The debt relief package negotiated between Guyana and the IDB in 2007 is helping the country to maintain its high level of spending to reduce poverty in the face of continuing shocks in oil and food prices.
The IDB is the country’s principal creditor. Through a debt agreement with the IDB, Guyana was relieved of 100 percent of its debt on outstanding loan balances as of December 31, 2004, from the IDB’s Fund for Special Operations (FSO). Total relief granted to Guyana was $467 million.
Other countries benefiting from the same debt relief were Bolivia, Haiti, Honduras, and Nicaragua, a total of approximately $4.4 billion debt relief. The Bank’s membership took the measure to help these countries free up resources to invest in quality education, health and other social services their citizens need to overcome poverty. In particular, debt relief was seen as critical to enable the countries to reach the United Nations Millennium Development Goals for halving poverty by 2015.
The benefits were effective retroactively to January 1, 2007, as Guyana and the other four countries had already reached the “completion point” under the enhanced Initiative for Heavily Indebted Poor Countries (HIPC). The HIPC was an earlier debt relief program―by establishing a good track record on programs supported by loans, implemented reforms previously agreed upon, and made satisfactory progress in implementing a strategy to reduce poverty.
Improved debt profile
In addition to freeing up resources for poverty reduction, debt relief for Guyana has helped to improve the country’s debt profile by dropping the net present value (NPV) of its external debt-to-revenue ratio from 183 percent to 107 percent, and its NPV of external debt-to-GDP from 70 percent to 39 percent.
In addition to enabling Guyana to save some $6.8 million per year in debt service payments, the country will also achieve significant benefits from improvements in its debt indicators and lowered risk of debt distress. It is anticipated that the country’s debt profile will remain favorable as long as Guyana continues with its plan to contract largely concessional debt.
Stories of Change
The IDB works in partnership with Guyana to help the country build a stable economy on a foundation of strong infrastructure and efficient institutions. Bank support for reducing poverty includes expanding housing opportunities, improving water and sanitation, reducing malnutrition, and boosting the effectiveness of social sector spending and services. Read more >>
Guyana: A perspective
Although Guyana’s economic fortunes have fluctuated considerably since its independence in 1966, the country has made encouraging progress in recent years toward stabilizing its macroeconomic situation. Read more >>
IDB in Guyana
Since Guyana joined the IDB in 1976, the Bank has worked with the country to build a stable economy on a foundation of strengthened infrastructure, public institutions, and continuing efforts to reduce poverty. Read more >>
In preparing its operational program in Guyana, the IDB consults closely with other donor organizations and agencies, together with the government, to ensure that external resources complement each other and do not produce redundancies or conflicts. Read more >>