President Bharrat Jagdeo is concerned that even though the country will benefit from the recently announced US$467M debt write-off from the Inter-American Develop-ment Bank (IDB), there will be a reduction in Guyana's access to concessionary funding.
Speaking at the Phase 1 opening of the Ogle Airport terminal on Friday, Jagdeo made public the IDB decision on debt write-off, but expressed the reservation that, "…while it would bring tremendous benefits, on the other hand we are going to see a reduction in our access to the soft resources of the institution which brings additional challenges."
He did not expand further on the implications.
IDB Resident Representative Sergio Varas Olea who also attended the function said that the debt write-off was an important and historical achievement for the country, adding that it would now lead to fiscal policies, which were a lot more monotonous.
In responding to the President's concern Varas noted that the IDB would still keep supporting Guyana with new programmes and a significant portfolio that it had already implemented. He conceded, however, that the availability of money for lending to less developed countries like Guyana out of a special programme was reducing.
"The thing is that the write-off was financed based on the programme created for the less developed countries which was around US$10B, and we use about $4B of that amount to clear off the debt of those countries, and so of course the availability for money in the fund now is not as much as we had, and so it going down gradually… and with only about $6B left this would go down faster," he said.
Varas further explained that the bank would therefore have to review the amount it drew from the LDC programme as this would be the only way to keep it rolling. However, he continued, a combination of options had been taken into consideration with the write-off decision.
The IDB representative said too that there were options for more funding, and this could be further facilitated if member states agreed to put more into the programme. In addition, the IDB was in the process of lobbying and doing fund-raisers among member countries to gather soft resources.
Varas said Guyana's debt with the bank in relation to the size of the country was huge, and represented 60% of the Gross Domestic Product (GDP). "The amount in millions doesn't say all... but when you are indebted to that level… this [was] a heavy burden though it was many soft loans," he said. The write-off allows for taxpayers' money coming from customs and other sources to be used for development purposes.
"This is an important event for Guyana since we have been pursuing the debt relief for it for the last year. This is really important and positive news for all the countries that were having a HIPC programme with the IDB," Varas said.
All Guyana's outstanding debt to the bank's fund for Special Operations (FSO) in the sum of US$467 received a vote from the IDB governors of its 47 member countries.
In a statement, the IDB said that under an agreement endorsed by governors of its 47 member countries, the IDB would forgive some US$3.4 billion in principal payments and US$1 billion of future interest payments owed by five Latin American and Caribbean countries.
The other countries which are benefiting from debt write-off are Honduras, about US$1.4 billion (including cancelled loan balances and forgone interest payments); Bolivia, US$1 billion; and Nicaragua US$984 million. Haiti will receive interim relief of US$20 million over the next two years. The bank had previously announced its support for the debt relief but it required approval by the governors of the member countries.
The release said the benefits would be effective retroactively to January 1, 2007 because Guyana, Honduras, Bolivia and Nicaragua had already reached completion point under the enhanced initiative for Highly Indebted Poor Countries (HIPC).
Haiti, which the IDB said was making progress toward completing the HIPC process, could obtain full debt relief by 2009. The amount, in the IDB's case, will total US$525 million.
In addition, under the agreement approved by the bank's board of governors, Haiti may receive up to US$50 million in IDB grants a year through 2009, and a mix of concessional loans and grants afterwards.
The agreement also guarantees Ecuador, El Salvador, Guatemala, Paraguay and Suriname access to a US$250 million-a-year concessional lending programme.
The release said the agreement ensured the FSO's financial viability through 2015 and IDB member countries had confirmed their commitment to the fund's sustainability, agreeing to assess, no later than 2013, the need for an eventual replenishment.
The last debt-relief initiative saw Guyana reducing its debt by about US$300 million bringing the total debt relief then to between US$850 to US$900 million. President Bharrat Jagdeo had met representatives of the four other countries on a joint strategy for the current debt relief on the fringes of the IMF Board of Governors Meeting which he had chaired. He had said that the lobby for debt relief had been very effective and the US$2.1 billion debt the PPP/C government had inherited in 1992 had since been reduced to just under US$1 billion.
Since the PPP/C government took office, he said it had borrowed some US$900 million as of September last year.