HIPC Initiative approval Guyana's best Xmas gift
- President Jagdeo
by Wendella Davidson
Guyana Chronicle
December 20, 2003
GUYANA's qualification for debt relief under the enhanced framework of the Heavily Indebted Poor Countries (HIPC) Initiative, places it on record as being the ninth country to reach the HIPC completion point.
As a result of the achievement, Guyana will benefit from a US$30M annually for 10 years to further aid in the development of the country's social sector.
Guyana joins the list of other successful countries, Benin, Bolivia, Burka, Faso, Mauritania, Mali, Mozambique, Tanzania and Uganda.
President Bharrat Jagdeo, at a news conference he hosted in the "Blue Room", Office of the President yesterday, hailed the success as "a big day for all the people of the country", adding it was "the best news we (Guyana) could have gotten for Christmas."
"It is the success of all Guyana and I do not want to claim it as a partisan success..." he noted, and publicly thanked Finance Minister Saisnarine Kowlesser; Director of Budget/Chairman Guyana Revenue Authority, Mr. Ashni Singh; Head of the Presidential Secretariat, Dr. Roger Luncheon, Head of the Policy Coordination and Programme Management Unit (PC&PMU), Dr. Coby Frimgpong, and staffers of the Ministry of Finance, for their efforts in ensuring this country's success.
The Head of State was also appreciative of the efforts of Brazil and Canada which acted as Guyana's representatives on the Inter-American Development Bank board, along with Members of Parliament in Guyana for their understanding in helping with the approval of needed legislation.
He also thanked representatives of the World Bank, the IMF, the Caribbean Development Bank and the Inter-American Development Bank, for their help at the bilateral level.
According to President Jagdeo, Guyana's debt relief under the enhanced HIPC from all of its creditors amounts to US$334.5M and is reflected in net present value (NPV) terms. It excludes an interim debt relief granted for 2003, of US$15M.
It is in addition to US$256.4 million in NPV received by Guyana when it reached the completion point under the original HIPC framework in May 1999.
However, the President made it clear that the relief cannot be used to fund Government expenditures such as wages and salaries, and must be spent in the social sector: health, housing, water, education and to stimulate economic activity to a lesser extent. This is a conditionality set out in the criteria by the Multilateral Financial Institutions.
In expressing his pleasure in that the money will be used to stimulate works in the social sector, President Jagdeo said it would aid Guyana in achieving the Millennium Development Goals (MDG) of the United Nations.
A release issued by the International Monetary Fund (IMF), External Relations Department stated that "the IMF and World Bank's International Development Association (IDA), have agreed that Guyana has taken the steps necessary to reach its completion point under the enhanced framework of the Heavily Indebted Poor Countries."
The release explained that completion point under the HIPC Initiative is when creditors commit irrevocably to debt relief, and that the decision point which recedes the completion point, is when debt relief is committed and begins on an interim basis.
To date 26 countries- two-thirds of the HIPCs - have reached their "decision points" and are receiving debt relief from all sources that will amount to more than US$40 billion over time, and an average NPV stock-of-debt reduction of nearly two-thirds, it added.
The release noted too, that beyond the debt relief, the World Bank disbursed US$13.35 million in zero-interest financing from a Poverty Reduction Support Credit on December 11, last.
The credit approved on December 17, 2002, supports Guyana's efforts of stimulating economic growth; increasing the country's productivity in key sectors such as sugar; improving the accountability and transparency of the public sector and the delivery of public services, including health, education, and water supply," it added.
President Jagdeo who recalled that the Initiative was announced in Coolum in 1997 at a G7 Meeting, disclosed that the relief would come in several forms, including stock relief, which entails write-off on Guyana's principal debts and floor relief, which will not write off on the principle debt, but reflect in the reduction in interest rates.
Under the current debt relief, Guyana will in 2004 pay $42.3M less; 2005 - $38.1M; 2006 - $36.2M and 2007- $33.9M, and continue to declining as the years progress.
Guyana's case was raised with the IMF on Wednesday and the following day with the World Bank, the President told the news conference.
He noted that for the past two years, Guyana has been working assiduously to reach the HIPC Initiative completion point.
He remarked too that by way of this Initiative, as was the case with the original HIPC and the other write-offs, Guyana continues to restore itself to a viable state that could pay its way in the world.
By way of its present credibility, the country can now borrow loans as against a decade ago when no one wanted to lend the country money, resulting in the suspension of a number of programmes.
"We were using almost all of our revenue to pay debts. We were technically bankrupt. Were it a company they would have declared bankruptcy, but of course you cannot declare a country bankrupt and than is when the Opposition took us to the IMF," he contended.
Guyana in November 2000, after reaching its decision point under the enhanced framework of the HIPC Initiative, committed itself to complete a full PRSP and implementation of the poverty reduction strategy; continue implementation of strong macroeconomic and structural policies supported by an IMF Poverty Reduction and Growth Facility (PRGF) program and an IDA Poverty Reduction Support Credit (PRSC), under both of which funds were disbursed in recent months; and, implement a set of social, structural, and institutional reforms.
And according to the Head of State, he is particularly proud of Guyana's track record on debt relief, as "none of our debt that we contracted over these years has been with a grant element of less than 25 per cent. We have borrowed, but cost of borrowing ranges from 0.75 to 2 per cent interest and the repayment period averages about 30 years. So this does not place an undue burden on the Treasury because of the long repayment period,"
He pointed out that his Government, on assuming office in 1992, contracted a sum of US$900M, of which a significant part has not been disbursed.
"Inspite of contracting this additional debt we have reduced the stock of debt by over US$700M," "We have removed the debt burden from the backs of the future generation, because paying of debts comes from taxing people," an achievement we are proud of. And it means that it will reduce this country's obligations," he said, adding that "we are very proud of that record."
Meanwhile, President Jagdeo announced that Minister Kowlessar who was present with him at the news conference, will head a Guyana delegation to Paris during the first quarter of 2004, for bilateral discussions on the details of the debt relief.