A straightforward question deserves a straightforward answer

Apr 19, 2023 Features / Columnists, Peeping Tom

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Kaieteur News – Any person that has ever taken a loan knows the importance of the interest rate on that loan. The higher the interest rate, the greater will be the loan repayments.

The syndicated investors who lent money for the construction of the Marriott Hotel were entitled to interest payments that were four times that which is offered to savings account holders at our commercial banks. Those investors were not going to lend any money unless they knew the rate of return. And Guyana which borrowed that money had to know the applicable interest rates.

It is hard to imagine a person entering into any transaction involving a loan and not knowing what is the interest rate that applies.  It is simply unthinkable.  Second Vice President, Bharrat Jagdeo, however is being evasive when it comes to indicating the interest rate that Guyana is paying on Exxon’s investments in Guyana. When asked about this again at his most recent press conference, this is what the Vice President had to say: “So, the interest rate question I am familiar with that and that has been asked. I am not going to go down that route again. It is the same questions that keep surfacing. Today, I am not going to deal with issues that I have dealt with before.”

This is the Second Vice President’s claim to greater transparency. Just minutes before he was making the argument that his government has provided more information about the oil and gas sector at a few press conferences and this was far more information that was provided by the APNU+AFC government.  It is bewildering that the Second Vice President cannot provide a straight forward answer to a straightforward question. All that is being asked is the interest rate on the investments being made by the oil companies. If the Vice President has provided the interest rate before, it would not do him any harm to repeat it. But it is not likely that if he had done so that the Kaieteur News would be asking this question again.  The Kaieteur News should continue to ask this question until a satisfactory answer is provided. This is a matter of public interest and if the government is not going to provide the answer, then it says a great deal about the government’s commitment to transparency. How can the government claim to be transparent when it fails to answer a basic and simple question about the interest rate which is being paid by Guyana? Why should such a straightforward question not evoke a straightforward answer?

This issue is not an isolated one. Readers will recall that the media encountered difficulties in obtaining information about many of the controversial projects which commenced under the Jagdeo presidency. One of the excuses given then was that the agreements signed provided for confidentiality. But it can hardly be a situation in which any interest rate which Guyana is paying is a confidential issue.  As this newspaper reported a few weeks ago, the Production Sharing Agreement (PSA) that the Guyana government signed allows the oil companies to pay back accumulated interest on loans it took to develop the resources in the Stabroek Block. According to the agreement, the prior permission of the relevant Minister is not required for this interest to be repaid. The danger of course is that the oil companies can take high interest loans and it is Guyana which will be saddled with repaying these high interest rates.

As this newspaper explained, “In order to fund their exploration and development projects around the world, oil and gas companies use a mixture of loans and liquid cash. But if the “abusive” conditions are in place, a company may have the right incentive to plug more loans with unreasonable interest rates into their project which could later be recovered. Guyana has not only allowed loans taken by Exxon to be recovered without the approval of the Minister but considers the costs eligible regardless of the interest rates.”

A petroleum consultant, Tom Mitro, is of the opinion that no country should be permitting interest as part of cost recovery unless there are protective caps built in. Otherwise, he says Guyana could end up subsidizing the borrowing of the oil majors. The issue of the interest rates and its recovery is of serious concern. The people of Guyana are entitled to ask questions about the interest rates, its recoverability and the existence of any caps to these interest rates. In turn, the government is obligated to provide that information. Now that the government’s oil and gas czar has refused to answer the question put to him on this subject at his last press conference, it is now incumbent on the Alliance For Change to place this question before the National Assembly. Let us hope that when it comes up for consideration that the excuse will not be made that the matter was previously addressed. But then again, the AFC should know the interest rate. It was part of the government that signed the 2016 Production Sharing Agreement.

(The views expressed in this article are those of the author and do not necessarily reflect the opinions and beliefs of this newspaper and its affiliates.)

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• Bharrat Jagdeo, loan, Marriott hotel, Peeping Tom, Vice President

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