— adjustments pave way for widened fiscal space, regularisation of Coalition-accumulated liabilities
THE need for wider fiscal space to advance local development and the reconciliation of liabilities incurred by Guyana under the former A Partnership for National Unity and Alliance For Change (APNU+AFC) Coalition Government, trumped arguments which sought to restrict motions, tabled in the National Assembly, to increase the archaic domestic and external debt ceilings. Orders seeking to make the necessary adjustments to both the domestic and external debt ceilings were tabled in the National Assembly, 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, through the motions which were approved by the House after about five hours of intense debates on Thursday, proposed 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.
Passage of the Government’s motions to increase those ceilings were secured even after arguments from the Parliamentary Opposition that those ‘caps’ could have been increased incrementally or not at all, since Guyana remains below the ‘vulnerability’ threshold.
Opposition Parliamentarians, Ganesh Mahipaul and Khemraj Ramjattan both argued that the debt ceiling could have been increased incrementally, since a rise in debt could be detrimental to the country, particularly taxpayers and the “small men”.
This view was supported by their colleagues Shurwayne Holder, Jermaine Figueira and others, who argued too that loan-funded projects and an increased rate of borrowing would not be ‘healthy’ for Guyana. The fact remains, however, that even though the ceiling might increase, it does not mean that the rate of borrowing would increase extravagantly to match the ceilings. Mover of the motions, Dr. Singh, assured the House that the debt ceilings have been set at a prudent level.
In further defending the necessity of this increase, the senior minister said: “While it is necessary to address the level of indebtedness [accumulated over the past five years] and not withstanding our ambitious plans, they have been set at a prudent level.”
As explained by Dr. Singh, this increased ceiling is especially necessary because of the large overdraft at the Bank of Guyana, which was 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 had said.
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.
The former Coalition Government, he argued, believed that the Central Bank was a “money tree” that they could constantly pick from.
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.
Dr. Singh explained that the proposed domestic debt ceiling represents 2.19 times of the Government’s current revenue, compared to 1994, when it would have taken six years of Government revenue to discharge its debt repayment obligation. Conversely, today, if the entire ceiling is utilised, it would take two years.
Similarly, in an even more striking comparison, external debt of $400 billion, in 1994, amounted to 33.8 times the Government’s revenue, meaning it would have taken 33 years of the Government’s revenue to clear the country’s debts. However, the proposed external debt ceiling of $650 billion represents a mere 2.85 times of the Government’s current revenue.
Guyana’s ability to offset its debt is compounded by the country’s improved creditworthiness, which was referred to by Government Member of Parliament, Sanjeev Datadin.
“We are more creditworthy… if we do not raise the ceiling, how are we going to fund and finance the developmental projects and how is the Government going to meet its obligations to the people of Guyana?” Datadin questioned, noting again that Guyana’s credibility has improved so the country has the ability to handle debt and provide better services to its people.
Advancements in the near term will, however, have to be managed simultaneously with the “cleaning up” of the ‘mess’ created by APNU+AFC through, what Datadin considered, “poor financial practices”. “So, these increases will allow Government to regularise and accurately reflect the significant liabilities accumulated over the past five years and harness Guyana’s debt carrying capacity to finance the development agenda,” the parliamentarian asserted.
Minister of Public Works, Juan Edghill, also justified the need for increased debt ceilings, by arguing that although the ceiling is larger, the minister with responsibility for finance still has to report incurred debt and loans to the National Assembly; upholding transparency and accountability.
The Government’s arguments were, however, not enough to convince their counterparts on the opposing side of the house, as the passage of both motions were, in the end, determined by way of two separate votes, which concluded both times with the Government leading the way with 32 and the Opposition recording 29.