Jordan promises not to borrow at rates that compromise Guyanas fiscal stance

Dec 03, 2018 News

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By Kiana Wilburg

In spite of the expected gains to come from the petroleum sector, the Coalition Government will continue to manage the nations debt in a most prudent manner.
Thats according to Finance Minister, Winston Jordan during his 2019 budget speech, which was presented to the nation on Monday last. The economist said that the Government will maintain a moderate risk of debt distress and, in this regard, will undertake not to borrow at rates that could compromise the countrys fiscal stance.
Jordan also reminded that the public debt legislation is currently being drafted and is expected to be laid in the House in 2019. He said, too, that the Government will prioritize the crafting of a national debt strategy and an annual borrowing plan, which together, will define the optimal mix of financing mechanisms in the short-to-medium term, for the funding of development initiatives.

The Finance Minister reminded that the Government also published a Public Private Partnership Policy Framework in 2018. He noted that this presents a structured framework within which the Government can pursue new options of financing that will reduce the need to incur significant debt.
Jordan said that this Framework will guide, in an open and transparent manner, how government will engage with the private sector in the provision of public goods for mutual benefit.
Further to this, Jordan said that the Government is preparing a roadmap to develop the countrys institutional, technical, financial, environmental and business expertise to engage private sector partners. In Budget 2019, he said that the Government has allocated $100 million to support this initiative.
PUBLIC PRIVATE PARTNERSHIPS
In an effort to fulfill its development objectives for Guyana, the Government will have to form partnerships with private partners. This collaboration will see private sector members participating more fully in procuring and financing infrastructural projects and services in the public sector.
To guide this Public Private Partnership (PPP), the Government adopted a policy framework that is intended to ensure value for every dollar invested in the Public Sector Investment Programme (PSIP).
This was expressed by Minister of Finance, Winston Jordan, at the 48th annual meeting of the Board of Governors of the Caribbean Development Bank (CDB). The event was held in St. Georges, Grenada.
The Finance Minister said that the document provides a structured platform for the local and external private sector to meaningfully engage the Government in achieving its national development agenda.
As Guyana rapidly approaches oil producer status, with the attendant massive inflow of new resources, Jordan said that the inclusiveness of all stakeholders in national development becomes a pressing imperative.
As such, Jordan noted that the document is a timely one.
According to the document, it is Governments intention to encourage innovation in as many areas as possible. The Government noted that traditionally, PPPs have been applied to the infrastructure sector in particular, in infrastructure, electricity, telecommunication, water, transport and solid waste sectors, and increasingly in the social (health and education) and Information sectors.
In the early stages of developing PPPs, Government said it will focus on the following key areas of development: the Demerara Harbour Bridge, the Linden-Lethem road link, the Deep Water Harbour and Container Port, the Mini and Maxi Hydro Plants and Energy Farms, Plantation Agriculture, the Modernization and Dredging of Port Georgetown, the Milk Plant for Guyana, the Information Technology farm; and Agro-industrial and Small Manufacturing arks.
The Government notes that the benefits and advantages of PPPs can be significant when they are well designed and implemented in a balanced regulatory framework.
It noted; however, that those positive outcomes have to be earned through projects that can catalyze development, are financially viable, will minimize impact on the national debt and can favourably affect Gross Domestic Product (GDP) growth.
To achieve this, the Government said that creative, competitive and transparent procurement processes as well as clearly articulated policies and procedures followed by thorough due diligence, must be applied.
It said that there are, therefore, certain key pre-conditions that need to be present in the policy framework for PPPs, as they are critical to delivering successful outcomes.
It said that these preconditions have been identified as affordability, the legislative environment, institutional arrangements and capacity building.
On the issue of affordability, the Government pointed out that this is a key requirement of all PPP projects. It said that the options must be affordable both to Government, and the public, given competing priorities and commitments.
The Government said that the rationale for PPPs is improved management of scarce resources, better risk allocation and more efficient and cost-effective delivery of services.
The Government said however, it should be noted that while the private sector may be willing to finance and deliver infrastructure and services through PPPs, only users or taxpayers can pay for these goods and services. It stressed that affordability, therefore, acts as a real constraint, and public bodies will need to give considerable thought to the selection of potential PPP projects, ensuring always that their choices are in line with Governments policy priorities and objectives.
With respect to the legislative environment, the Government said that Guyana already has many of the ingredients required for a successful PPP programme: a stable administration; an independent judiciary; a robust Procurement Act and mechanism; and reasonably well-performing public institutions.
“However, political and regulatory risks can be potential barriers to effective PPP implementation. A new PPP regulatory framework will be approved to provide further and concrete evidence of Governments commitment to a PPP policy and to establish the principles and rules with which all public bodies will be required to comply.”
As for institutional arrangements, the Government contended in its policy that international experience suggests that identifying and establishing clear and unambiguous institutional functions at the onset of a countys PPP programme, greatly assists in successful PPP implementation.
It said that while institutional roles and responsibilities may change over time, as Governments experience with PPPs grow, the following public institutions will have integral roles in the programme: the Ministry of Finance, Ministry of Public Infrastructure, and the Ministry of Business.
The Government said that strategic direction of the Governments PPP programme will be the responsibility of a Steering Committee. A PPP Core Team, within the Ministry of Finance will act as the Secretariat to the Steering Committee and as a focal point for the day-to-day management of the programme.

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