APNU/AFC used bond as ruse to borrow – Ashni Singh

GuySuCo’s $30B bond

…PPP now forced to intervene to save defacto loan

The controversial $30 billion bond that the former A Partnership for National Unity/Alliance For Change (APNU/AFC) saddled the State with the responsibility of repaying, posed problems for the People’s Progressive Party (PPP) Government early in their term when they had to step in to make payments.

This was confirmed by Finance Minister Dr Ashni Singh, in an exclusive interview with this publication in which he was asked for the status of the bond that was borrowed with the stated objective of funding capital projects in the Guyana Sugar Corporation (GuySuCo).
According to Dr Singh, the bond was no more than a ruse by the former Government, to borrow monies and keep it off the balance sheet, foisting it instead onto the National Industrial and Commercial Investments Limited/Special Purpose Unit (NICIL/SPU), which borrowed the money in 2018.
“There was massive borrowing to finance what was described as a $30 billion bond for GuySuCo, supported by an ironclad Government guarantee. Meaning the Government is saying we will pay. Knowing full well that GuySuCo and NICIL will not have the capacity to pay. So, it was basically Government borrowing, but disguised as borrowing by NICIL,” he said.
“They knew full well the Government would have to repay that loan. But to shift it off the budget, they shifted it off the Government’s balance sheet and disguised it to evade the necessity of adjusting the debt ceiling. So, you have accumulation of the (central bank) overdraft,” Dr Singh explained.
The Finance Minister explained that when the bond was issued, it came with a Government guarantee that it would back the bond payments should NICIL be unable to make any payments. And this is just what the PPP Government had to do last year.
“They issued a Central Government guarantee to say that the Government is guaranteeing that in the event that NICIL or GuySuCo cannot meet its obligations, that the Government will step into their shoes.”
“There has even been one instance when the (PPP) Government has had to step in and pay. When we came into Government, we discovered a situation where a Government guarantee had been issued and we had to step into the shoes of NICIL/GuySuCo to meet one payment,” the Finance Minister said, further explaining that the bond is currently being serviced and payments have since stabilised.
Back in 2018, NICIL, through Republic Bank, went out on a limb to arrange a $30 billion syndicated bond at a rate of 4.75 per cent interest and a five-year repayment period for GuySuCo.
According to the agreement between NICIL and Hand-in-Hand Trust Corporation as the trustee, the first tranche payment of $16.5 billion from the bond was to be used for a long-term project and capital financing for GuySuCo.
Specifically, the money was to be used to acquire two co-generation plants, upgrade the existing factories to produce plantation white sugar, build storage and packing facilities, and help pay for two years of general operational costs.
However, a significant part of the bond was never used for the purposes it was secured. The previous APNU/AFC Government itself had admitted that between July 2018 to February 2020, $9.7 billion was disbursed from the bond to GuySuCo to fund its operational expenditure – much of which was outside the terms of the bond.
In November of last year, Housing Minister Collin Croal had brought to the attention of the National Assembly, a letter from now ousted NICIL/Special Purpose Unit Head Colvin Heath-London to former Finance Minister Winston Jordan regarding the bond.
In the letter, Heath-London had spoken of money that the Central Housing and Planning Authority (CH&PA) owed NICIL for land which had been transferred for housing development back in 2019. This money, according to Heath-London, was needed to service the $30 billion bond. (G3)