Message from the Minister of Finance
I am pleased to present Guyana’s Public Debt Annual Report for 2018. This fourth Annual Report provides a detailed assessment of the country’s public debt as well as debt management activities and operations during the review year. Dissemination of information on public debt operations signifies Government’s continued commitment to improving transparency, accountability and good governance, all of which are important in our quest for sustainable economic growth and development.
Guyana had a successful year in debt management operations, marked by the historic issuance of a $30 billion bond in May 2018. The bond was arranged by Republic Bank on a five-year term, at an interest rate of 4.45 percent per annum, for the purpose of financing investments in the Guyana Sugar Corporation (GUYSUCO). This instrument was the first of its kind to be issued in Guyana, signalling the country’s entry into the capital markets.
During 2018, Guyana maintained sustainable debt levels through prudent debt management activities, which ensured government operations were financed at minimum cost, within acceptable risk parameters. The stock of total public debt has remained manageable, increasing by 3.2 percent, from $345 billion, at end-2017 to $356 billion, at end-2018. This increase resulted primarily from a rapid rise in disbursements, relative to 2017; and the contracting of new loans to fund government’s development initiatives. External debt accounted for 77.4 percent of total public debt, at end-2018, while domestic debt accounted for the remaining 22.6 percent.
Notably, the total debt to GDP ratio declined by 1.9 percentage points, from 46.1 percent for 2017, to 44.2 percent for 2018, on account of faster growth in nominal GDP compared to total public debt. The total debt service to revenue ratio remained stable, increasing by 0.6 percentage points to 8.2 percent in 2018, mainly due to a 0.9 percentage-point increase in the external debt service to revenue ratio to 7.4 percent, in 2018. These marginal increases in the indicators have not diminished Guyana’s strong debt sustainability position.
The national economy continued to register strong growth, expanding by 4.1 percent in 2018. Contributory factors included significant increases construction, manufacturing and services, coupled with heightened production of bauxite, livestock and forestry. However, declines in rice, sugar and fish production had a dampening effect on the growth rate. Going forward, Guyana’s economic prospects are bright, with oil production set to come on stream in early 2020. This development is expected to catalyse economic growth and engender buoyant growth in government revenues.
The anticipated economic expansion would increase Guyana’s debt carrying capacity. However, government is mindful of the vulnerabilities associated with excessive accumulation of debt and is very committed to long-term debt sustainability. To this end, a Public Debt Management Bill (PDMB) is being finalised. Once enacted, this critical piece of legislation would support long-term debt sustainability, by enshrining key considerations such as the authority to borrow and debt ceilings. The Bill would also mandate the formulation and implementation of a Medium-term Debt Management Strategy (MTDS), thereby ensuring that financing decisions are underpinned by a rigorous, comprehensive and cutting-edge methodology.
Importantly, proceeds from impending crude oil production would be deposited into the Natural Resources Fund –which was passed and assented to in January 2019 – and injected into the economy through the budgetary process, based on a fiscal rule. These injections are likely to supplant much of the current external borrowing as well as enable the retirement of expensive debt, leading to a reduction of debt levels, and concomitant reduction of exposure to interest rate and exchange rate risks. In the near-to-medium-term, Government intends to design and commence issuance of more domestic borrowing instruments such as treasury notes, in order to further mitigate risks associated with external borrowing. An increase in public issuance of domestic debt instruments would also promote domestic financial market development, by serving as a benchmark for private security issuances, and by encouraging wider participation in the domestic non-bank financial market.
Recent events, especially the discovery of vast crude oil deposits, have positioned Guyana for rapid economic and social advancement. Through sound macroeconomic management, government intends to successfully usher Guyana into this new and exciting chapter. Effective public debt management would play a crucial role in government’s overall macroeconomic governance framework.
Hon. Winston D. Jordan, MP
Minister of Finance
Cooperative Republic of Guyana
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CRG Public Debt Annual Report 2018