Plans to borrow US$15 billion to pay off the liabilities of two sugar factories belonging to the Guyana Sugar Corporation (GuySuCo) will trigger a local financial crisis the likes of which have never been seen domestically.
This is the view of economic advisor to the Opposition, Peter Ramsaroop, who advised that Government not get this loan, as it would be a huge debt to repay.
Peter Ramsaroop
Ramsaroop said this decision could lead to the treasury swelling tenfold or more in the near future.
The economic advisor said this large debt could place even more pressure on the country to repay its current loans to bilateral partners like China and India, and financial institutions such as the Inter-American Development Bank and the Caribbean Development Bank.
Ramsaroop views this decision as taking a backward step to the 1980s, when Guyana had most of its revenues servicing debt. He said that the People’s Progressive Party/Civic (PPP/C) managed to reduce the debt-to-Gross Domestic Product (GDP) ratio to 47.9 per cent and it should be maintained rather than burdened.
“(Finance Minister Winston) Jordan is banking on oil, but the contract signed by Minister of Natural Resources, Raphael Trotman is so lopsided, Guyana, at current world market prices, will only earn about US$400 million per year.”
According to him, the price of oil on the world market is currently US$64 per barrel, which at 120,000 barrels per day gives US$2.8 billion a year. Under the Production Sharing Agreement (PSA) signed by the Guyana Government and ExxonMobil, of the US$2.8 billion earned on oil sold, ExxonMobil gets US$2.4 billion, while Guyana gets a paltry US$400 million. The US$400 million includes profit and royalty.
Government has said it hoped to repay the loan over the next three to five years. Finance Minister Jordan explained that the money would be used specifically to fund the operations of the Skeldon and Enmore Sugar Estates, which were likely to reemploy some workers.
The Minister said the idea was to keep the Estates operational as it searched for buyers. He said opening the Estates stood a better chance of being sold to a private company, as opposed to being closed. He noted that the idea was to close deals in another six to nine months to have these Estates sold in full.
Jordan said revenues generated from the sale of Estates and other assets would be used to repay the loan. The Government will be turning to commercials banks for this syndicated bond.
But Opposition Leader Bharrat Jagdeo has since warned the nation that Guyanese taxpayers may ultimately foot the bill for the repayment of this loan while the “handpicked” investors would reap the gains and maximise their profitability.
Jagdeo has said he was not buying the economic and financial arguments put forward by the Finance Ministry and the Government to justify this move.
He has said it defied logic that Government wanted to borrow G$15 billion to keep these Estates open for a few months, when that sum could have assisted the reopening for close to one year.
