–archaic cap being revised to facilitate Guyana’s developmental trajectory
AHEAD of a much-anticipated economic ascension, the Government of Guyana is looking to widen its fiscal space and regularise financial appropriations, which were made under the former APNU+AFC Coalition Government, by increasing the current “debt ceiling,” which was last adjusted in the early 1990s. The orders seeking to make the necessary adjustments to both the domestic and external debt ceilings were tabled in the National Assembly on Thursday, by Senior Minister in the Office of the President with responsibility for Finance, Dr. Ashni Singh.
The People’s Progressive Party/Civic (PPP/C) Government is proposing that the current domestic debt ceiling of $150 billion be increased to $500 billion, and that the existing $400 billion external debt ceiling be increased to $650 billion.
This will, in effect, increase the Government’s fiscal space [budgetary room], but, according to Dr. Singh, the increase is also being sought in order to regularise the state of public finances, which were impacted heavily by a large overdraft at the Bank of Guyana, which racked up over the past five years by the former APNU+AFC Government.
“When we assumed office [August 2020] we went about trying to take stock of the state of the public finances… this process is still ongoing, but as time has gone by, you heard us sharing some of the issues we have identified in relation to stock taking and the state of domestic finances.
“There was a discovery that the Government [APNU+AFC] had accumulated a very substantial overdraft at the Central Bank, and we have spoken publicly that this overdraft has been accumulated and rose constantly over the course of five years,” Dr. Singh told reporters on the sidelines of a sitting of the National Assembly, on Thursday.
It was reported that the Government, after being elected to office in August last year, met a net overdraft of G$93 billion at the Central Bank.
The Government is also saddled with a G$30 billion National Industrial and Commercial Investments Limited (NICIL) bond, of which G$17 billion has been drawn down, and G$12 billion is owed to the Guyana Power and Light Incorporated (GPL).
“We inherited a huge overdraft. In addition to this, we also ascertained that there were a lot of other outstanding monies to other agencies, mainly suppliers of goods and services,” Minister Singh lamented, noting that the Government is still in the process of uncovering other liabilities.
Had all those issues been treated in the “appropriate manner,” the ceilings would have already been reached.
In explaining the situation, Dr. Singh said the previous Government tried to finance fiscal deficits through overdrafts in order to avoid the debt ceiling.
“If it had been financed by the issuance of Government securities, the ceiling would have been reached… we would have come in when the ceiling was already reached if you treat the overdraft in the manner it was supposed to be treated,” the senior minister explained.
It is for this reason that the Government is looking to regularise the existing situation by increasing the debt ceiling.
Regularisation of the situation is needed because fiscal deficits are unavoidable, in the sense that the Government would have to borrow additional finances to fund projects which are relative to the nation’s developmental trajectory.
Additional debts coupled with pre-existing liabilities, which are still being uncovered, would undoubtedly push the ceiling to its current limit, so this necessitates an increase.
“We have outlined a comprehensive programme for transforming the economy of Guyana… we are investing in infrastructure and social services which will necessitate the contracting of new finance… so there is need for space to contract additional finance,” Dr. Singh reasoned.
The senior minister also explained that an increase is necessary since the existing ceiling caters for the size of the economy in the early 1990s and not the current and potential economy.
But, even as the economy grows, Dr. Singh affirmed that the Government will maintain the same commitment to ensuring that the country stays on a path to sustainable indebtedness and, at the same time, have the ability to invest in the required areas.