Guyana’s Debt Pile Is Growing Despite Oil Riches

News Americas, NEW YORK, NY, Thurs. Oct. 18, 2023: Despite reported revenue from oil royalties of $439 million in the second quarter, which increased the nation’s oil fund balance to $1.72 billion at the end of June, Guyana’s government has secured an additional loan of US$90 million from the Inter-American Development Bank (IDB), adding to Guyana’s debt of nearly US$1 billion.

The loan, approved by the IDB’s Board of Executive Directors, is reportedly specifically designed to expand access to safe and improved learning environments and enhance educational services, with a particular focus on supporting vulnerable students in Guyana. The IDB has described this loan as the first individual operation of a conditional credit line for investment projects (CCLIP), with a total value of US$150 million.

The additional debt comes as Guyana’s Ministry of Finance last month announced the third and fourth drawdowns from the Natural Resource Fund (NRF) for the year 2023. As per the official press release from the Ministry of Finance, a total of US$200 million had been transferred from the NRF to the Consolidated Fund in 2023, channelling resources to further national development objectives.

In August and September, the government drew US$100 million each, totaling GY$41.7 billion, which adds to the US$400 million withdrawals, or GY$83.4 billion, conducted earlier this year. Cumulatively, the total drawdowns for this year have reached US$600 million, which translates to a whopping GY$125.1 billion. The progression of these funds into the Consolidated Fund is in accordance with approvals made during the Budget 2023 process. The Parliament approved a total transfer of US$1.002 billion for the fiscal year 2023. US$402 million remains to be transferred.

Yet, as of December 31, 2022, Guyana owed the IDB US$787 million. With the recent US$205 million in loans, the total indebtedness to the IDB stands at US$992 million. In 2022 alone, Guyana borrowed US$335 million from the IDB.

Additionally, the Guyana government has taken on two development loan agreements worth $150 million with Saudi Arabia and a a $350 million loan with Qatar, all just this year.

Meanwhile, subject to approvals from authorities in Guyana, the final investment decision (FID) for ExxonMobil’s massive Whiptail development – its sixth in the Stabroek Block – is expected by Q1 2024.

So says the president of the company’s Guyana operations, Alistair Routledge, when asked by reporters on October 17.

“We’re anticipating somewhere around the first quarter or maybe the end of [the] first quarter of next year… but as I say, subject to going through the appropriate regulatory process,” he relayed.

Fitch Solutions forecast Guyana’s fiscal deficit will widen from 2.2% of GDP in 2022 to 3.0% in 2023 given the government’s planned 41.4% increase in headline expenditure over the year. While this suggests a slight deterioration in the market’s fiscal trajectory, Fitch notes that the projected deficit remains comfortably below both the 5-year and 10-year historical average deficits of 5.0% and 4.3%, respectively.
The successful offshore oil field explorations and developments in Guyana in recent years have prompted the government to increase headline expenditure by double-digit growth rates since 2019, and 2023 will be no exception to this trend.

Nonetheless, Oil revenues will record large gains in the medium term as production continues to rise amid stabilizing prices, suggesting that Guyana will hit its first surplus in Fitch’s records by 2024. Overall, Fitch sees limited risks to Guyana’s medium-term fiscal trajectory due to persistent surpluses and a low debt-to-GDP ratio (24.6% in 2022 and averaging 25.6% between 2023 and 2027).

Guyana became an oil producing nation in 2019 and, with a population of roughly 800,000, is poised to dramatically increase its per capita wealth. While GDP per capita is skyrocketing thanks to oil production and 2022 GDP growth of 62 percent, but many still live under the poverty line. Guyana’s economy is, however, projected to grow by 37 percent in 2023 alongside a 6.6 percent inflation rate, making it one of the fastest growing economies in the world.

Guyana’s offshore oil development is poised to deliver over 500,000 barrels of oil per day (bpd) by the end of 2023 with expectations that the country will produce 1.2 million bpd by 2027.