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Opposition not in favour of proposed guaranteed loans to contractors

Opposition  not in favour  of proposed  guaranteed loans to contractors


Government and opposition are at loggerheads over one of the measures being employed to rehabilitate the country’s infratructure, damaged by last December’s destructive floods.{{more}}

Under the arrangement, Government is offering to guarantee loans from a financial institution to contractors in the construction sector to execute parts of the planned rehabilitation.

The Government Guarantee (Special Loan Financing) Bill was presented to Parliament at its last sitting on Wednesday, April 2, 2014.

Government sees the measure as one way of getting urgent rehabilitation work done while it awaits promised recovery funds, most of it from external agencies with slow processing times.

The measure is reported to have had its genesis in a meeting of local and regional contractors and financial institutions, chaired by Prime Minister Dr Ralph Gonsalves, in the wake of the December floods.

The Bank of St Vincent and the Grenadines has signed up to the measure, offering to provide Government guaranteed loans to contractors who are clients of the Bank.

Government has indicated that interested contractors will be invited to visit the various flood-affected areas, from which they can select a project for which they will be invited to tender. Once approval is granted by the tender’s board, the contractor can seek to access the Government guaranteed loan to mobilise for and conduct the project.

Opposition Leader Arnhim Eustace and Opposition representative for Central Kingstown St Claire “Major” Leacock, who both opposed the measure in the Parliament, again took to the airwaves this week to voice their concerns.

The Opposition is concerned that delinquent contractors could leave Government with their loans to service and, as a consequence, create a payment burden on tax- payers. They have also asked why are the contractors not made to face the banks directly and mobilise any required funding on the strength of the approved contract. The Opposition is also concerned that contractors who are clients of other banks will be excluded from the business opportunities, and that the measure may have been designed for favoured current and would-be contractors.

Responding to the absconding fears, Works Minister Senator Julian Francis said the disbursements from the bank are expected to follow the established proceedures, where funds are released in installments, with the bank conducting assessments of completed work before each new disbursement. He said this loan option is also better for the contractor’s cash flow, eliminating the delays and bottlenecks associated with direct Government funding.

The Christmas Eve flood did considerable damage to the country’s infrastructure, including roads and bridges.

Government’s tally shows “14 bridges destroyed; 14 bridges severely damaged; several miles of secondary roads and feeder roads ravaged, making certain habitable and farming areas impassable.”

Additionally, many rivers overflowed their banks and caused widespread destruction and the forests have been substantially denuded beyond 10 per cent of the total forest area.

Beyond the public infrastructure, the Government has also indicated that 662 houses have been damaged or destroyed, some 300 of which, require relocation. The Government has embarked on a programme to rebuild 122 houses, 80 on site and 42 at alternative locations.