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Django

Nov 08, 2021

…raises red flag over technocrat signing loan request to China instead of Finance Minister

Kaieteur News – Former Finance Minister Winston Jordan, has expressed grave concerns over Guyana’s borrowing spree and he also questioned the legality of a letter sent to the Chinese ambassador regarding a loan request of US$1.5B, which he said was signed by a finance ministry official instead of the subject minister who according to Section 58(1) of the Fiscal Management and Accountability Act 2003 (FMAA), has the sole authority to borrow on behalf of the Government of Guyana.
In a letter to the editor of this newspaper, Jordan said that he had begun to hear rumours, around March, about the government’s approach to China for loans totalling US$1.5 billion, to finance various infrastructure projects.

Former Finance Minister, Winston Jordan

“What I found to be astonishing was that the letter to the Chinese Ambassador, requesting the loan, was signed by a senior official of the Ministry of Finance and copied to the President, Vice President, the Senior Minister in the Office of the President with responsibility for Finance, among others. Section 58(1) of the Fiscal Management and Accountability Act 2003 (FMAA) reposes in the Minister of Finance the sole authority to borrow on behalf of the Government of Guyana,” Jordan wrote.

At a news conference last week Vice President Bharrat Jagdeo confirmed his government’s approach to the Chinese for the US$1.5B loan. When questioned he said: “We made it clear to everyone. No financing from anybody comes with political strings but Chinese financing has been readily available to the world and we believe, like the rest of the region, we have to explore friends and partners from every part of the world.”
Jagdeo also spoke about the government trying to access 103 million Euros from Austria for the construction of a children and maternal hospital, but Guyana would have had to deduct 13 million Euros immediately as an “upfront fee” and repay that along with the requirement to use one of their pre-approved contractors. He said India and the United States stipulate that contractors from those countries be used.

Meanwhile, Jordan said that the 2021 Mid-Year Report records the stock of public debt as $2.905 billion. This, he said can easily rise to $5.3 billion within a few years, if one were to factor in the $1.5 billion from China and the undrawn $0.9 billion from the Islamic Development Bank. “It becomes even starker when one considers: i. the burgeoning overdraft of the Consolidated Fund; ii. borrowing from traditional sources, such as World Bank, IDB and CDB; and iii. new sources of borrowing, such as the Sovereign Wealth Funds of the United Arab Emirates and Kuwait. All of this borrowing is taking place, ostensibly, to fulfill manifesto promises, regardless of how implausible many of them appear to be.” Jordan said the repayment of these loans is premised on future oil receipts coming to the government. “In this regard, however, the experience of Ghana is most instructive and the government should avail itself of the lessons learnt.

Jordan said too that borrowing at a concessionary rate as low as 2%, although it makes sense will only work providing that the projects being financed guarantee a return greater than the cost of borrowing. “Since moneys are accumulating in the Natural Resource Fund (NRF), then it makes sense to finance a project by borrowing at 2%, once the returns on the NRF’s funds are greater than 2%. But here is a reality check: first, the funds in the NRF are earning almost zero return because the government refuses to activate the Investment Committee, among the other Committees of the NRF,” Jordan said.
He said too that it is unlikely that the $1.5 billion loan from China can be secured at an interest rate of 2%. “I say this based on previous attempts by a PPP/C government to secure funding from China for the Amaila Falls Hydropower Project (AFHP). A major sticking point during the negotiations was the interest rates on the two major loans that were to be provided by the two Chinese funding institutions. These interest rates were far in excess of 2%.

Vice President Bharrat Jagdeo

The Kaieteur News reported last week that according to the mid-year financial report, disbursements from the Inter-American Development Bank (IDB) increased 10-fold, from US$5.2 million in the first half of 2020, to about US$55.5 million for the corresponding period in 2021.
According to the report, about 75.2 percent of the latter amount was allocated to combating the economic and social ramifications of the pandemic. The report was at the time addressing the nation’s total debt stock and explained that the increase “was largely due to positive net flows (disbursements less principal repayments) from the IDB, driven by disbursements, under two loan agreements geared at combating the COVID-19 pandemic.”

