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AFC will not support motion to increase external loan ceiling
– Awaiting IDB to approve Amaila Falls project
By Keeran Danny
Believing that Government is seeking to increase the external loan ceiling to accommodate the debt created by the Amaila Falls Project, the Alliance For Change (AFC) has signaled its intention to not support the motion until the Inter-American Development Bank (IDB) approves the project.
AFC Chairman Nigel Hughes
This was revealed by the party’s Chairman, Nigel Hughes, during a press conference yesterday. Hughes said that Government has presented a motion before Parliament to extend the ceiling on the External Loans Act to US$1.1B.
“We believe that this motion by Government is driven by the fact to accommodate the debt created by Amaila Falls…and created by the demand to have the Government guarantee GPL (Guyana Power and Light Inc.)’s performance of its obligations under the Power Purchase Agreement that ceiling will be increased.”
The other reason posed for not wanting to support the motion at this juncture is GPL’s dependence on Government’s guarantee under the Power Purchase Agreement to be entered with Amaila Falls Hydro Inc.
“Given that this application for the increasing of the ceiling is clearly driven by the requirements of Government to guarantee the performance of GPL that it is premature and we would not be supporting it at this stage,” Hughes said.
He added that the AFC has made it clear that until the IDB approves the project, the Party will not give any approval for funds for the project. He said there is no national crisis that necessitates the raising of the ceiling.
Another concern the AFC has in relation to this motion is the transferring of risk from investors to Government.
“Private investors that enter into any venture ought not to have that risk removed from them and the onus of the capital onto the Government. Here we have the Government being asked to guarantee the loan or performance of GPL under the Power Purchase Agreement.
In effect what would be happening is that Guyana would be underwriting the entire project, because the risk would be immediately transferred from the investors because they may lack confidence in GPL, which falls directly onto the Government of Guyana of which all of us pay taxes,” he said.
Hughes explained that if GPL does not perform under this agreement, Government would have to assume the risk. He said this scenario being presented is similar to the Marriott Hotel project where investors are absolutely protected.
He said that the AFC is concerned about this transaction, and documentation received days ago would be examined.
In 1973, the External Loans Act was passed for the purpose of waiving loans outside of Guyana for the purpose of financing the general development of Guyana. That ceiling was $500M and increased in 1991 to $400B.
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