AFC support for debt ceiling increase rests on IDB findings on Amaila

-Hughes

The Alliance for Change says they will not support government’s motion for an increase in the debt ceiling on external loans until the completion of the Inter-American Develop-ment Bank’s due diligence and approval for the Amaila Falls Hydropower Project.

“The AFC is of the view that until the IDB concludes their diligence and other investigations and approves of the contract on Amaila… there is no need for the premature increase in the external debt,” said party Chairman Nigel Hughes.

Nigel Hughes
Nigel Hughes

Last week, Minister of Finance Dr. Ashni Singh tabled a motion so that the debt ceiling on external loans could be increased.

Government is expected to make financial closure for the US$840 million project sometime around the third quarter this year and this too is contingent on the findings of the IDB’s due diligence, currently ongoing and expected to be completed by the end of July. The project’s success is also dependent on the completion of the access road, which has been plagued by setbacks from the beginning, including the changing of contractors.

In a statement, the Ministry of Finance said that the motion seeks to increase the limit on total guarantees that can be issued under the Guarantees of Loans (Public Corporations and Companies) Act from $1 billion to $150 billion or approximately US$730 million. This is as a means of guaranteeing that Guyana Power and Light is able to purchase the power that the Amaila Falls Hydropower station will generate

It is expected that the motion will be debated shortly in the National Assembly and government is optimistic that based on the consultations with the opposition, the motion will receive unanimous support in the House, the statement added.

Main opposition APNU’s leader David Granger told Stabroek News that his party has not yet met to discuss the ceiling increase and it would be premature to give a stance without consensus of its members.

However, he said that APNU was also awaiting the IDB’s due diligence on Amaila. “We have had a meeting with the IDB representatives last Thursday and we are looking forward to their due diligence… we will also be basing our response on this report,” Granger said.

According to the ministry statement, the guarantee limit was last raised in 1980 from $500 million to $1 billion. “Based on the US Dollar rate in 1980, the guarantee at the time was equivalent to US$400 million. Adjusted for US inflation from 1980 to 2013, the equivalent figure in US dollars today would be approximately US$1.1 billion.”

It also explained that the increase in the guarantee limit follows on the government’s commitment to the Amaila Falls project and guaranteeing that the Guyana Power and Light (GPL) honours its financial commitment under the Power Purchase Agreement (PPA) to be entered into between GPL and Amaila Falls Hydro Inc. “Under the PPA, GPL commits to purchase the power from Amaila for an average annual capacity payment,” the statement said.

“GPL’s obligation is in the form of a Performance Guarantee. The Performance Guarantee is not a guarantee of debt but a guarantee of GPL’s obligations under its PPA to pay for power delivered from the hydro facility,” it added.

The AFC in its reaction said “it would appear that under the PPA the generators of power have reservations about the capacity of GPL to meet its obligations hence the request for a guarantee by the government of GPL’s obligations. This would necessitate an increase in the extended debt ceiling from its current levels to facilitate these guarantees. ”

The party feels that the raise would have a negative impact on the country’s economy and as a result it will wait.

“This is not yet the time and there is no national crisis in monetary terms …the per capita debt is going to go through the roof, so we have to wait and be guided because this is a serious decision having tremendous implications for the future,” Hughes explained.

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