The cash-strapped Guyana Sugar Corporation (GuySuCo) is being asked to repay a loan of $3.8 billion which it received from Central Government as part of its $12 billion subsidy last year.
Auditor General Deodat Sharma, during an audit of the nation’s accounts for last year, found that Cabinet in June 2015 had agreed that the sum of $3.8 billion, which was transferred to GuySuCo be treated as a loan.
Amounts totalling $12 billion were released to GuySuCo during the period June to December 2015 and according to Auditor General Sharma, “An examination of Cabinet decision number, CP (2015) 6:3:BB dated 16 June 2015, indicated that the sum of $3.8 billion be treated as a loan.
Sharma found, however, “no loan agreement was provided, as a result, we are unable to determine the terms and conditions of the repayment of this amount”.
The Agriculture Ministry, in response to the auditors, claimed that GuySuCo never entered into a loan agreement for that amount.
The Auditor General is adamant, however, that the Ministry complies with the Cabinet
Decision and enter into a loan agreement for the repayment of the $3.8 billion transferred to GuySuCo.
This past week, President David Granger had bemoaned the state of affairs with GuySuCo pointing to its $89 billion in local and international debt.
The President was at the time addressing Parliament and said the most grave financial problem when his Administration took office in May 2015 was the bankruptcy of GuySuCo, which owed the aforementioned amount.
“Your Government was forced to divert money from economic development and social projects to rescue the ailing corporation with an immediate injection of $12 billion. An additional $11 billion had to be provided the next year, 2016, making a total of $23 billion bailout in 18 months.”
The President noted, “These transfers exclude the servicing of GuySuCo’s debts in respect of the Skeldon Estate Modernisation Project – a monstrous and monumental US$200 million mistake and, probably, Guyana’s single most costly industrial catastrophe of all time.”
There has already been an indication too that GuySuCo will be looking to Central Government for yet another bailout before the end of the year.
Chairman of the Board of Directors, Professor Clive Thomas is on record saying that the entity had initially requested $11 billion, but had only received $9 billion in the 2016 Budget and, as such, would have to approach Government before the end of the year to gain another $3 billion in subsidy.
GuySuCo has already recorded a whopping $6 billion deficit in its accounts for the first half of 2016, but this has been masked by the $9 billion subsidy that was handed to the beleaguered entity by Government.
In fact, while the $9 billion transferred was earmarked for the Corporation to be disbursed for the entire year, all of the money has already been transferred.
Finance Minister Winston Jordan had documented in his 2016 Mid-Year Report that the reason the allocation was disbursed in its entirety by the end of June 2016 was “because of a deterioration in the Corporation’s cash balances that was due to a severe shortfall in production”.
The subsidy that was transferred to GuySuCo has in fact allowed the company to record on its books an operating surplus of $2.9 billion, down from an operating surplus of $3 billion for the corresponding period last year.
Jordan had earlier this year also complained bitterly about the lack of alignment between production costs and market prices which has resulted in the destabilisation of revenues and the eventual need for Government support packages.
“This is exemplified in the case of GuySuCo, where constant demands for transfers continue to crowd out other priority Public Sector expenditure.”
The inefficiencies, he said, compromise GuySuCo’s ability to compete globally, while facing growing competition from alternative sweeteners and sugar substitutes.
According to Jordan, “In the short run, GuySuCo, in particular, poses a large risk to the Government’s fiscal position.”
He said if sugar production failed to improve in the second half of 2016, GuySuCo may face financial strain that would lead to requests to the Government for further transfers, on top of the $9 billion it has already received.