…PPP Presidential Candidate questions value for money
When Government arranged a $30-billion bond guaranteed by the State and National Industrial and Commercial Investment (NICIL) assets, it was supposed to recapitalise the sugar sector. But the poor performance of the Guyana Sugar Corporation (GuySuCo) for the year raises questions about how the money was actually spent.
The recently released Ministry of Finance half-year report tells of a sector still mired in trouble. And according to People’s Progressive Party (PPP) Presidential Candidate and parliamentarian, Irfaan Ali, the population needs answers for how this money was spent.
“Of concern is the Government guarantee $30 billion bonds of which the Government utilised approximately $17.6 billion and is yet to provide an explanation to the people of Guyana regarding the use of these funds”.
“In his report, the Minister also stated that NICIL repaid $785.3 million during the first half of 2019. Given the poor performance of GuySuCo during the first half, an urgent explanation is warranted,” Ali said in a statement on Monday.
The 2019 mid-year report had found that at the end of June 2019, GuySuCo recorded a cash surplus of $843 million when compared to a deficit of $3.8 billion in the same period in 2018. However, sources have attributed this to the Corporation having received a total of $9.3 billion, of which $3.9 billion came from NICIL’s Special Purpose Unit (SPU) to fund its operations and capital projects.
“The Corporation exported 37,836.7 tonnes of sugar, of which 33,263 tonnes were sold to the EU market at a higher price than budgeted, resulting in an increase of $1.3 billion in export sales. Current expenditure was $8.1 billion in the period under review, $2.7 billion lower than the corresponding period in 2018”.
“The Corporation’s capital expenditure was $334 million, 90.3 per cent lower than the budgeted amount of $3.4 billion, primarily due to delays in funding for capital works. The Corporation projects a deficit of $920 million at the end of 2019,” the report also said.
GuySuCo was also found to have fallen short of its production targets for the first crop, with output reaching 33,531 metric tonnes of sugar. There were delays in the start of production, which attributed to the late delivery of materials for critical repairs to boilers in the factories.
In addition, the Corporation had to contend with extended equipment maintenance at the Uitvlugt factory. Thus, the commencement of cane harvesting was pushed to late February. The report also warned that all these things could affect production for the rest of the year and 2020.
And in the Bank of Guyana’s recently released first quarter statistical bulletin, it had showed that sugar experienced a major decline of 34.3 per cent, owing to the restructuring process the Corporation is undergoing.
Since the closure of the four estates, leaving more than 7000 sugar workers jobless, Government has moved to divestment the facilities. United Kingdom company, PricewaterhouseCoopers (PwC), was subsequently contracted to carry out valuations of GuySuCo’s assets up for sale and had invited expressions of interest from potential buyers, though it was recently revealed that the political climate has stalled these transactions.
The bond was arranged last year by Republic Bank Limited, through its Investment Banking Division, with law firm London House Chambers, headed by Devindra Kissoon acting as a transaction attorney.
It was arranged at a rate of 4.75 per cent interest. A source close to the Finance Ministry had told Guyana Times that while the interest rates secured would appear to be very favourable, the implications of failing to consistently repay the bond and related interest rates would be dire.
Indeed, SPU Head Colvin Heath-London has previously confirmed that specific NICIL assets are on the line, should they default on the bond. In addition, concerns were previously raised that GuySuCo was not accounting for how it was spending the money, though it subsequently denied this.
Meanwhile, Ali also warned that while the report’s monetary statistics paint a “rosy picture” of the investment climate, there are worrying indicators. According to Ali, the monetary statistics revealed that credit to the private sector increased in all the key sectors.
“However, the growth in credit should be cause for concern since the commercial banks are increasing credit at a time when the economy is struggling, and non-performing loans are increasing. The ratio of non-performing loans has trended upwards from 5.97 per cent at end-June 2014 to 12.58 per cent at end-June 2019”.
“Meanwhile, the reserves for loan losses reduced continuously from 67.24 per cent to 37.05 per cent. Thus, while less reserves are set aside to cater for loans losses, there is a continuous increase in non-performing loans. Since the most critical risks that confront the banking system is credit risk, all should be concerned, rather than happy with the growth in credit,” he said.