Major oil find could spell permanent debt relief

Stabroek News
July 10, 2000

A major oil find in Guyana could have enormous potential for clearing Guyana's stock of debt within a matter of years, a senior government functionary indicated on Friday.

With the clearing of this stock of debt, the 50 per cent revenue which goes to debt repayment each year would be available for spending in the social and other sectors of Guyana to boost the standard of living.

CGX Energy Inc, a Canadian oil company, is currently drilling for oil off the Berbice coast and the government is making efforts to jointly exploit with Suriname a more lucrative site for oil in the Corentyne Basin. The CGX rig was stationed at its Eagle site in the Corentyne Basin but it was ejected by the Suriname Navy from that area on June 3. President Bharrat Jagdeo and Surinamese president, Jules Wijdenbosch are scheduled to meet this week in Jamaica, where it is hoped the issue of the return of the rig to the Eagle site in the Corentyne Basin could be resolved.

The Corentyne Basin has a potential of 15 billion barrels of oil and the Eagle site 1.5 billion, which, according to CGX President, Kerry Sully, could lead to Guyana's national output doubling and Suriname's GDP increasing by 50 per cent.

Guyana's stock of debt stands at just under US$2 billion and it is anticipated that the government's share of revenues from a successful oil find could lead to the debt being cleared in no time.

In the meantime, Guyana is going to the International Monetary Fund (IMF) board for enhanced debt relief under the Cologne Terms in September. Guyana's case for enhanced relief, which could realise US$25 million in annual debt repayment relief, was put on the back burner after the IMF ruled that Guyana was off its economic course. President Jagdeo has been fighting the issue.

A government source told Stabroek News that Jagdeo was fighting the matter at the IMF level, insisting that Guyana was on track with its fiscal target.

The government source pointed out that this argument by the IMF was a red herring as the real issue was that the money had not been found as yet to meet the enhanced debt package agreed to by the Group of 7 last year.

However, Guyana will take its case to the IMF board in September. Guyana is among the first four countries which are eligible for such relief and if granted, will be the second country to benefit. The government official indicated that the poverty reduction paper being prepared by the government was far advanced and will be ready by December, expected to be the completion point for Guyana to receive enhanced debt relief. The relief is expected to make Guyana's debt burden sustainable. And with economic activities within Guyana enlarging national output, the ratio of debt servicing to GDP is expected to fall further and redound to the benefit of the population.

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