– Financial expertBy Keeran DannyGovernment’s propensity for irresponsible borrowing and the likely absence of a demonstrated debt policy are troubling factors that legislators should consider before significantly increasing the external debt ceiling from $1B to $150B, say financial experts.Within recent weeks,Wholesale China Jerseys, more so since the developments in the National Assembly last Thursday, increasing the debt ceiling to allow Government to guarantee loans for public corporations and companies has been topical.Chartered Accountant, Christopher RamIn early June, it was reported that Government was looking to increase the limit on total guarantees that can be issued under the Guarantee of Loans (Public Corporations and Companies) Act.According to the Ministry of Finance, the proposed increase in the guarantee limit follows on the commitment to the Amaila Falls Hydroelectric Project, which will cost at least US$840M.The increase seeks to guarantee that the Guyana Power and Light Inc. (GPL) honours its financial commitments under the Power Purchase Agreement (PPA) to be entered into between the Power Company and Amaila Falls Hydro Inc. (AFHI).Under the PPA,Wholesale World Cup Jerseys, GPL commits to purchase the power from Amaila for an average annual capacity payment.According to one financial expert aligned to an Opposition Party in the National Assembly, the Guarantee of Loans (Public Corporations and Companies) Act authorizes and empowers the Government to guarantee that it will repay or provide coverage for moneys borrowed by Government for itself or national entities if they default.“For example, if a Government Corporation or Government Company wants a loan from an international financial institution, the Government can guarantee that loan. Now if that company cannot repay the loan, for whatever reason, Government would have to repay plus Government would have to repay the loans it took for national projects.”The expert explained that there is nothing wrong with a Government wanting to increase the debt ceiling. But,China NFL Jerseys, the drastic increase from $1B to $150B is what is troubling some Members of Parliament.“When Government approaches the National Assembly to increase the debt ceiling, it does not have to present specific entities and loans that would be guaranteed. In fact, the ceiling that is usually requested is far above whatever is currently required. 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.”According to the expert, the debt ceiling itself is not an indicator for people to be alarmed about but the amount requested is.“This is an indicator that Government may not be coming back to the National Assembly to request an increase in the debt ceiling for quite awhile.”It was noted that during Finance Minister Dr. Ashni Singh’s hour-long presentation to the House he did not explain the drastic increase.“Nobody needs to argue with the increase, but Government should explain why…what the rationale behind such significant increase is,” the expert stated.“Government needs to appoint Boards that ensure that all projects are viable by way of proper due diligence before even considering guaranteeing any loans taken to fund the projects. The lack of a debt policy of Government for Guyana is a very troubling factor in this scenario. Government needs to have set criteria for which loans would be accessed, whether loans would be sourced from commercial financial institutions or countries, and Guyana’s capacity to repay loans. Having a debt policy would help Government to not over borrow or guarantee more loans than it could repay,” the expert said in conclusion.Sharing similar views on the matter, Chartered Accountant Christopher Ram said had he not been aware of Government’s tendency for poorly thought out spending such as the CJIA expansion, Skeldon Project, Marriott Hotel, Amaila Falls Road project and the Specialty Hospital, he would have no difficulty with an increase in the debt ceiling.“Given its track record,Wholesale Jerseys Free Shipping, I would have some difficulty in the absence of strict guidelines to endorse any opportunity or facility that allows for more borrowing,” Ram said.According to Ram, borrowing foreign exchange can have a positive impact on the economy if it is spent locally and/or it will generate foreign exchange earnings. But,Cheap China Jerseys, foreign loans to finance foreign-sourced capital expenditure and not producing foreign exchange can have the opposite effect on the economy.Speaking about the Amaila Falls Hydropower Project, Ram said the loan is being accessed in foreign currency and so is the bulk of the expenditure, resulting in no net gain in foreign currency for Guyana. In addition, the debt servicing would also be in foreign currency.Ram questioned whether the increase on the external debt ceiling could be used to guarantee GPL’s obligation under the Purchase Power Agreement from Amaila Falls Hydro Inc.,NFL Jerseys China, since GPL’s revenues would be in Guyana dollars while its commitments to Amaila Falls Hydro Inc. would be in United States Dollars. As such, it would expose GPL to foreign exchange risks.According to Ram, increasing the debt ceiling by the legislature should not be seen by the Executive as a blank cheque to engage in its typical practice of borrowing.
