Debt distress warning
by Michelle Elphage
PRESIDENT Bharrat Jagdeo yesterday challenged local and foreign experts at a national debt strategy workshop to draft a comprehensive plan that will ease the country's formidable debt burden. Addressing participants from the Finance Ministry's Debt Management Division, related Government agencies and the international donor community, Mr. Jagdeo called for a plan for additional debt forgiveness and a new borrowing strategy to avoid a return down the path of debt distress. Opening the 10-day workshop at the Ocean View Convention Centre, Liliendaal, East Coast Demerara, the President said the new borrowing policy looked at must be consistent with long-term growth for the country. The challenge facing debt specialists, he said, is to examine new borrowing strategies and to ensure these are consistent with debt sustainability. "Today we face a very difficult external environment and you will know that many third world countries up to now...don't have a clue...(about) how to deal with this rapidly changing external environment", President Jagdeo told a gathering which included representatives from the International Monetary Fund (IMF) and the Inter-American Development Bank (IDB). "The changes are so rapid that these countries simply cannot make those changes...the structures of their economy to cope with the changes. In fact, many of the institutions to promote these changes simply don't exist in third world countries." He urged those at the workshop to look not only at the "optimistic" side of the situation, but at the challenges likely to face the country. The President, who has responsibility for finance, said the current borrowing policy is largely guided by a technical memorandum and places limits on contracting debt. But he did not think it was consistent with what is happening in the economy. He stressed the excessive debt burden facing Guyana despite several successful efforts in getting relief. Over the years, the country has received debt relief from the Paris Club group of creditors and most recently the World Bank's Heavily Indebted Poor Countries (HIPC) Initiative. For this year, even after the HIPC relief granted in May, the Government will spend 38 per cent of its revenue on debt relief. In 1997 and last year, 51 per cent of the country's revenue was spent on debt relief. President Jagdeo said in June, the G8 leaders announced the Cologne Debt Relief Initiative, an enhanced HIPC framework, which defines as sustainable, a level of 25 per cent to government revenue. However, for Guyana to benefit from this, the President said the Government will have to pursue sound economic policies and commit to use the additional debt relief to strengthen poverty alleviation programmes. Under the enhanced HIPC programme, Guyana will be eligible for more than double the debt relief it has received from HIPC. This will bring total debt relief under the HIPC Initiative to about US$578M. British High Commissioner, Mr. Edward Glover who spoke on behalf of the donor community, said while it is important for countries to deal with their debt of the past, it was equally critical to adopt a prudent and long-term strategy for future borrowing, to achieve new economic growth. He said a mid-term review of the capacity building programme has shown it has so far been a tremendous success. "It provides a much needed additional focus to the whole question of debt relief," Glover noted. He said Guyana is proof of the benefit of the HIPC programme and of the commitment of the Government to economic stabilisation, structural reform and poverty reduction. The British envoy said it is notable that these have been achieved, despite political instability, the El Nino weather phenomenon and the Asian crisis. Glover added that the HIPC Initiative is the "end of the beginning" because the country's debt burden remains unsustainable as defined by the multilateral financial institutions. He said it is hoped that the additional relief under the enhanced HIPC Initiative will present the final step to remove Guyana from unsustainable indebtedness. The opening session of the workshop co-sponsored by Debt Relief International (DRI) and the Debt Management Division of the Ministry of Finance, was chaired by Mr. Juan Carlos Aguilar, Programme Coordinator of DRI. A presentation on the HIPC Initiative was yesterday expected to come from Mission Chief of the IMF, Mr. Gopaul Yadav and an overview of the workshop by Ms. Alison Johnson, DRI consultant.
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