Govt.’s restraint towards borrowing against oil revenue commendable –IMF

Jul 16, 2018 News

…calls for short-term financing needs to be carefully managed

The political opposition has been warning for some time that the government would be tempted to borrow against the nation’s future oil wealth.
But the International Monetary Fund (IMF) in a statement last week assured that the Coalition Administration has resisted this appeal of this option. In fact, the IMF said that Government’s prudence and restraint towards borrowing in anticipation of future oil revenue is commendable.
It was only a few months ago, that Finance Minister, Winston Jordan reminded the citizenry of the Government’s position when it comes to borrowing against future oil revenues. Jordan stated that the Government is actually uneasy about borrowing in that regard.
The Finance Minister said that while this is tempting, as it would provide important resources to finance many critical pipeline projects, “we have to be wary of the volatility of the oil market and our capacity to utilize such resources in a transparent and accountable manner.”
Jordan said that the Government will “continue to assess the situation and weigh carefully our options before any decision, in this regard, is made.”

Finance Minister, Winston Jordan

As it relates to other matters of borrowing, the IMF cautioned that short-term financing needs should be managed carefully. The Fund said that the Government should rely as much as possible on Multilateral Development Banks, including its non-concessional financing operations.
The IMF said that developing the domestic capital markets would provide a more stable source of financing and help meet the needs of domestic long-term institutional investors. The international body said that private external borrowing should continue to be avoided, and Central Bank financing should not be used at all.
In addition to this, the Fund said that it welcomed the authorities’ intention to close the overdraft balances at the Central Bank in the near-term. It commented too, that saving the one-off gains from the tax amnesty would reduce financing needs, and also help preserve external buffers.

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