Loan Authorization Bill passed without Opposition support

The New Democratic Party (NDP) will not approve any further loans brought to Parliament unless the Government provides an account, including a balance sheet, of the financial situation at the Argyle International Airport.

Leader of the Opposition Arnhim Eustace stated the position of his party yesterday,{{more}} during the debate on the Economic Diversification Loan Authorization (No. 2) Bill, 2015, which was brought to Parliament by Prime Minister and Minister of Finance Dr Ralph Gonsalves.

Through the Bill, the Government sought and obtained authorization to borrow US$16.5 million to “assist the financing of a contract related to the international airport project at Argyle and for connected purposes.”

Eustace, in his contribution to the debate, said his party needed financial statements which indicate where the project stood with the resources that have been used so far and what is left to be done.

“No more support unless we get a picture, a detailed picture of the financial situation of the Airport Authority.”

The Opposition Leader said he had listened carefully to the Prime Minister’s presentation of the Bill and he had come “to an important corner in the winding road of airport development.”

He said over the years, he had doubts about the project, but he recognizes that because of the amounts of money that have been spent, one cannot turn around and forget about the project because of the implications it has for the national debt and the economy as a whole.

The Prime Minister, in presenting the Bill, said the US$16.5 is being borrowed from Her Brittanic Majesty’s Secretary of State, acting through the United Kingdom Export Finance (UKEF), which is the trading entity of the export credit guarantee department of the UK government. He said it became necessary for the Government to borrow the money because some of the money which was expected from the sale of crown lands in Canouan and from the Venezuelan government through the Alba bank had not yet been realized.

“Do you fold your hands or seek other sources?” he asked rhetorically, adding that one must always have back-up avenues to secure financing.

Gonsalves said for the last four years, the International Airport Development Company (IADC) had been in discussions with UKEF to secure export credit to purchase a range of equipment.

However, because of the extended time for accessing the export credit funding, the IADC got approval to go ahead with the procurement of equipment from the approved package, with the understanding that the money expended would be reimbursed once the credit was extended.

“We have expended money and now the credit line is here, we have to get back money,” he said.

The money is being extended as a seven-year loan to be repaid in 14 equal semi-annual instalments. The first instalment payment becomes due and payable six months after the starting point of credit. Interest on the loan is to be calculated using the commercial interest reference rate known as CIRR, which currently stands at 2.54 per cent per annum.

In addition to the interest payable, there is a one-off payment of an arranger fee of two per cent and a one per cent administrator fee is also payable on the outstanding balance of the loan to the lender’s agent Nordstar Trade Finance Inc.

These fees, the Prime Minister said, in the circumstances, are modest.

The Prime Minister stated that of the US$16.5 million being borrowed, US$12 million or EC$33 million was part of the 2015 Estimates which were approved.

“All I am doing today is to satisfy the legal requisites, for the payments to be made for items which have already been purchased and received.”

Gonsalves said out of the US$16.5 million being borrowed, the IADC will be reimbursed US$4.086 million, which means that what will be owed is the US$12 million, which was approved in the Estimates.

The Opposition Leader, during his contribution to the debate, however, countered this, saying that the full US$16.5 million had to be repaid.

“We are playing games, we talking about reimbursement of $4 million to the airport, the loan remains at $16 million, not $12 million. The $4 million just improves the IADC’s cash flow, but the export credit agency wants back all its money!” Eustace stated.

Member of Parliament for Central Kingstown St Clair Leacock said what was approved in the Estimates was EC$33 million, but the Government had come to Parliament asking for approval of EC$44.5 million (US$16.5 million), which was $12 million more than what was approved.

Stating that the title of the Bill was very misleading, Leacock said it was “an attempt to wrap the request in foreign clothes and to hide the agenda of the legislation before Parliament.”

The Prime Minister, however, described Leacock’s point as foolish, saying he illustrated the manner in which the financial arrangement is taking place.

“If I do not recover that sum from the loan itself, I will be in a hole. If a source of money, which you have budgeted is not delivered on a timely basis, what do you do? You just linger, and adopt the posture of the Honourable Leader of the Opposition and say ‘find it where?’ I don’t fold my hands and be so pessimistic.”

Describing the presentation by the Opposition as political demagoguery, Gonsalves said he had come to the house with a simple request to provide the authorization to sign for a facility with an agency of the United Kingdom government.

He said of the US$16.5 million, the IADC had already spent US$6.22 million on a package of goods.

“…But because it is an authorization, we have to get the reimbursement in full. I could have said, well what is to be reimbursed to us, don’t reimburse that, just deduct that up front. And therefore the Bill would have been for a lesser sum. But because this was money coming from the IADC, the resources itself, and we need to spend those monies in the process of the completion of the airport, we say we would like the facility to be the US$16.5 million.

“…You may say why is it that spent US$6.22 million and we are only getting a refund of US$4.086 million. It is because the contract says we have to pay certain fees and we have to pay 15 per cent of the total contract. That is what this bill is about. Mr Speaker, we have already purchased all of these items or have sourced them, necessary for the equipping of the airport and the finalization of its construction.”

Included among the equipment purchased or sourced are the two passenger boarding bridges and the baggage handling systems for international domestic travel and the terminal and security equipment, the check-in counters and other service counters, the office furniture and public seating, the build out of shops and stores in the terminal building, the ground handling equipment to handle big jets, the mobile concrete batching plant, the mobile asphalt batching plant, loaders, concrete pump, truck and other equipment and the two zippers.

“… All of these equipment and more, they are there, purchased already or sourced and coming. So the US$6.22 million which we have already paid, if I don’t get the approval for this money, I have to find that back, that is the reality. and what we owe NSG, we have to find it somewhere else.”

NSG Exports Ltd is the agent acting on behalf of the IADC in relation to the procurement of the equipment. They will receive an arranger fee for their work. The agent of the lender UKEF is Nordstar Trade Finance Inc.

“The Opposition act today is purely political demagoguery and therefore highly irresponsible. And I, from a political standpoint, I am very pleased that you are opposing it, but from a national standpoint, I am disappointed because it is an anti-national act and you will pay a heavy political price, I advise you, in these elections, if you continue to oppose it.”

The Bill was passed following a vote of 12 members in favour and six against.

One month ago, the Opposition supported a Bill to authorize a loan of an additional US$5 million (EC$13 million) to assist in the financing of the construction of the Argyle International Airport. In 2012, when a Bill was brought to Parliament approve a loan of EC$208 million towards the completion of the airport, the Opposition did not support the Bill.