According to the report, at the end of June 2021, multilateral creditors held 64.2 percent of external Public and Publicly Guaranteed (PPG) debt, bilateral creditors 33.4 percent, and private creditors 2.4 percent. Projecting forward, the report states that the external PPG debt stock is projected to increase by 3.9 percent from its mid-year position, to US$1,407.5 million at the end of 2021, mainly driven by disbursements under several IDB funded projects.Detailing the borrowing, the report reflected that in the first half of 2021, disbursements from external creditors amounted to US$61.6 million, more than three times that in the first half of 2020. To this end, it was explained that “this increase reflects higher disbursements from multilateral creditors, moving from US$10.3 million in the first half of 2020, to US$60.8 million in the first half of this year.”Meanwhile, as key projects approached completion, the report highlighted that bilateral disbursements totalled US$0.8 million in the first half of the year, 89.1 percent lower than US$7.3 million during the same period of 2020.

Meanwhile, as it relates to domestic PPG debt, the report documents that, at the end of the first half of the year, this amounted to US$1,552.6 million, a 22.1 percent increase from the end of 2020 figure of US$1,271.4 million. It was noted too that in June 2021, government securitised the inherited overdraft at the Bank of Guyana using 85 variable-rate debentures, with tenors ranging from 1 to 20 years, totalling G$200 billion (about US$959.2 million). “Consequently, the first half of 2021 ended with the Consolidated Fund, as well as public deposits, reflecting a positive balance.”

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DjangoAdmin

The Coalition sought an NRF of the highest caliber

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November 8, 2021

Dear Editor,

I have arisen, albeit temporarily, from my self-imposed letter-writing retreat, to comment on your Editorial, “The China Loan” (SN, November 6, 2021). First, a word of congratulations for a superb editorial; it was worth reading twice for what it sought to identify, clarify and educate about the borrowing binge upon which this government has embarked.

I had begun to hear rumours, around March, about the government’s approach to China for loans totalling US$1.5 billion, to finance various infrastructure projects. But I was only able to confirm this, recently. What I found to be astonishing was that the letter to the Chinese Ambassador, requesting the loan, was signed by a senior official of the Ministry of Finance and copied to the President, Vice President, and the Senior Minister in the Office of the President with responsibility for Finance, among others. Section 58(1) of the Fiscal Management and Accountability Act 2003 (FMAA) reposes in the Minister of Finance the sole authority to borrow on behalf of the Government of Guyana. The act of borrowing is initiated by a letter to the lender and ends with the consummation of a loan agreement.

The 2021 Mid-Year Report records the stock of public debt as $2.905 billion. This can easily rise to $5.3 billion within a few years, if one were to factor in the $1.5 billion from China and the undrawn $0.9 billion from the Islamic Development Bank. It becomes even starker when one considers:

i. The burgeoning overdraft of the Consolidated Fund;

ii. Borrowing from traditional sources, such as World Bank, IDB and CDB; and

iii. New sources of borrowing, such as the Sovereign Wealth Funds of the United Arab Emirates and Kuwait.

All of this borrowing is taking place, ostensibly, to fulfil manifesto promises, regardless of how implausible many of them appear to be. The repayment of these loans is premised on future oil receipts coming to the government. In this regard, however, the experience of Ghana is most instructive and the government should avail itself of the lessons learnt.

You assert that “borrowing at a concessionary rate as low as 2% … makes a lot of sense.” That is true, provided that the projects being financed guarantee a return greater than the cost of borrowing. Since moneys are accumulating in the Natural Resource Fund (NRF), then it makes sense to finance a project by borrowing at 2%, once the return on the NRF’s funds are greater than 2%. But here is a reality check: first, the funds in the NRF are earning almost zero return because, as you correctly identified, the government refuses to activate the Investment Committee, among the other Committees of the NRF. Second, you assume that the $1.5 billion loan can be secured at an interest rate of 2%. This is highly unlikely. I say this based on previous attempts by a PPP/C government to secure funding from China for the Amaila Falls Hydropower Project (AFHP). A major sticking point during the negotiations was the interest rates on the two major loans that were to be provided by the two Chinese funding institutions. These interest rates were far in excess of 2%.

Editor, your “Fifteen months into this administration and we are yet to see the amendments to the Natural Resource Fund Act [NRFA]” struck a nerve with me. The NRFA remains the only piece of new legislation that has been enacted since oil was discovered in 2015. It has been maligned by the then Opposition, now government, who continues to gripe that it puts too much power in the hands of politicians. One waits with bated breath to see the amendments that would free the legislation of this supposed malady. Equally, one awaits the setting up of the so-called autonomous body to govern the NRF in a country driven by ethnic strife and political partisanship.

Guyana’s NRFA was the product of extensive national and international consultations. It benefitted from Sovereign Wealth Funds (SWFs) such as Ghana, Chile, Norway and Trinidad and Tobago. Ultimately, its design was tailored to meet the peculiar needs of Guyana, taking into consideration the country’s stage of development. Hence, we eschewed any wholesale copying of the SWFs of other countries. It was expertly shepherded by two experienced professionals from the Commonwealth Secretariat: Dr Daniel Wilde and Ms Alache Fisho, a Ghanaian national. I note the government has brought to the country a Ghanaian contingent to review Local Content legislation and the NRF. I suppose nothing is wrong with them reviewing the work of their compatriot. Dr Vilas Gobin and Ms. Sonya Roopnauth were among key Ministry of Finance officials working closely with the experts. I commend them publicly for their dogged determination in helping to forge a piece of legislation that meets 23 of the 24 Santiago Principles (SPs), thus allowing Guyana to be admitted to the International Association of Sovereign Wealth Funds (IASWF), in 2019.

In an effort to meet all of the SPs, the Coalition government drafted a Public Debt Management Law, which should have been passed in 2019, were it not for the No Confidence Motion (NCM). Such a law is vitally important, since it is recognised that a government may want to bypass the stringencies, transparency and accountability of the NRFA by engaging in indiscriminate borrowing while funds are accumulating in the NRF. While we await the enactment of this legislation, the present NRFA, at Section 34, precludes any arrangement or agreement that would encumber the current and future resources of the NRF. With the government borrowing like a drunken sailor, it seems that this section would be axed in the amendments contemplated.

The Coalition made strenuous efforts, in 2019, to activate the NRFA, after it was passed in January 2019. In May 2019, I met with the Bank of Guyana, the Association of Bankers (AB) and the Private Sector Commission (PSC). We were able to conclude an Investment Agreement with the Bank of Guyana and establish the NRF at the Federal Reserve Bank of New York, in accordance with the NRFA. The AB named their representative to the Committee. However, the PSC, while praising the strength of the NRF, appeared reticent to name their representative to the Macroeconomic Committee. Of course, the then Opposition, in their typical display of hubris, refused to participate in any discussion, much less naming officials to any of the Committees.

At the Ministry of Finance, we were engaged in identifying suitable candidates for the Investment and Macroeconomic Committees. In that regard, we were on the verge of attracting a well-known Nobel Economics laureate to chair the Macroeconomic Committee, while Guyanese nationals at Stanford University and UCLA-Berkley were among persons being canvassed for other positions on the two Committees. Finally, we had contracted out the hosting of awareness sessions for the organisations comprising the Accountability and Oversight Committee to the University of Guyana. Alas, the limitations of governing imposed by the NCM precluded greater success and activation of the NRFA. But this much is clear: we wanted an NRF that was of the highest calibre, manned by persons of impeccable character and integrity, transparent in its operations, and accountable to the Parliament and the people of Guyana.

Sincerely,
Winston Jordan
Former Minister of Finance

11/8/215:42 PM

Ali Khan AzadNew Member

I agree with Jordan. Be careful with debt.

11/9/218:58 AM

Former Member

Jordan was “sleep-walking” as Finance Minister – Govt responds to “misrepresentations”

November 9, 2021 --- Source --- https://www.inewsguyana.com/jo...-misrepresentations/

Finance Minister Dr Ashni Singh and former Finance Minister Winston Jordan

Finance Ministry response to Winston Jordan’s misrepresentations

The attention of the Ministry of Finance has been drawn to a number of pronouncements made by former Minister of Finance Winston Jordan, during his increasingly frequent forays in the media in recent times. It is a matter of public record that Jordan has frequently described himself as a professional. Regrettably, his recent pronouncements reinforce the widely held and very credible view that he is at best a grossly incompetent professional and at worst a downright dishonest one.

Indeed, many of his pronouncements constitute a clear attempt to mislead the people of Guyana with blatant distortions and misrepresentation of facts. Alternatively, they indicate that he was sleep-walking through the last five years during which he was “the least impressive of all of the Finance Ministers since the first self-Government Administration at the beginning of 1950” in the words of Freddie Kissoon.

Letter sent on proposed new projects

Mr Jordan is quoted in the November 8th Edition of the Kaieteur News as saying, “what I found to be astonishing was that the letter to the Chinese Ambassador, requesting the loan, was signed by a senior official of the Ministry of Finance and copied to the President, Vice President, the Senior Minister in the Office of the President with responsibility for Finance, among others… Section 58 (1) of the Fiscal Management and Accountability Act 2003 (FMAA) reposes in the Minister of Finance the sole authority to borrow on behalf of the Government of Guyana.”

