Unpaid interest on loans drove up external debt – Jagdeo

Unpaid interest on loans is among the factors responsible for driving up the country’s external debt by 20.3% to US$804M, between the end of September 2007 and the end of September 2008, President Bharrat Jagdeo said yesterday.

Speaking at a news conference, he said the most significant contribution to the figure was from the country’s PetroCaribe funds, almost US$100M now in a bank account to be used at any time in addition to central bank reserves. “We haven’t spent it,” he said, “But we need the cushion now to bolster our reserves so we could ride out this recession much better than many countries, we have a cushion there.”

This dramatic increase in Guyana’s external public and publicly guaranteed debt was revealed in a quarterly report by the Bank of Guyana. President Jagdeo explained that roughly 60% of the US$804M figure represented the PetroCaribe funds, while the remainder came from disbursements on loans that were contracted in the past from institutional creditors including the IDB and the CDB. He said the government should be credited with reducing the debt from US42.1B to $800M in spite of holding the PetroCaribe funds in reserve.

The President yesterday returned from state visits to Libya and Greece. A visit to Qatar was shelved as a result of the situation in Gaza.

While the visits were aimed at strengthen ties and secure investment opportunities, the visit to Libya had the specific purpose of securing a debt write off for a US$41M loan that dates back to the 1970s. Jagdeo explained that the loan has affected bilateral discussions between the two countries and he said it was important to resolve the outstanding issue before investments could be explored. While Guyana sought a write off of not less then 85%, however, Libya took the position that were it to go forward other borrowers with larger debts would apply for  similar treatment.

According to Jagdeo, under the Paris Club and HIPC agreements, Guyana must seek comparable write-offs from other creditors or jeopardise the existing arrangement. “We cannot jeopardise our negotiations with other creditors who have written off substantial amounts of debt,” he said. He added that Libya would send a team here to continue discussions on the issue. He was happy to report, however, that the debt would not affect bilateral relations between the two countries.

The President said his visit to the countries is part of a new economic diplomacy that would focus less on the west and more on emerging markets. He said with the with the credit crunch in the western markets, it is difficult to secure investments, it is imperative to look at the Middle East as the new source of investments, as several oil producing  countries have placed billion-dollar gains from exports into sovereign wealth funds.

Meanwhile, he said his visit to Greece was aimed at securing a strategic partner in Europe. He said Greece has been sympathetic to the arguments of small nations like Guyana and he noted the need in Caricom for states to champion its causes in Europe.

He cited the damaging sugar price cuts as well as the EPA as recent examples of devastating polices “We need sympathisers at the table to add their own perspectives,” he said.

Jagdeo said current diplomacy is focused too much on larger countries like the UK that are the very ones pushing the agendas that are harmful to us.

As a result, he stressed the need to build close ties with smaller countries that can serve as political allies at European council meetings.

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