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An assessment of Guyana’s public debt sustainability

In a report published by the IEEFA, it is stated that Guyana’s public debt is climbing, implying that the public debt levels would reach unsustainable levels. Yet, the report failed to demonstrate any thorough public debt sustainability analysis to support this wild and careless assertion.
If one were to perform a debt sustainability assessment for the period 2012–2022(F) using the forecasted position for 2022, one would find that total public debt stood at US$1.359 billion in 2012, and increased to US$3.127 billion by the end of 2021, representing an increase of 130% over this ten-year period, or an average annual growth rate of 13%. At the same time, real GDP moved from US$4 billion in 2012 to US$8.3 billion by the end of 2021, representing an increase of 115% over this period, or an annual average growth rate of 11.5%.
During the period 2012–2021, the debt-to-GDP ratio was 34% in 2012, and it decreased below 30% in 2014, and remained below 30% up to 2018. During the period 2018– 2020, the debt-to-GDP ratio reached its highest levels of 37%, 52% and 43% respectively – higher than the period between 2013 and 2017, albeit below the 60% benchmark.
However, by the end of 2021, the debt-to-GDP ratio had declined from its highest level of 52% in 2019 to 36%. In 2022, the debt-to-GDP ratio is forecast to reduce further, from 36% to 28%. This is reflective of prudent debt management, coupled with the expansion of the economy driven by the oil economy and the drawdown from the NRF, thereby reducing the level of borrowing. Moreover, this outturn is indicative of the fiscal space available to support the economy’s aggressive development and expansionary agenda within the framework of a sustainable development model.
Furthermore, the external debt-to-GDP ratio; that is: the foreign-denominated public debt exclusive of domestic debt, represented 34% of GDP in 2012, and this was consistently reduced over the years relative to the growth of GDP, and is now forecasted at 12% of GDP for the fiscal year 2022, based on the projected GDP growth rate of 47% and external borrowings. This is the lowest external debt-to-GDP ratio in eleven years, and it is among the lowest in Latin America and the Caribbean region, if not the lowest in the world.
Having examined the growth of the above indicators for the past eleven years (2012-2022F), the average annual growth in total public debt is 15%; external debt 1%; GDP 20%; and revenue 18%. Clearly, the level of growth in revenue and GDP is greater than the average annual growth rates for total public debt and external debt.
With this in mind, given the low debt-to-GDP ratio, Guyana’s total public debt is well below the minimum sustainable benchmark, which for the debt-to-GDP ratio is 60%, which is considered fiscally sustainable, and this ratio for 2022 is less than 30%.

Fiscal Deficit
According to the IMF standard, moderate levels of fiscal deficit relative to GDP are in the region of 3%-10% of GDP. Evidently, Guyana’s fiscal deficit position for the period 2012– 2022(F) is well within this range. For the year 2022, fiscal deficit is forecasted at 3.7% of GDP. The highest fiscal deficits during this period were in the fiscal years 2020 and 2021, and they were 6.04% and 6.74% respectively, still below the 10% benchmark, and were due to the impact of the COVID-19 pandemic. As such, budgets 2020 and 2021 had allocated substantial resources to help cushion the impact and revamp the economy. Therefore, in this situation, this level of fiscal deficit was very necessary and was well justified in the circumstance – while it is worthwhile to note that, even before the crisis, the average fiscal deficit for Latin America and the Caribbean in 2020 was 9% of GDP, according to an Inter-American Development Bank (IADB) report. Moreover, the median fiscal deficit forecasted for the fiscal year 2022 for Latin America and the Caribbean region is around 4.6% of GDP. Hence it is important to highlight that Guyana’s fiscal deficit forecasted for 2022 is well below the regional average, and is well within the minimum sustainable benchmark.