Many questions still to be answered on $30b financing for sugar

Dear Editor,

Almost a month after the disbursement of $17B of the $30B borrowed by National Industrial and Commercial Investments Limited (NICIL) for the sugar industry from commercial banks, the nation remains in dark in respect of the real purpose of the loan. In fact, neither the Government nor the Special Purposes Unit/NICIL have seen it fit to make a full and frank disclosure of the details of this loan to the public. No such information was provided in the National Assembly, nor to the political Opposition. Therefore, we have been forced to access information from secondary sources. So the Guyanese taxpayers have been burdened with the repayment of a $30B loan imposed on their backs by their Government who refused to consult with them prior to taking the loan and now refuses to inform them of the details of  loan which they (the taxpayers) will have to repay.

I am informed that the purposes of the loan was stated to be for “operational cost” and “re-capitalisation”. No other details are available to the public.

Without a word of consultation, either with the Opposition or with the public, the Government chose to guarantee this loan. What this means, is that in the case of default, monies would have to come directly from the treasury to repay. The interest rate at which this loan is borrowed is 4.75% per annum. When fully disbursed, the Guyanese taxpayer will pay over $1.425B per annum in interest only; this works out to a whopping $119M per month or nearly $4M per day. And this is merely interest only!

$17B have been disbursed over a month now. It remains parked in an account at NICIL. As the Government continues to twiddle its thumbs, the Guyanese taxpayers are shackled with the repayment of interest on this sum at a rate of $67M per month that works out to over $2.2M per day! There is absolutely no evidence of any urgency at the level of government to utilise these funds in the near future. The commercial banks must be smiling.

It is to be noted that there is no assurance from the Government that this $30B will create a single job for any of the over 5000 sugar workers who were rendered redundant by GUYSUCO. Neither was there any assurance that this loan, or any part thereof, will be applied to the payment of severance due and owing to over 4000 of these workers.

My information is that this loan will be primarily used to rehabilitate the existing estates and the co-generation plant in order to sell them off. So it is the potential purchasers who will eventually be the beneficiaries of this $30B. I suspect that this huge expenditure that is now being laid out to rehabilitate, is largely due to this Government’s own reckless, inaccurate and politically propagandistic narrative about the sugar industry. Until recently, for years, both in and out of government, leading personnel in the Administration have publicly labelled the sugar industry as “bankrupt”, “uneconomical”, “a waste of taxpayer dollars” etc. Common sense will tell you that it would be impossible for one to sell any item to a prudent buyer at a competitive price when that very seller has used the aforementioned adjectival labels to describe that product. So the Government is now forced to improve and enhance the product in order to make it “marketable”.

In any event, it is difficult to conceive any investor willing to invest in such magnitude, in Guyana, having regard to the environment created by this Government and its approach to investments, generally. It is not a coincidence, that this Government has been unable to attract any investment of worth over the last 3 years. Let me immediately point out that ExxonMobil was brought here by the PPP administration. On the contrary, this Government has declared virtual war on investors, both local and foreign. The Government has signalled very clearly that it is pursuing a policy against the grant of concessions. Various forms and regimes of concessions granted under the PPP administration are being revoked.

Additionally, SARA and SOCU are 2 agencies which have been established to specifically target, investigate, prosecute and eventually seize State assets acquired via investment transactions done with the previous Administration. This has instilled great fear and uncertainty not only in potential investors but also in those who have already invested. For example, although NICIL has been given the mandate to privatise some of GUYSUCO’s assets, those constituting NICIL’s current Board are mortally afraid of entering into any transaction having regard to what has been done to Dr. Ashni Singh and Winston Brassington.  On the other side of the coin, no one wants to buy any property from this Government for the fear that the transaction would be later embroiled in some legal challenge. Hence, there has been no movement in the privatisation of those assets.

In this matrix, one cannot exclude the stress and lack of confidence that the Minister of Finance is injecting in the banking sector by 5 pieces of legislation recently tabled in the National Assembly. These legislation significantly alter the existing fiscal infrastructure in the banking sector, they enlarge the functional responsibilities of the Central Bank generally, but more specifically, in relation to other financial institutions.

In light of the foregoing, my prognosis is that the assets of GUYSUCO will be sold at prices far below their market value or the assets will not be sold at all. Therefore, the $30B will, largely, be wasted. In the end, Guyanese would, eventually, be saddled with a debt many times more than $30B when the interests are added over a number of years.

Yours faithfully,

Anil Nandlall

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