Guyana’s public indebtedness since 2006

Guyana and the wider world

Part 1

Problems of measurement
For my remaining columns commemorating the Third World Debt Crisis (TWDC) I shall focus the discussion on Guyana’s public debt situation since 2006.  Despite its appearance, this decision is not based primarily on the consideration that this covers a convenient recent period for discussion.  Instead it is due principally to the fact (which I have drawn attention to on several previous occasions in these columns) that analyses of Guyana’s macroeconomic performance will fall into grave error if the GDP measures prior to 2006 are used in the same time series analysis with GDP values after 2006.

To explain: As I have indicated earlier, debt burden is measured by the total public debt divided by GDP. This yields the familiar public debt-to-GDP ratio.  For Guyana, continuity in the measurement of debt burden becomes impossible before and after 2006 because the GDP estimates were rebased in 2006.  Indeed the effect of that rebasing exercise has been a substantial increase (about two-thirds) in the size of the 2006 price series GDP estimates when compared to those based on the 1988 price series.

guyana and the wider worldThe table below has been provided by the Bureau of Statistics (2010), which has been responsible for providing the rebased GDP measures.

 

20130203graph1

 

 

 
That table displays both the Bureau’s estimates of Guyana’s GDP based on the 1988 price series and the rebased 2006 price series for the period 2006-2010.  There it can be clearly seen that the 2006 price series data are on average 65 per cent larger than the 1988 price series GDP measures.

Readers who have been following my Sunday Stabroek columns would have been reminded on several earlier occasions of this situation. It would be useful nonetheless, to repeat once more the statement made by the Bureau of Statistics in the publication cited above:
“A rebasing exercise immediately results in two predictable outcomes: the size of the nominal GDP expands significantly and the growth rate generally increases” (Bureau of Statistics, 2010, page 29).

One other important piece of information needed for this public indebtedness review is to inform readers that I utilize in this review only public debt information accessed from publicly available official sources, mainly the Bank of Guyana and the Annual National Budgets.  I have made no independent effort whatsoever to verify these data, as I do not have access to the information required for such an exercise.
For purposes of illustration

For purposes of illustration only, the impact of the GDP rebasing exercise on measuring the public debt burden (public debt-to-GDP ratio) is presented in the table below utilizing the identical official public debt data sources and the different price series GDP data for 1988 and 2006.

20130203graph2

 

 

 

 

This table reveals the dramatic impact of the rebasing exercise on the main measure of the debt burden, namely the public debt-to-GDP ratio.  As can be seen the difference between the average debt-to-GDP ratio based on 1988 prices (118 per cent) and that based on 2006 prices (71 per cent) is quite large, 47 per cent.  Of significance, the ratio would have been at 99 per cent or greater for all of the period 2006 to 2011, although it has indeed fallen from a peak of 155 per cent in 2006.

The main lesson

Last week I gave a brief glimpse of what I have termed as “the worst of times” when describing the horribly painful experiences of structural adjustment this country has had to endure in reducing a public debt-to-GDP ratio in excess of 600 per cent to a level of about 200 per cent.

This adjustment was very savage, based as it was almost exclusively on the contraction of the incomes, wealth and living standards of the broad masses of Guyanese people.  Today that structural adjustment experience remains a tortured legacy of our post-independence politics.

For our economic legacy, however, it points to one very fundamental lesson. That is, our country is too small, too open, and too poor, to sustain the ravages of significant macroeconomic dislocations.  As a result, I urge both the authorities and the parliamentary opposition (who should be over-sighting economic governance in the country) to pay very close attention to the emergence of macroeconomic disequilibria.  The speed and rapidity with which these can proceed in dragging the country to a halt and into a vicious downward spiral should never be underestimated.

Latest in Features, Sunday

LUCAS STOCK INDEXThe Lucas Stock Index (LSI) rose 0.54 per cent during the third period of trading in June 2016. The stocks of six companies were traded with 79,573 shares changing hands. There were three Climbers and one Tumbler. The stocks of Banks DIH (DIH) rose 1.98 per cent on the sale of 18,757 while the stocks of Demerara Distillers Limited (DDL) rose 5.26 per cent on the sale of 41,667 shares. In addition, the stocks of Demerara Tobacco Company (DTC) rose 1.51 per cent on the sale of 13,603 shares. In contrast, the stocks of Demerara Bank Limited (DBL) fell 5.26 per cent on the sale of 4,324 shares.  In the meanwhile, the stocks of Guyana Bank for Trade and Industry (BTI) and Republic Bank Limited (RBL) remained unchanged on the sale of 222 and 1,000 shares respectively.

Massy and Guyana (Part 1)

Steadfast Last year, this writer looked at the Massy Group of Companies formerly Neal and Massy to gain an understanding of the operations of this company which has been doing business in Guyana for the past 48 years. 

20160626table2jun

Value-added performance of the forest sub-sector: Erratic, weak, declining

Erratic Last week’s column highlighted what I consider to be a most distinctive feature of the extractive forest sub-sector’s performance in Guyana’s economy, during the past decade.

default placeholder

The UK bids Europe farewell

On June 23 by a small majority, the British people voted to remove themselves from the European Union (EU). The decision has consequences for the Caribbean.

default placeholder

What would life be without sport?

I wonder what it would be like to exclude sport completely from one’s life for, say, one year? No playing sport, no watching it, no reading it no discussing it no thinking about it even.

default placeholder

Brexit: Lessons for Caricom

The results of the referendum held in Britain to determine whether or not it should remain in or leave the European Union (EU), has been won by voters who supported the leave option.

Director of Sport Christopher Jones and President of the Guyana Chess Federation Irshad Mohammed (centre) stand with some members of the 2016 Guyana Olympiad chess team. The team travels to Baku, Azerbaijan, for participation at the Olympiad in September. A signature qualifying tournament was not held to determine the members of Guyana’s Olympiad chess team.

Federation picks chess Olympiad team without holding qualifier

The Guyana Chess Federation (GCF) has decided upon a 2016 Guyana Olympiad chess team without hosting a qualification competition to determine the competence of its participants.

Quamina Farrier

Heavy on historic significance, Journey to Freedom failed as a musical

Several Guyanese plays of historic significance were recently staged at the Theatre Guild and National Cultural Centre as part of a Jubilee festival.

Pawpaw Fruit Soup with Passion Fruit Photo by Cynthia Nelson

Fruit soup

If you’re looking for an easy dessert that uses mostly fruit, then you’ve hit the jackpot when you make a fruit soup.

Comments

About these comments

The comments section is intended to provide a forum for reasoned and reasonable debate on the newspaper's content and is an extension of the newspaper and what it has become well known for over its history: accuracy, balance and fairness. We reserve the right to edit or delete comments which contain attacks on other users, slander, coarse language and profanity, and gratuitous and incendiary references to race and ethnicity.

Stay updated! Follow Stabroek News on Facebook or Twitter.

Get the day's headlines from SN in your inbox every morning: