Borrowing to look fancy

Apr 08, 2018 Features / Columnists, Peeping Tom

The government was unwilling to continue, in the short-term, to bail out the Guyana Sugar Corporation (GuySuCo) in order to save the jobs of thousands of workers. Yet, it has to find billions of dollars to pay severance to the very workers whom it placed on the breadline.
It could not have afforded to pay all the workers at the said time. But it was determined to send all of them home at the same time.
The government said that GuySuCo was saddled with heavy debt. It claimed that it would have to assume these debts. It did not dwell too much on the fact that GuySuCo has the assets to cover these debts.
It is most interesting, therefore, that the government, which was unwilling to bail out the corporation over the short-term, is now borrowing up to thirty billion dollars in order to prepare the industry for privatization. There needs to be some detailed explanation as to why government, which was unwilling to bail out the industry to save jobs and the rural economy which these jobs support, is now going to borrow thirty billion dollars against the assets of the corporation, in order to make the enterprise more attractive for investors.
The government is behaving like Rip Van Winkle. It seems to have fallen asleep on the job. It sent home thousands of workers, plunging them and their families into despair. It closed three factories – two of which are major factories – and now it has decided that it must reopen these factories by employing the very persons it dismissed in order to ensure that the factories are attractive enough to be sold, and in order to produce molasses for Demerara Distillers Limited.
The government has vested the assets of GuySuCo in NICIL, the same NICIL which it was critical of under the PPPC. So the holder of the shares of GuySuCo is the same entity which has to sell the corporation. This is a most disingenuous and dangerous manoeuvre by the government. There was never any reason for the shares of GuySuCo to have been placed in the hands of NICIL. The corporation could have been sold as a going concern by the Board of the corporation.
And it is the same NICIL, not Cabinet, which legally has the right to appoint the Board. It is the same NICIL which appoints the Board which has to sell the corporation. The government has made a fatal mistake by allowing NICIL to hold the shares.
The only reason why this is being done is to place the company on the auction block. Yet, the government is borrowing 30 billion dollars to make the same company attractive for privatization. The government is assuming this debt so as to be able to sell the company. But it did not seem to realize that it downgraded the market value of GuySuCo when it sent home the workers, because it closed three factories, making these non-going concerns. It now has to borrow 30 billion to do what the workers could have done – ensured a going concern.
APNU is going around in circles when it comes to the sugar industry. It sends home workers then rehires them. It complains about debt and claims it does not wish to burden taxpayers anymore with additional debt, but then it turns around and borrows 30 billion dollars. It removes responsibility from the Ministry of Agriculture and places the corporation in the hands of NICIL. The government must cease its merry-go-round. It will end up becoming dizzy from its own actions.
The government has hired an international firm to value the assets of the sugar corporation. It should hire some international consultants to give it an independent assessment of the company and the possible options for the future.
But the government’s merry-go-round does not end with GuySuCo. It is evident in other sectors also. Guyanese were told that the government was no longer going ahead with the Specialty Hospital which was to be funded by India. It said that it would use the money in order to upgrade some hospitals. Now we are being told that the government will be borrowing to upgrade regional hospitals. Why does the government have to borrow to do that?
Then it announced that Guyana has access to US$900M from the Islamic Development Bank. So we could end up borrowing again and increasing our stock of debt. This is what got Guyana in the problems it found itself in the 1980’s when its debt servicing had to be capitalized. We seem to be repeating the missteps of the past. That happens when you are confused and heading into a crisis.

Discover more from Kaieteur News

Subscribe to get the latest posts sent to your email.

Latest News