Press Release: Guyana to Receive Over US$400 Million in Debt Relief

IMF News, May 14, 1999

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The IMF and the World Bank agreed that Guyana has met the requirements to receive about US$ 410 million in nominal debt service relief under the Heavily Indebted Poor Countries (HIPC) Initiative.
Of the US$ 410 million, about US$ 40 million (equivalent to US$ 34.5 million in NPV terms) will be provided by the IMF.
Relief from all of Guyana’s creditors will be worth about US$256 million in net present value (NPV) terms, equivalent to 24 percent of total debt outstanding at the end of 1998.
The Inter-American Development Bank (IDB) supports the decision and is Guyana’s largest external creditor.

IMF assistance will take the form of a grant deposited into an escrow account to cover part of the debt service falling due to the IMF.
This IMF grant will cover about 26 percent of Guyana’s annual debt service to the IMF on average over the next nine years.
All other multilateral and Paris Club creditors of Guyana have provided satisfactory assurances of their participation in the package.

Resources released from debt servicing under the HIPC Initiative amount to about 3½ percent of GDP (10 percent of public sector revenue) on average a year during 1999-2003.
During 2004-09, resources released amount to about 2 percent of GDP (5½ percent of public sector revenue).
The freed resources are expected to provide room for additional expenditures in social and poverty alleviation areas, supporting Guyana’s efforts to halve the number of people in poverty by 2015.

Mid-1990s achievements:
- Real GDP growth increased to an average annual rate of 7 percent.
- Inflation fell from over 100 percent to 3½ percent.
Adverse developments beginning in late 1997:
- Decline in major exports (sugar, rice, gold, timber) related to El Niño and weak overseas demand.
- Civil disturbances following the December 1997 elections.
Consequences:
- Diminished production and revenue base.
- Undermined business confidence.
- Hampered implementation of the three-year ESAF-supported economic program.

Authorities committed to returning the program closer to its original path and creating a durable basis for economic growth and poverty reduction through market-oriented policies.
The revised medium-term program aims to:
- Boost real GDP growth from about 2 percent in 1999 to 4 percent in 2003.
- Reduce inflation to about 3 percent after a temporary rise in 1999.
IMF Executive Board action:
- Following a midterm review, the IMF Executive Board approved on May 12, 1999, a new disbursement of SDR 8.96 million (about US$12.1 million) of the total SDR 53.76 million (about US$ 72.7 million) originally committed.
- Completion of that midterm review was a condition for Guyana to reach the HIPC completion point.

Since approval of the HIPC Initiative in September 1996, seven countries have qualified for exceptional assistance.
Total nominal debt service savings projected for these countries are about US$6 billion.
Assistance to Uganda, Bolivia and Guyana, the first three countries to obtain relief under the Initiative, amounts to about US$1.8 billion in nominal terms.
Footnotes in the source:
- The HIPC Initiative entails coordinated action by the international financial community to reduce to sustainable levels the external debt burden of heavily indebted poor countries that pursue IMF and World Bank-supported adjustment and reform programs, but for whom traditional debt relief mechanisms are insufficient.
- The ESAF is a concessional IMF facility; ESAF loans carry an interest rate of 0.5 percent a year and are repayable over 10 years, with a 5½-year grace period on principle payments.

Source: IMF Press Release No. 99/17, May 14, 1999.