Latest update April 17th, 2024 12:59 AM
Jul 10, 2015 Features / Columnists, Peeping Tom
People are not perfect. They will make mistakes.
It is better to have someone who makes a mistake and is willing to accept that he or she is infallible than someone who pretends that they know it all and are beyond reproach.
In life, accommodation has to be made for mistakes. When someone makes a mistake they should be commended for admitting to it and apologizing.
This is what happened yesterday in parliament when the Minister of Finance, one Guyana most brilliant economists, admitted that in a previous address within the National Assembly he had quoted the external debt of the country at US$1.6B. The external debt was subsequently found to be US$1.2B.
This is a fairly straightforward matter. The Minister made a mistake and he was man enough to admit to it. He deserves applause. Yet there will be the persistent naysayers who will want to unfairly question his ability. They should not. Ability is not the issue.
What is more important than whether the Minister referred to the external debt or the combined public debt of the country is the consequence of such a huge public debt. There are many persons who are bothered by the huge size of the internal debt, most of which was accumulated to sterilize liquidity in the system. Over the years it has grown and there is a need for its growth to be checked. This requires a monetary solution, something that all previous governments have been less than creative about. This requires a debate, something that would be interesting now that we have at least an inclination that the opposition will be attending parliament.
There has been a lot of attention on the size of the external debt, US$1.2B, but the size of the debt only becomes problematic in terms of its relationship to the size of the economy. Guyana’s economy has grown tremendously under the PPP – like it or not, it did leave in place an economy that was many times larger than the one it inherited. Guyana’s debt to GDP ratio is not frightening, and definitely not as bad as some countries in the Caribbean which are facing a serious debt crisis.
The second ratio that is important is the debt servicing. Here Guyana has no problem. In fact, our debt servicing is peculiarly very low. It is sustainable. But this sustainability can be misleading and this is where the new government has to be careful.
The fact that there is relatively low debt servicing as a percentage of revenues, may deceive the government into believing that it can borrow more. The new government has to be careful that it does not go on a borrowing spree, because if it does, it may find the first ratio, namely the debt to GDP ratio, in problems.
So while it is a fact that the external debt in excess of one billion United States dollars should not be source of worry, it should also not lead to carelessness and force the government to contract higher levels of debt.
Guyana is indebted to debt. It is the contracting of debt that has allowed for economic and social investments. Imprudent borrowing can result in a de-capitalizing of the economy, as now seems the fate of many countries in the Caribbean.
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