Loss of PetroCaribe funds would have fiscal impact on country – IMF

Should the plug be pulled on the PetroCaribe arrangement, member countries, which include St Vincent and the Grenadines (SVG) can be adversely affected.

During a press conference on Tuesday, officials from the International Monetary Fund (IMF) {{more}}outlined the possible repercussions for SVG of such an eventuality.

Under PetroCaribe, member states are allowed to import oil from Venezuela and pay only a fraction of the bill. The rest is transformed into a loan, which can be paid over a 25-year period, with an interest rate of two per cent.

In recent times, the continuation of the agreement has been questioned by world analysts, given the reduction in the price of oil on the world market and the current declining state of the Venezuelan economy.

“Venezuela is usually dependent on selling oil, so I think we are mindful and concerned about the feasibility of PetroCaribe continuing, certainly at the level it has been. We are looking into what will be the impact on Caribbean countries,” IMF advisor for the Western Hemisphere Elie Canetti told reporters on Tuesday, during a press briefing.

Canetti noted that the IMF’s main concerns lie in the South American country’s increasing financial stress, as oil prices have dropped from $120 a barrel to a little more than $70 a barrel.

The advisor further revealed that the IMF has been thinking about the issue for some time and noted that it has become an urgent matter as the financial situation in Venezuela seems to be deteriorating quickly and is this trend is expected to continue because of the drop in oil prices.

However, in relation to St Vincent and the Grenadines, Canetti pointed out that should the PetroCaribe agreement cease, the impact will not be reflected in energy, but rather on the fiscal situation of the country.

“I think in St Vincent and the Grenadines, it’s not really an issue of energy per se. VINLEC has alternative sources of supply and we’ve been assured that should, under the PetroCaribe agreement, stop flowing that would not adversely affect energy supplies here. I think our concerns are none, minimal if any,” he said.

“The impact, if anything would be a fiscal impact because PetroCaribe comes with advantageous financing terms… if the financing benefits become less generous, it is something that will have to be taken account into the fiscal strategy.”

Canetti noted that this country has used PetroCaribe funds to finance certain projects and without that concessional funding, the country will have to look elsewhere to replace the loss.

Prime Minister Dr Ralph Gonsalves announced on Tuesday that he intended to attend a PetroCaribe meeting in Caracas yesterday, with other heads of members states, which was called to reaffirm their commitment to the initiative.

“The notification I received said it is about reaffirming the commitment to PetroCaribe, for reaffirmation and certainly to look for ways and means where we can deepen the integration process within the framework of PetroCaribe,” he said. (BK)