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Guyana Foreign Debt
In the early 1990s, Guyana was one of the world's most heavily
indebted countries. Its external debt burden was almost US$2
billion in 1990, or about seven times official GDP. The debt burden
accumulated in Guyana--as in many other developing countries--
beginning in the 1970s. At first, loans were earmarked for
development projects. But when rising oil prices adversely affected
the balance of payments, Guyana began borrowing to finance imports.
Guyana's foreign debt was unlike that of many other Latin American
nations because most of it was owed to official creditors (loans
from international financial organizations and foreign governments)
rather than commercial institutions (loans from foreign banks).
Roughly one-third of the debt was owed to the IMF and the World
Bank, and one-fourth to neighboring Trinidad and Tobago. Other
major creditors were the Caribbean Development Bank and Barbados.
In 1981 Burnham underlined the severity of the debt crisis when
he authorized the government to stop making debt-service payments.
Arrears on debt repayment and trade credits were simply allowed to
accumulate. (Mexico's 1982 announcement of a similar moratorium on
its much larger commercial debt sent shock waves through the
international financial community.) Guyana's debt moratorium had
two serious results. First, unpaid debts and interest payments
compounded, leading to rapid growth in total debt. Thus, external
debt increased from US$1.2 billion in 1984 to US$1.7 billion in
1987 even though Guyana received few new loans. Second, the buildup
of arrears destroyed Guyana's credibility as a debtor. In 1983 the
IMF refused to provide further loans; many other international
organizations and governments followed suit. The loss of
credibility also directly affected Guyana's trade relations:
Trinidad and Tobago cut off oil shipments in 1986.
The debt crisis persisted during the 1980s as Guyana remained
unable to resume debt service. The country consistently had a
deficit in the overall balance of payments, and the government
financed the deficit by accumulating even more arrears on debt
service payments. By 1989 those arrears exceeded US$1 billion, or
five times the value of annual exports. By the late 1980s, the debt
crisis threatened to shut down the economy; even short-term trade
credits were difficult to obtain. Venezuela began insisting on
prepayment in bauxite in exchange for shipments of oil. It was
mainly the debt crisis that led the government to agree to an IMFbacked austerity program in 1988.
Temporary debt relief arrived after Guyana agreed to enact the
Economic Recovery Program. A Donor Support Group consisting of
Guyana's major creditors (Canada, the United States, Britain,
Germany, France, Venezuela, and Trinidad and Tobago) provided a
bridge loan of US$180 million that enabled the government to pay
off arrears to the IMF, the World Bank, and the Caribbean
Development Bank. In addition, bilateral creditors agreed to
reschedule major portions of Guyana's debt, such as US$460 million
owed to Trinidad and Tobago. The complicated refinancing scheme,
which was conditioned on rigorous economic reforms within Guyana,
removed the massive arrears and allow Guyana renewed access to
international financial support. The IMF and the World Bank
extended new loans to Guyana in 1990 for infrastructure projects.
The restoration of Guyana's creditworthiness, however, did not
signal an end to its debt problem. Interest payments on the debt
were the largest expenditure in the 1990 budget. A priority for the
government was to increase foreign currency earnings by expanding
exports, but a large share of export revenues would have to be used
to continue debt service. Thus, debt service absorbed scarce
resources urgently needed for economic development. There was a
possibility that Guyana would receive some measure of debt
forgiveness from the United States under the
Enterprise for the Americas Initiative (see Glossary),
according to 1991 congressional
testimony by Undersecretary of the Treasury, David Mulford. But
there were few precedents for official debt forgiveness on the
scale that Guyana's economy seemed to require.
Data as of January 1992
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