IMF finds Guyana’s risk of debt distress “moderate but rising”

first_imgGuyana’s debt distress risk remains moderate but is rising, the International Monetary Fund’s Country Report has revealed.Coming out of a debt sustainability analysis conducted by the IMF and the World Bank on Guyana, data disclose that debt indicators remain well below their respective thresholds over the projection period. The present value of external debt to Gross Domestic Product (GDP) ratio rises to around 28 per cent in the long-run. The report cautioned that Guyana remains vulnerable to large terms of trade shocks given the concentration of its exports on a few commodities, and its dependence on imported oil – which also has large implications for the financial sector.The sensitivity analysis and bound tests demonstrates a high vulnerability of Guyana’s debt to shocks, in particular, in the case of new loans on less favourable terms and one-time 30 per cent depreciation.Nevertheless, the analysis indicated that debt service would remain manageable, reflecting the high concessionality of public borrowing. However, under some situations and bound tests debt service could increase significantly, reducing the amount of resources available to public investment and social spending.It noted that in light of the risks associated with plans to significantly increase expenditure, the authorities should proceed with extreme caution, such as ensuring that the projects are financially viable and that they increase the economy’s productivity, and improve debt management.It added that a significant rise in non-concessional debt, including domestic borrowing, may be needed to finance persistent deficits. That would bring additional risks and therefore would warrant close monitoring.The country’s gross public debt to GDP ratio is projected to reach 60 per cent of GDP by 2021, a relatively high level which can bring heightened financing risks on the non-concessional component, but noted that the authorities are determined to promote a robust economy.The IMF stated that the authorities are committed to prudent fiscal policies, adding that “Guyana’s fiscal balance improved considerably in 2015, underpinned by the rebound in revenue collection”.The primary balance registered a 0.8 per cent of GDP surplus in 2015 from a 4.8 per cent of GDP deficit in 2014. The overall Non-Financial Public Sector (NFPS) deficit improved considerably from 5.7 per cent of GDP in 2014 to just 0.2 per cent of GDP in 2015.Guyana’s Executive Director for the IMF, Octaviano Canuto, addressed this matter in a statement, explaining that the country’s fiscal deficit is projected to remain between five and six per cent of GDP over the medium-term.“Given the ambitious development agenda undertaken to bridge the significant infrastructure gap and address unmet social needs, the authorities intend to carefully calibrate their consolidation strategy to limit the adverse impact on the debt-to-GDP ratio, without forfeiting their objectives,” he said, adding that they continue to improve their debt management strategy and emphasise that they will refrain from utilising non-concessional external borrowing.“Private Sector funding would be mobilised through the increased use of well-designed private and public partnerships,” he noted.last_img read more