In a bid to regularise several issues unearthed after assuming office in 2020, as well as to facilitate new financing for a transformative development agenda, the government has moved to increase the ceilings for domestic and external debt.
On Thursday, Senior Minister in the Office of the President with responsibility for Finance, Dr Ashni Singh, tabled two orders in Parliament proposing adjustments to the two ceilings. It was proposed that the domestic debt ceiling be increased to $500 billion, almost three decades after the last upward revision to $150 billion, in 1994. Additionally, a new external borrowing ceiling of $650 billion was proposed, three decades after its last increase to $400 billion.
The move to increase the domestic debt ceiling was influenced by several factors, one of which is the existence of a large Consolidated Fund overdraft at the Bank of Guyana, accumulated over the last five years.
The government is now seeking to remedy this situation through the issuance of appropriate instruments. However, if the overdraft were to be addressed under the existing ceiling for domestic debt, a breach would result. In addition, the government would require the issuance of new domestic instruments, in future, to finance various policy initiatives, and to stimulate the development of the domestic financial market.
Meanwhile, the move to increase the external debt ceiling is to accommodate the existing level of the external debt contracted, plus anticipated new borrowing to fund government’s development agenda.
Importantly, these revisions to the external and domestic debt ceilings do not threaten Guyana’s long-term debt sustainability, given the substantial economic progress made since the early to mid-1990s (when the ceilings were last revised) and the country’s robust economic outlook.
At the time of the last revision in 1991, Guyana’s external debt ceiling was set at more than 1,000 per cent of GDP. In contrast, the new proposed external debt ceiling would amount to less than 60 per cent of GDP, using the latest 2020 GDP estimates.
On the domestic side, when last revised in 1994, Guyana’s domestic debt ceiling was set at almost 200 per cent of GDP. In stark contrast, the revised domestic debt ceiling would amount to less than 50 per cent of GDP. The above-mentioned comparisons clearly depict that Guyana’s current debt carrying capacity could safely accommodate the proposed ceiling increases.
In sum, this landmark move serves to regularize and accurately reflect significant liabilities accumulated over the last five years and harness Guyana’s debt-carrying capacity to finance government’s transformative development agenda.
This latest move is consistent with the incumbent administration’s sterling track record of prudent debt management in the course of safeguarding Guyana’s long-term fiscal and debt sustainability. (Ministry of Finance press release)