Government
of Jamaica to funnel PetroCaribe funds to public
bodies - IMF
By
Camilo Thame
The Jamaica Gleaner
Kingston
Petroleumworld.com
09 17 06
The
Jamaican Government plans to lend PetroCaribe savings
to public sector entities to avoid more expensive,
planned borrowing, the International Monetary Fund
(IMF) revealed in its staff report published earlier
this week.
However, approximately US$150 million
($9.75 billion) accrued cash flow savings from the
Jamaica/Venezuela oil pact for the fiscal year to
March 31 appeared not to have been reported to the
IMF.
The Financial Gleaner since August
23, had asked the finance ministry for details on
the US$150 million, but no responses have been forthcoming.
Jamaican authorities "explained
that they would use the cash flow savings to replace
already planned but more expensive borrowing (including
domestic borrowing) by public entities," said
the IMF in its Interim Staff Report Under Intensified
Surveillance on Jamaica published September 12.
"As such, the savings would
not be used to increase public entities' spending
relative to current plans."
Clarification
The IMF itself had sought clarification
on the way the oil funds would be used to address
its concern that public entities would expand their
"overall spending envelope" including
those allocated from the PetroCaribe funds.
"In this regard, the authorities'
intentions to use at least some of the cashflow
savings from the PetroCaribe agreement to finance
public entities spending were potentially worrisome,"
said the report.
The IMF mission, as opposition spokesman
on finance Audley Shaw did earlier this year, had
recommended that the concessionary funding available
from the PetroCaribe agreement be used to offset
more expensive projected borrowings.
The pact with the Venezuelan government
supplies oil to Jamaica - initially 21,000 barrels
a day and since July 2006 23,500 barrels a day -
with the government having to pay cash for 60 per
cent of the purchase.
The remaining 40 per cent is converted
to long-term loans, at interest as low as one per
cent, initially to be used for development projects.
Savings
Jamaica is projected to save between
US$180 million and US$200 million a year under PetroCaribe.
In early March this year, when Government
would have accrued approximately US$150 million
in PetroCaribe savings, financial secretary Colin
Bullock was appointed head of an interim committee
to vett requests for funding from an off-budget
entity, the PetroCaribe Development Fund, which
is yet to be established.
However, six months after the appointment
and 16 months into the agreement, no accounting
has been provided to the public.
Moreover, in the IMF's report the
Government provided no figure for the PetroCaribe
debt for the year to March 31, 2006.
In fact, in its own projections
of the cumulative debt over the next few years -
projected to grow at US$190 million per year - the
IMF showed zero flows from PetroCaribe between June
2005 and March 2006.
Also not accounted for is the long-term
financing that was provided through PetroCaribe's
predecessor, the Caracas Energy Agreement, in which
10-25 per cent of the payment for the oil would
be available for cheap development loans to Jamaica
at two per cent.
The agreement was fundamentally
the same as the current PetroCaribe arrangement,
with access to 7.4 million barrels of oil annually,
except that the financing portion was increased
to 40 per cent, with a maximum allowable financing
of 50 per cent of the cost should the price of a
barrel of oil surpass US$100.
The IMF has cautioned the Government
that "any receipts and uses of the funds should
be reflected fully in the Government accounts and
its administration integrated into the budget process
to ensure transparency, efficiency and accountability
of public spending."
camilo.thame@gleanerjm
The
Jamaica Gleaner
Friday | September 15, 2006
Copyright
©1997-2006
Gleaner Company Ltd.
All Rights Reserved.
