Unsustainable loans will harm future generations – Jagdeo warns

first_img…expresses concern over $30B bond, possible collusion with NICIL Expressing concern over the Government’s borrowing habits and the recent revelations that over $100 million was paid to arrange a government-backed bond, Opposition Leader Bharrat Jagdeo is warning of the future consequences of these decisions.At his most recent press conference, Jagdeo noted that unsustainable levels of borrowing can have detrimental effects for Guyana as a whole. He referenced other economic variables, like the Bank of Guyana’s Statement of Assets and Liabilities showing billions of dollars in overdraft.President David Granger“We’ve pointed out that unsustainable levels of borrowing will harm our country in the future… (billions of dollars) overdraft at the central bank, US$150 million of development borrowing,” Jagdeo said.“The Minister of Finance (Winston Jordan) was in the Middle East talking about closer relationships with the Islamic Bank and he has already signalled that he intends to borrow some US$900 million there.”Jagdeo also zeroed in on the $30 billion bond that was negotiated by the Special Purpose Unit (SPU) for the Guyana Sugar Corporation (GuySuCo). According to Jagdeo, he warned President David Granger about the pitfalls of this transaction.“I sat with the President. I said to him, ‘this is not necessary, because you’re not using the money now’. He did absolutely nothing about it. Now there is a raging controversy between the Agriculture Ministry and the SPU and he does not intervene.”According to Jagdeo, the former People’s Progressive Party/Civic (PPP/C) Administration never arranged a bond of this magnitude, much less paid such a large arranger fee. In addition, the former President expressed concern over possible links between the point person for the bond and a member of the National Industrial and Commercial Investments Limited (NICIL) Board.“That, if it is true, is really a serious issue. That would explain the rush to raise all of the money –because the arranger then gets a percentage – even though you do not need the money now and even though the taxpayers have to pay a 4.75 per cent interest,” Jagdeo observed.Earlier this year, NICIL acquired the $30 billion syndicated bond at a rate of 4.75 per cent interest to spend on capitalising GuySuCo’s remaining estates. It subsequently emerged that part of the bond was used by GuySuCo to repay interest on another debt.As the bond has strict requirements for how it would be used, Republic Bank Managing Director Richard Sammy wrote to the bond trustees – Hand-in-Hand Corporation, to complain. The Bank also called for a full explanation as to the apparent breach of the terms of the Trust Deed.Hand-in-Hand had written to Republic Bank requesting that the purpose of the Trust Deed be changed regarding how the proceeds of the bond shall be applied. While Republic Bank has stated its no objection to the proposed changes to the Trust Deed, it said it remained disappointed that proceeds from the bond were utilised for a purpose other than what was approved.The SPU has not taken lightly criticisms which seek to suggest that the bond would be wasted and that it was acquired at an unreasonable rate. In fact, the SPU had said it should be noted that, as standard for any debt financing, security is required to secure payments to bondholders.The term of the bond is five years, since it is expected that the proceeds of the land sale for GuySuCo would be used for repayment. But Agriculture Minister Noel Holder himself has been publicly critical of the transaction.last_img read more