Companies and Banks Opposed to Increasing External Debt
The Monetary Authority of Guatemala decided, against the vote of banking representatives and private enterprise sectors, to increase debt through issuance by 10.9%.
Friday, April 24, 2009
The main argument by the opposition is that the solution to the problems in the treasury is to reduce state spending, not increase debt. They insist that the money that is going to cover state expenditures in this manner should be invested to facilitate credit for the productive sector, which has suffered a sharp decline.
The Central American Institute for Fiscal Studies has concluded that only the public debts of Panama and Nicaragua, using official data, are sustainable in the medium term.
The fiscal deficit of 2.3% proposed for the 2014 budget would cause such an increase in the Guatemalan public that could put monetary policy at risk.
Increased borrowing costs, a disincentive to foreign investment and distrust of economic performance, are part of the expected scenario if public debt growth is not controlled.
If the additional tranche of $250 million approved by Congress is placed, the country's debt level will rise to over 40% of GDP.
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