Friday, June 3, 2011


Peeping Tom: When Guyana was finally liberated from the clutches of the PNC, the new government found the treasury virtually bankrupt.
The money that was being generated in revenues was being gobbled up by the provisions which had to be made for servicing the country’s external debt.
The defenders of the PNC government like to claim that while budgeted debt servicing was as much as 90% of total taxes, which left very little for any development after paying wages, in reality the government was paying far less because its actual debt service was less than what it was supposed to pay.
This is a shameless argument, akin to saying that while you are required to pay to a bank 90% of your income, which leaves only 10%, you can short pay what is due and therefore have more money to pay the bills.
It is precisely this sort of attitude that saddled Guyana with one of the highest per capita debt ratios in the world. It was because Guyana was not meeting its external debt obligations that it found itself in a situation whereby it could not service its interest payments on the debt it had accrued, with the effect that this interest grew and eventually had to be capitalized.
There can therefore be no comfort in the argument that while our debt provision was prohibitive, the actual debt servicing was far less than what was being budgeted, because Guyana was not paying the full amount that it was supposed to have paid.
Because of this huge debt and the need to regain international creditworthiness, Guyana had to borrow and beg in order to keep the economy going, even with debt forgiveness.
If the government wished to refurbish the court system it had to beg for internal assistance, and this often came with strings attached.
If they wanted to do drainage and irrigation works, they had to beg. To repair the major highways of the country, they had to sign billion-dollar deals with the international development banks.
They had to negotiate these loans, which often took years to be approved. Since also the country was, and still is, spending more than it was earning, it had to seek international help in obtaining enough foreign exchange. .
Guyana paid a huge price for the economic mismanagement of the economy under the PNC, but today, the country’s revenues are no longer being swallowed up by the external debt to the extent of what existed in the past.
Today Guyana still has a debt and it is growing, but so do most of the businesses in Guyana. Most of the businesses owe the banks.
Owing the banks or having debts is not a problem unless you cannot generate enough income to pay these debts. Thus your debt service ratio is very important, and today Guyana has a very impressive debt service ratio, despite the fact that the overall debt is still high. Guyana can afford now to pay its debt servicing, and this has come about as a result of sensible economic management.

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