In doing so, he sought to repeat an accusation he made previously that there is somehow something irregular about an official signing such letters instead of the Minister.

The Laws of Guyana are crystal clear. Only the Minister responsible for Finance can contract loans on behalf of the Government of Guyana. This is enshrined in the External Loans Act and it is reinforced in the FMAA. As a result, in practice, only the Finance Minister signs loan agreements on Guyana’s behalf. This has been in place since time immemorial, and has always been honoured, even during Jordan’s lacklustre tenure which was marked by repeated breaches and illegalities.

However, while the Finance Minister is the only authority empowered to sign loan agreements, it is routine practice for senior technical staff of the Ministry of Finance to communicate with donors and development partners throughout the project cycle, including at the earliest stages of mobilising resources to fund projects. Indeed, the Head of the Project Cycle Management Division, which division is charged with responsibility for resource mobilisation, has always been the lead Government interlocutor with development partners and has been engaged in communication with development partners on issues of resource mobilisation for many, many years.

Attached to this release are a number of examples of such letters in which this same official wrote donors – during Jordan’s tenure – requesting loan financing for several different projects.

For Mr Jordan to insinuate that there is something irregular about this, is a clear indication that he is either woefully unfamiliar with a well-established practice that continued under his tenure (the question of Jordan feigning ignorance of what was transpiring in his own Ministry and under his watch will be returned to shortly), or that he is aware of this practice but would still dishonestly seek to insinuate that something is irregular about it, in an obvious attempt to mislead those who don’t know otherwise.

The fact of the matter is that there is absolutely nothing irregular about the letter to which Jordan is referring, and he should be aware of this if he had any modicum of familiarity with the law and semblance of familiarity with a long-established practice in the Ministry.

Natural Resources Fund

In his most recent foray in the media, Jordan also attempted to give the impression that the APNU/AFC Government of which he was a part had crafted a superlative Natural Resources Fund (NRF) (letter in SN of November 8, 2021, under caption “The coalition sought an NRF of the highest calibre”). Here again, his letter is replete with brazen misrepresentations.

He asserts that “the NRF Act was the product of extensive national and international consultations”, but conveniently omitted to disclose that that Act was rushed through the National Assembly after his Government had already lost the No-Confidence Motion (NCM) and had therefore lost their mandate to govern. Well after the Government had fallen, in total disregard for the clear consequences that are constitutionally due to flow from a NCM, Jordan’s Government rushed in January 2019 to sneak the NRF Bill through Parliament with no Opposition participation and no Opposition input.

This is the single most important piece of legislation to have been enacted in many years, and the APNU/AFC Government saw nothing wrong with sneaking it through Parliament at a time when they had lost their mandate to govern, when they were widely regarded as an illegal and illegitimate Government, and without any Opposition input whatsoever. Yet, Mr Jordan now has the audacity to speak of “extensive national and international consultations”.

Mr Jordan then goes on to attempt to hide behind the reputations of two professionals from the Commonwealth Secretariat and two Ministry of Finance officials, in his attempt to assert the quality of the NRF Act. Without any disrespect intended to any of these four distinguished professionals, it is apposite to note how subject matter experts have assessed the same NRF Act.

The Inter-American Development Bank recently issued a publication entitled “Economic Institutions for a Resilient Caribbean” which includes a detailed assessment of Guyana’s NRF (pages 268-274).

Amongst the observations made by that assessment are the following:

* “The objectives and design of the NRF raise several issues. The fund on its own cannot achieve the objectives that have been set for it. The rigid withdrawal rules may do little to foster stabilisation or saving but may entail fiscal costs” (p. 270)
* “The formula for the maximum permissible withdrawal is among the most complex operational rules for a resource fund in the world. Its design departs from good practices”. (p. 271)
* “State-of-the-art advice based on international experience and good fiscal management principles emphasizes simplicity, flexibility, transparency, and close integration with the budget and public asset-liability management. The rule’s complexity may also conspire against fiscal transparency and public understanding.” (p. 271).

The irrefutable fact of the matter is that the NRF Act in its current formulation was a piece of legislation which was very poorly conceived, and was “rammed down the throats” of the nation during a period when the APNU/AFC was in a state of illegality and illegitimacy. While it must be recalled that this NRF Act (which Mr Jordan so proudly and presumptuously touts in his letter) was passed during a period that his Government was occupying an illegal period in office, it must also be noted that his letter serves as the most recent reminder of his Government’s prevarications that the law does not mean what it says and that 33 votes in the National Assembly are not greater than 32.

