-Economic spotlight

June 29, 2018

Guyana among lowest in Caribbean for Debt to GDP ratio

In comments earlier, this week Minister of Finance Winston Jordan assured that the economy remains sound and that the country’s external debt levels are still below 50% of the country’s Gross Domestic Product – a key indicator of a country’s financial health.

Debt to GDP for an economy is similar to a household’s combined debt – from credit cards, mortgages or small loans – as it compares to its income. The more debt to pay back compared to income the less a household or a government has to spend on services such as health or education or infrastructure.

And in the case of Guyana, the most recent figures indicate a debt level of 45.2% in 2017 and 46.4% in 2016. This is down from 48.6% in 2015. How does this compare to the region? Sadly, some of our fellow Caricom countries are not in good financial shape. Barbados had a debt to GDP ratio of 145% in 2016, Jamaica 120%, Antigua 93% and Grenada 89%. These debt levels are dangerously high and in the case of Barbados have meant severe austerity measures by the government and a move to the International Monetary Fund for assistance.

For Guyana, the current level is more than manageable and Minister Jordan also made an important point that debt should be viewed in relative terms and not absolute, noting that as the economy continues to grow it can take on more debt. So just as a household’s income may rise, Guyana’s GDP will rise too –this year by 3.6%. And with First Oil only months away, the IMF forecasts Guyana’s GDP to increase by 38.5 percent in 2021 “with a significant increase in official reserves and a gradual decline of the public debt-to-GDP ratio.”