By Kiana Wilburg
While it is practical to focus on ways in which policy makers need to improve the nation’s debt management practices, Finance Minister Winston Jordan is of the view that key to the picture, is the consideration of loans his administration inherited from the PPP, and how those debts affect Guyana’s pace of development.
Jordan recently alluded to this salient point during the opening session of the second national workshop on sustainable funding strategy which was recently held at the Pegasus Hotel.
The Finance Minister said that one has to be cognizant of the impact on the public debt, and of the many loans contracted by the previous administration, several of which remained largely undisbursed at the time the government came to office. In this regard, he cited the CJIA Modernization Loan of US$135 million and the East Coast Road Widening project of which a US$50 million was taken from China Exim Bank.
Jordan said that these remained largely undisbursed during 2015. The economist noted that compounding this was the ill-advised and/or poorly conceived projects and investments embarked upon by the previous administration. He said that these do not contribute to the Treasury, but the repayment is nevertheless being met by the Government and, by implication, the citizenry – at least those who pay taxes.
He cited projects such as the US$200M Skeldon Sugar Factory, the US$60M Marriott Hotel, and investments from the National Insurance Scheme into CLICO and the Berbice Bridge.
The Finance Minister said, “With an outer debt ceiling limit of 60 percent of GDP, these loans have restricted the fiscal space and reduced our room to manoeuvre, at a time when we are seeking to implement a new generation of transformative projects such as the Demerara Harbour Bridge and the Georgetown to Lethem Road.”
The economist went further to state that Guyana is well acquainted with the harsh consequences of an onerous debt burden; the painful process of structural adjustment; and the acrid outcomes of weak and impudent management of the public purse by previous administrations.
In spite of many unhelpful comments and misguided actions, since the presentation of the last budget, Jordan maintained that the Government will do all that is required to prevent the recurrence of such situations.
He said, “Some of our policy measures may be bold in their intent, leading to unpopular reactions. However, while governments are often swept into power on a wave of popularity, they are similarly swept out ignominiously when they succumb to demands, especially by special interest groups, to implement policy measures that have short term gain for these groups, but long term pain for the mass of the population. History is a great teacher, for which we should learn its copious lessons.”
The Finance Minister added, “Our Government has managed to reduce the debt further to 46 percent of GDP at the end of 2016, relative to 2015. But we cannot become complacent; neither do we have the luxury of sitting on our laurels for the lower debt ratio was achieved at the expense of the unsatisfactory implementation of the Public Sector Investment Programme (PSIP), where we failed to achieve an exemplary disbursement rate of our foreign-funded projects.”
Jordan noted that this led to the unacceptable situation of negative net inflows by major donors, at a time when foreign exchange supply was challenged because of under-performance in critical sectors and areas of the economy.
The Finance Minister said that undoubtedly, the hard work must continue to ensure that debt levels remain sustainable, within prescribed parameters.
He stated that even with past fiscal consolidation and oil revenues on the horizon, “we must be cognizant of the new challenges that confront us such as dwindling sources of concessional financing and vulnerability to external shocks.”
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