the work of the Auditor General’s office.
Regrettably, the Public Accounts Committee (PAC) has not been paying any attention to these certifications which are in effect the overall conclusions of the Auditor General in terms of the proper presentation of the statements and compliance with applicable laws, regulations, circular instructions and contractual obligations. Indeed, the PAC’s examination of the public accounts over the years has been almost exclusively on the discrepancies highlighted in the Auditor General’s as they relate to Ministries, Departments and Regions. As a result, the quality of financial reporting has not changed in any meaningful way. For example, considering the severe limitations of the cash-based system of accounting in terms of complete and full financial reporting, as opposed to the accrual-based system, the Government had decided to implement the International Public Sector Accounting Standards. However, the project appears to be at a standstill.
In today’s article, we discuss the last set of financial statements comprising the consolidated public accounts. We refer to the Schedule of the Public Debt.
Constitutional and legislative requirements
By Article 221 of the Constitution, the public debt of Guyana and service of that debt are a direct charge on the Consolidated Fund, that is, they are not voted for by the National Assembly. Section 3(1) of the External Loans Act authorises the Government to raise loans outside of Guyana not exceeding G$400 billion. This ceiling has since been increased to $1.5 trillion. All agreements relating to such loans are to be laid before the Assembly as soon as practicable after the execution of such agreements. Additionally, in July 2023, the Assembly passed two amendments to the Public Loans Act that raised the ceiling for the internal debt ceiling first from G$500 billion to G$750 billion, then to $1.5 trillion in February 2024.
The Fiscal Management and Accountability (FMA) Act provides for the Minister to borrow from any bank, persons within or outside of Guyana, foreign governments and international financial institutions, for the following purposes: (i) to meet cash shortfalls that may occur periodically during the execution of the annual budget; (ii) to fund investment and infrastructure projects undertaken by the Government; (iii) to finance a budget deficit; and (iv) to meet the objectives of monetary policy. Advances in the form of an overdraft on an official bank account are required to be repaid in full on or before the end of the fiscal year during which that overdraft was drawn.
The Minister is required to certify and issue an official schedule of public debt outstanding in the name of the Government, other levels of government and public enterprises. The schedule is to include: (i) the identity of the issuer; (ii) the face value of the debt; (iii) the amount unpaid at the beginning and end of the current fiscal year, including principal, accrued interest, commissions, and any repayment arrears; (iv) the applicable rate of interest; (v) the maturity date; and (vi) the aggregate amount of the debt service cost of the debt due and payable during the current fiscal year.
Overdraft in the Consolidated Fund
Despite the requirement to repay overdrafts before the end of the fiscal year, the Consolidated Fund held at the Bank of Guyana at the end of 2023 was overdrawn by $112.461 billion, compared with $90.695 billion, an increase of $21.766 billion. The Auditor General, however, did not comment on this matter. Considering that the fiscal deficit in 2023 was $166.211 billion, it therefore meant that remainder of the deficit amounting to $144.445 billion was financed out of the proceeds of the issue of new Treasury Bills.
Size of the public debt
An examination of the Schedule of the Public Debt indicates that debts contracted by another level of government and public enterprises have not been included, except for on-lending agreements involving the Guyana Power and Light Inc. and the Guyana Sugar Corporation (GUYSUCO). It is not clear whether such debts exist and how much is involved.
The total public debt, inclusive of publicly guaranteed debts, was US$4.682 billion at the end of 2023, compared with US$3.848 billion at 2022 year-end, an increase of US$834 million, or 21.7 percent. According to the 2024 Mid-Year report, the public debt has increased further by another 8.1 percent to US$5.063 billion as at June 2024.
External debt
The external debt at the end of 2023 was US$1.758 billion, compared with US$1.554 billion at the end of 2022, an increase of US$204 million. This increase was due mainly to: (i) disbursements totalling US$267.259 million in respect of loans contracted; (ii) repayment of principal totalling US$64.555 million; (iii) accrued interest to Non-Paris Club Creditors amounted to US$783,000; and (iv) fluctuation of exchange rates.
During 2023, the Government entered into eleven new loan agreements totalling G$222.484 billion, as follows:
(a) Five loans totalling US$395.0 million, equivalent to G$82.358 billion, from the Inter-American Development Bank (IDB) mainly for health care strengthening and road infrastructure development.
(b) One loan amounting to Yuan 1.385 billion, equivalent to G$40.705 billion, from the Bank of China for East Coast Demerara Road Project Phase II.
(c) One loan from the Islamic Development Bank for US$200 million, equivalent to G$41.7 billion, for the reconstruction of the Soesdyke-Linden Highway.
(d) Two loans from the Saudi Fund for Development for 562,500 Saudi Ryals, equivalent to G$30.675 billion, for infrastructure development works in the housing sector and the construction of the Wismar Bridge.
(e) One loan from Global Affairs Canada for C$120 million, equivalent to G$18.975 billion, for bud get support.
(f) One loan from the International Development Association (IDA) for 26.7 million SDR, equivalent to G$7.471 billion, for enhancing policies for human capital accumulation development.
There were also three amended agreements with the IDB, the Islamic Development Bank and the Bank of China with additional amounts equivalent to G$41.674 billion.
The 2023 Estimates showed that amounts totalling G$101.462 billion were to have been disbursed on external loans. However, actual disbursements amounted to G$55.724 billion, resulting in a shortfall of G$45.738 billion, or 45.1 percent. In respect of the new loan agreements entered into in 2023, disbursements equivalent to G$25.527 billion were made on seven of these loans.
The loan from the IDA for enhancing policies for human capital accumulation development was fully disbursed during 2023. However, according to the Auditor General, the disbursement was not budgeted for in 2023. It is not clear what impact this had on the financial reporting of the agency concerned.
Internal debt
At the end of 2023, the internal debt was G$609.757 billion, compared with G$478.258 billion at the end of 2022, a net increase of G$131.499 billion. The increase was due to: (i) redemption of Treasury Bills valued at $232.321 billion; (ii) issuance of new Treasury Bills totalling $379.634 billion; (iii) issuance of one non-interest-bearing debenture for $3.148 billion; and (iv) repayments/cancellation of debenture certificates, loans and bonds amounting to $18.963 billion. At the end of 2023, Treasury Bills outstanding amounted to $376.290 billion.
In May 2018, the Minister of Finance signed a Government Guarantee relating to National Industrial and Commercial Investments Limited (NICIL) Fixed Rate Bonds that were issued to assist with the revitalisation of GUYSUCO. The total amount issued on the bonds was $14.080 billion. However, NICIL was unable to repay the bonds, resulting in the government taking over the liability. The bonds have fully been repaid as of 2023 year-end.
