-By Ravin Singh-
Guyana’s present value of external debt-to-GDP (Gross Domestic Product) is projected to decline to 8 percent over the medium-term, the International Monetary Fund (IMF) has said in its 2018 country report.
Although the report was released in May of this year, the Debt Sustainability Analysis was added to the report and published earlier this week.
The present value of the external debt-to-GDP ratio peaked at 27 percent of GDP this year. According to the international financial institution, this was due to the public guarantee on the National Industrial and Commercial Investments Limited’s (NICIL’s) GYD$30B bond.
However, the IMF predicts that in the medium term, this external debt-to-GDP will decline to 8%, and in the long term, to 2%. This significant decline, the IMF said, will be because of the elimination of external borrowing due to the accumulation of external assets.
The report highlighted that these developments are credited to oil production which is expected to commence from 2020.
“Guyana’s risk of external debt distress remains moderate, but debt dynamics will improve markedly with the start of oil production in 2020” the report stated.
The report’s debt sustainability analysis (DSA) update shows that indicators of the risk of external debt distress remain under the relevant thresholds in the baseline for Guyana.
Further, it stated that stress tests indicate the susceptibility of public debt to adverse shocks before oil revenues place the debt on a downward trajectory.
“Guyana’s external public debt ratio is sensitive to extreme shocks to exports and to the exchange rate. These shocks cause temporary but significant breaches in the external debt thresholds, prompting a moderate risk rating” the IMF wrote.
Nevertheless, the institution stated that: “Guyana’s medium and long-term outlook is very favorable given the projected oil revenues, which will eventually underpin fiscal surpluses and a reduction in external indebtedness.”