…insists citizens will never “just sit down at home, receive a cheque from Govt & stop working”
Guyana is pursuing a path of sustainable borrowing, Vice President Dr Bharrat Jagdeo has reinforced, insisting that there will be no harm to the economy, which is projected to continue down a path of rapid growth, at 34.3 per cent this year, on the heels of an incredible 33 per cent expansion is 2023.
At his weekly press conference on Thursday, the Vice President was again forced to dismiss criticisms of the Government’s borrowing strategy, contending that naysayers simply lack comprehension.
“If you borrow to eat, it’s bad; if you borrow to invest, and the investment in the future will increase your income or save you expenditure…then it’s a good investment…,” Jagdeo, a trained economist, explained.
“If a smaller share of your revenue progressively is going towards this — we sustained this when we were spending 100 per cent of revenue to service debt, now it’s six per cent of revenue — we have room to sustain in the future; and it will fall even lower when, in the future years, when the revenue goes steeply up,” he noted.
It is expected that, from 2025, Guyana will earn about US$2 billion per annum in oil revenue alone, which is significantly more than the external debt.
At a previous press conference, the Vice President had recalled that in the early 1990s, Guyana’s Gross Domestic Product (GDP) was around US$300 million, with an external debt stock of US$2.1 billion. According to the Vice President, the size of Guyana’s economy now stands at approximately US$22 billion, with US$1.8 billion in external debt — lower than it was in the 1990s.
“We’re not borrowing to eat. Most of our recurrent budget is self-financed; that is, from revenue. The capital budget — we borrow mainly for capital expenditure; and anyone who knows, if you have a business, you borrow to invest in the future, for future income. And all of these investments that we’re making will enhance our capacity to have greater income in the future as a country: more revenue, so we can get wealthier…the investments are made so we can reduce costs…,” Jagdeo explained, referencing the gas-to-energy project, which is calculated to save Guyana about US$100 million each year when electricity rates are slashed.
Lowest debt-to-GDP ratios
Jagdeo also pointed out that Guyana has one of the lowest debt-to-GDP ratios in the world, at 27 per cent.
“In the developed world, it’s over 100 per cent, or near 100 per cent,” he explained, adding that Guyana also has one of the lowest figures for debt servicing, at six per cent.
Meanwhile, Jagdeo also made it clear that the rising interest rates globally will not affect Guyana.
“The rising interest rates globally have not impacted Guyana. So it may affect countries like Guyana, but it has not impacted us. Why was this so? Because our loans are fixed-interest loans, and that the only two variables in interest loans we have are both to multilateral agencies, and not private creditors. So, we did not get affected by this spike in interest rates over the past three years,” he posited, adding that inflation rates have nevertheless been falling globally.
“We believe that the interest rate spike is at its peak now. In fact, many central banks around the world are talking about interest rates coming down,” he disclosed.
Moreover, in responding to the critics, the Vice President outlined that, even by raising the debt ceiling, “it doesn’t mean we have to borrow up to that level; it is just to give us room, should we have to do so.”
In his Budget 2024 speech, Finance Minister Dr Ashni Singh had announced that the Government would be moving to increase the domestic and external debt ceilings, “which will provide the flexibility needed to optimise on the financing mix while at the same time safeguarding our debt sustainability.”
$8M handout? Dangerous
Meanwhile, Jagdeo also made it clear that the Government would never allow to occur a situation wherein citizens can stop working and depend on the State for cash grants from oil revenues – a philosophy which is being supported by some.
“Some people made it seem — like Ramjattan just recently in a speech said, ‘We have all this money to do whatever we want to’, and when they get into office, they’ll give it all out to people,” the Vice President recalled.
He added that another person has been saying, “We’re so rich because of the oil and gas resources (that) we don’t need to work any longer; we can all get $8 million handout from the treasury, and we don’t need to work.”
“I think this is extremely dangerous…it creates a syndrome of dependency,” Jagdeo contended.
He admitted that, over time, the resources in the oil and gas sector will accumulate at a magnitude wherein the government will be able to, in a growing way, address more and more needs of the population.
“But we will never come to a point in our history when the citizens of this country will just sit down at home and receive a cheque and have to stop working,” he asserted.
“It is only a charlatan, a clown, who will promote that sort of philosophy: that you can stop working and that the State will get enough money to mind everybody,” he said.
“We’re not wealthy as yet as a nation…if you look at our revenue flow to the budget if we were to do what they suggested…in a single year we’ll bankrupt the country, based on giving $8 million to every single person in this country…,” he explained.