The Guyana Sugar Corporation (GuySuCo) and the Guyana Power and Light (GPL) together owes Government a whopping US2 million and the coalition A Partnership for National Unity/Alliance for Change (APNU/AFC) Government has indicated its intention to begin recovering this money from the two cash-strapped State Owned Entities (SOE).
This information is contained in the recently released Public Debt Report for 2015 which was prepared by the Debt Management Division (DMD) of the Ministry of Finance and made public on Friday last by Substantive Minister, Winston Jordan.
Government has been struggling over the years to recover the monies it had loaned the two state entities.
At end-2015, GPL and GuySuCo had repaid less than one per cent of their debt payable to Government.
According to Minister Jordan in his Public Debt Report, two entities have over the years been billed for the debt service payments falling due but have not made payments to the Government.
Jordan concedes that while many SOEs do not appear to have the resources to service their debt obligations to the Government, “The process of reconciling the debt outstanding by SOEs to the Government commenced in 2015.”
He noted too that at end-2015, this process was still in progress but at “the end of the exercise, the Government will make arrangements to recover the debt from the SOEs.”
The two entities became indebted to the State through loans handed to it by government through what is referred to as an ‘on-lending arrangement.’
Such an arrangement obtains where the Government obtains a loan, usually concessional financing from an international financial institution such as the World Bank or Caribbean Development Bank, and then passes on the loan principal to another entity, usually a SOE.
The two beneficiaries of on-lend loans from Government are GPL and GuySuCo and “At end-2015, the Government had on-lent some US$282M to these two entities.”
Of that amount, 54.8 per cent was on-lent to the GPL.
There are a total of 11 such loan agreements, seven of which are between the Government and the GPL, and four with GuySuCo.
Of the 11 agreements, six were financed directly from the PetroCaribe Fund.
According to information in the report over the review period, all new on-lending agreements were contracted with the GPL in the amount of US$80.1 million with the source of funding being the PetroCaribe Fund.
GPL, according to the Report has been the only SOE that benefitted from the PetroCaribe Fund in addition to another China Exim loan to the tune of US$39.6 million.
The report documents also that of the beneficiaries of the on-lend loans, GuySuCo was the only SOE covered by a Memorandum of Understanding (MoU), which was specifically for loans on-lent in relation to the Skeldon Sugar Modernisation Project.
The MoU states the all payments due within three years after 2008 will be deferred but that MoU came to an end on December 31, 2011.
GuySuCo has not however resumed repayment of its obligations to the Government.
On-lending is said to be a means by which Government can support strategically important projects that aid national development.
The Government enters an on-lending arrangement given that the primary loan proceeds are earmarked to fund capital expenditure for the SOEs.
The terms and conditions of the primary loan agreements differ typically from those included in subsidiary loan agreements.
Interest rates are usually higher in subsidiary loan agreements than in primary loan agreements, but the rate is generally lower than the rate that the beneficiary could otherwise negotiate from commercial lenders.
According to the Report, by improving their financial viability, on-lending can facilitate the delivery of development projects that are expected to provide broader economic benefits to Guyana.