Guyana yesterday secured a further US$329M ($65B) in debt relief in net present value (NPV) terms (its future value) which is likely to translate into an additional US$25M in annual debt service relief over the next 20 years.

The International Mone-tary Fund (IMF) board last evening approved Guyana's case for enhanced Heavily Indebted Poor Countries (HIPC) Initiative relief, which is Guyana's exit strategy from a heavy debt overhang. The relief will allow the country's debt-to-revenue ratio to fall below the 250% threshold to 215%, once growth rates of between 1.5 and 2.75% are achieved.

The board had to grant two waivers related to civil service reforms to allow Guyana to be deemed to have reached floating completion point for the additional relief. However, one of the key issues which allowed the IMF's approval and the US support for it was the passage of the Fiscal Management and Accountabi-lity Bill, which the government rushed through Parliament on Monday.

Stabroek News understands that the original schedule to have the Bill passed was December 31, but after the IMF board meeting was scheduled for December 15, the US directors said their support for Guyana's case would be contingent on the passage of this Bill. The board meeting was then postponed to December 17 to allow for the passage of the Bill on December 15. Another of the key criteria for Guyana to secure the debt relief was to ensure that there was no large salary increases to worsen the fiscal burden. Earlier this month, much to the chagrin of their respective unions, the government announced a five per cent across-the-board pay hike to public servants and teachers.

This additional debt relief is the maximum available to any country and presents an opportunity for Guyana to consider exiting the IMF programme. But Guyana would have to continue to maintain sound macro-economic policies to allow for continued assistance from other international donor agencies.

"Sustained structural and macroeconomic reforms remain key to achieving the growth and revenue objectives needed to ensure Guyana's external and fiscal viability over the medium term. Further progress will be needed, in particular in reforming the civil service," a statement from the acting chairman of the IMF board said yesterday.

That statement said Guyana established a satisfactory track record of social reforms and macroeconomic and structural policy implementation to qualify for debt relief under HIPC and enhanced HIPC. It added that progress is being made in implementing end-2003 structural reforms under the programme with the IMF.

The statement said the debt relief, as well as the government's commitment to sustained structural reforms and macroeconomic stability, will provide Guyana with a sound framework to achieve its poverty and growth objectives in the Poverty Reduction Strategy Paper.

Debt sustainability indicators show that the net present value (future value discounted using a previous year's base) of Guyana's external debt to Gross Domestic Product (GDP) ratio would fall to 68% this year after enhanced-HIPC assistance and will translate under certain assumptions into a net present value debt/ revenue ratio of 215% and a debt/export ratio of 75%.

In May 1999, the government secured US$259M in NPV terms under the original HIPC framework when 80% of its original debt was reduced under what is known as the Lyon terms.

Linked to the current U$329M debt relief was a number of reforms including the completion of the poverty reduction strategy paper; maintenance of a stable macroeconomic climate in keeping with the IMF programme; passage of the procurement act; tracking HIPC resources in the budget; improving social sectors and structural performance by increasing the number of teachers and health care workers; developing a plan for the 2002 population census; further reforming the civil service; restructuring and modernising the sugar industry; completing the sale of the Guyana National Cooperative Bank; tabling a new investment law in Parliament and beginning implementation of the IDB-financed SIMAP II programme.