Burgeoning Overdraft

Jordan, also in his most recent letter, speaks of a burgeoning overdraft of the Consolidated Fund. It is a matter of public record that it is Jordan who ignored the advice of the International Monetary Fund as well as his own technical staff, and refused to address the rapid accumulation of the overdraft during his tenure. It is also a matter of public record that it is this PPP/C Government that has regularised that overdraft, securitising it with appropriate debt instruments, and putting in place arrangements to ensure that the fiscal operations of Government are adequately financed without recourse to re-accumulation of the overdraft. Despite this publicly known fact, Jordan soldiers on, continuing to repeat yet another falsehood.

The Signing Bonus Revisited

Mr Jordan’s most recent misrepresentations are a reminder of the chronic behaviour he displayed throughout his tenure in office.

It would be recalled that Jordan presided over the illegal diversion of the US$18 million signing bonus from the Consolidated Fund. The fact of the matter is that the law required that bonus to be deposited into the Consolidated Fund. Jordan presided over and facilitated the illegal diversion of that sum into a secret bank account. He is yet to state publicly under what law and by what legal authority that amount was diverted from the Consolidated Fund and secretly stashed away to finance unknown activities, bypassing the budgetary and appropriation process.

Even more astonishingly, Jordan famously denied any knowledge of the existence of the signing bonus, long after his own Ministry had requested in writing the opening of a special bank account to receive the funds. As if this were not enough, he would then stumble over one excuse after another trying clumsily to feign ignorance of the illegality he facilitated: firstly, that he knew nothing about the bonus, secondly that he thought it was a gift, and thirdly that the individual who negotiated the bonus (apparently by this time he knew who had negotiated it) had misled the APNU/AFC Government.

A Pattern of Behaviour

History is replete with examples of Winston Jordan trying to mislead the nation. It would be recalled that at one of his first sittings in Parliament in 2015, he attempted to mislead the nation by quoting incorrect debt numbers, a matter on which, after he was challenged on the accuracy of his statements, he would subsequently reluctantly apologise to the Assembly for the misinformation he was caught peddling redhandedly and for creating an erroneous impression.

The repetition of falsehoods and misrepresentations by Winston Jordan is a clear pattern of behaviour. It points clearly to either a complete dereliction of duty to the point where he apparently was unaware of everything, or a woeful lack of knowledge of established norms and practices, or a deliberate and sudden amnesia, or downright dishonesty in order to hoodwink the public and score cheap political points.

What is clear is that Winston Jordan has no reservations deploying all manner of misrepresentations as he seeks belatedly to acquire some semblance of relevance and as he desperately tries to repair the strikingly lacklustre mishap that his ministerial tenure constituted.

In the final analysis, these public pronouncements provide ample illustration that, contrary to his often-repeated self-proclamation as a professional, Winston Jordan has no hesitation to distort facts in order to mislead the nation.

It would appear that the APNU/AFC needs Winston Jordan to crawl out every now and then, to ramble on economic matters given the obvious and glaring void on their parliamentary benches. Sadly, for them, his occasional forays serve more to discredit them and reinforce their now unshakeable reputation for incompetence and dishonesty.

11/9/2112:20 PM

TotaramSenior Member

Finance Ministry response to Winston Jordan’s misrepresentations

This is typical PPP clap trap. Their favorite weapon is the personal attack: forget about the facts, in this case, attack Jordan. Jagdeo and his acolytes are upset that Jordan is exposing their multiplying mistakes that could bankrupt the country even with substantial oil revenues. All it would take is a few white elephants like Skeldon. The burgeoning cost of the gas to shore project and secrecy surrounding it and the Amaila Falls project are signs that there will be trouble ahead. Where was Ashni Singh when Jagdeo neglected to hire auditors for Exxon's expenses? If he wants to talk about competence let's talk about that of his boss, VP Jagdeo. Didn't Jagdeo also forgot to file a defence in a recent libel case. Could it be that he is senile?

11/9/211:17 PM

Former Member

the glee for oil money made jaggy senile

11/9/212:09 PM

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The Coalition sought an NRF of the highest caliber

Jordan was “sleep-walking” as Finance Minister – Govt responds to “misrepresentations”

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