Guyana's debt to drop to US$829M after HIPC
What is the stock of Guyana's external public and publicly-guaranteed debt after the write-offs, reliefs and rescheduling received over the last few years?
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Guyana's debt to drop to US$829M after HIPC
Stabroek News
January 28, 2001
What is the stock of Guyana's external public and publicly-guaranteed debt after the write-offs, reliefs and rescheduling received over the last few years?
According to Guyana's decision point document for further debt relief under Cologne Terms--prepared by the IMF and the World Bank (IDA)--that debt in net present value (NPV) terms will stand at US$829 million after relief under the original HIPC initiative is implemented.
Guyana's debt stood at US$1.085 million at the end of 1998, but with the US$256 million relief under the original Heavily Indebted Poor Countries (HIPC) initiative granted, would fall to US$829 million. This, the document said, was equivalent to 415% of the government revenues (calculated using the end of 1998 exchange rate) and represents 1,152% of Guyana's exports.
But even after implementing the original HIPC relief, the NPV of Guyana's debt (including new debt) is projected to fall below 250% of government revenue only in 2007. As it relates to government revenue, debt service due after the original HIPC is projected to be 62% of exports in 2009-18. In nominal terms, the debt relief under the original framework amounted to US$440 million.
Guyana's debt at the end of 1998 to non-Paris club bilateral creditors stood at US$76 million in nominal terms, which is equivalent to 5.5% of the total debt. The document said that the government has contacted all of these creditors but has reported limited progress in negotiations comparable to Lyon terms (80% NPV reduction on eligible debt). However, multilateral creditors, have, for the most part, delivered their share of the debt relief under the original initiative.
With relief under the enhanced HIPC framework (Cologne Initiative), Guyana stands to get an additional US$329 million in NPV terms which will reduce its debt to revenue ratio to 250% and take the debt figure down to US$500 million in NPV terms after the relief is implemented.
There are conditions attached to the government being able to access this further relief and the completion point is expected to be by the end of this year.
The cost of the additional assistance is to be shared proportionally among Guyana's creditors, based on their exposure after full implementation of both Naples terms (67% stock of debt write off) and the relief under the HIPC initiative.
It is expected that some 61% of the enhanced relief, which would amount to US$200 million in NPV terms, would come from the multilateral creditors, while the remaining US$129 million would come from bilateral and commercial creditors.
The Paris Club creditors are expected to provide about 72% of the bilateral assistance.
Among the multilateral creditors, the World Bank would contribute in NPV terms US$40.7 million, the IMF US$39.5 million, the IDB US$64.3 million, the CARICOM Multilateral Clearing Facility (CMCF) US$28.9 million, the European community US$10.5 million, the Caribbean Development Bank US$9.7 million, the OPEC Fund US$5.3 million and the International Fund for Agricultural Development (IFAD) US$1 million.
The document said that the time profile for the relief will depend on the modalities of debt relief that each creditor will apply to reach the indicated NPV reduction.
Because Guyana has benefited from a stock of debt reduction on Lyon terms, it is assumed by the IMF and World Bank that the bilateral creditors would provide relief on Cologne terms starting at the completion point.
World Bank assistance of US$40.7 million will be provided through a 58.6% debt service relief on IDA debts disbursed and outstanding as of the end of December 1998--that is on debts remaining after cancellation under the original HIPC Initiative. IDA assistance started at the decision point (last year November) and becomes irrevocable at the completion point. A total debt service relief of US$70.6 million will come from World Bank over 20 years and would average US$22 million per year in nominal terms from 2001 to 2010 and US$42 million over 2011 to 2020.
The IMF assistance under the Cologne Framework would average nine per cent of total debt service and will be delivered over nine years. Twenty per cent of the IMF's assistance was to be deposited into Guyana's account after the decision point was reached last year, and the remainder at completion point.
For the other multilateral creditors, the World Bank and IMF assume that the debt relief would be delivered over 20 years starting from the completion point and through debt service relief. This assumes no interim relief by the IDB, though the IDB is considering a financing modality that includes a provision for interim assistance, the document said.
The document said that while Guyana would achieve a debt equivalent to 250% of government revenue after enhanced HIPC relief, several Paris Club creditors have indicated possible debt relief beyond their assistance under the HIPC initiative and this could amount to an additional US$90 million in NPV terms.
But despite Guyana being a beneficiary of the original and enhanced HIPC initiatives, based on the fiscal openness criteria, the World Bank and IMF noted that Guyana's external position remained vulnerable to exogenous shocks because of traditional exports which are subject to price volatility and uncertainties in preferential export markets, while oil import prices continue to fluctuate sharply. They noted that sugar, gold, bauxite and rice account for over 70% of the export earnings, while fuel and lubricants represent about 20% of the merchandise imports by value.
The document noted that a worsening of the terms of trade could increase the burden of external debt and debt service for Guyana.
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