In principle, the NDC has no difficulty with upgrading our infrastructure. After all, that is part of the role and function of Government. Recently, the Government borrowed just over $180,000,000.00 ($180m) in secret for expansion of the MBIA. There are more questions than answers, and several concerns with this loan, that go beyond its mere size and justification.
First, the loan agreement was not tabled in Parliament and the silence on its details is deafening. We have been told that it is to be used to build a parallel taxiway, construct a loading bridge, upgrade the terminal facilities (upgrades that may be desired) and build a hotel. However, no information has been provided on the terms and conditions of the loan. For example, nothing has been said about the interest rate, the period of repayment, any moratorium and if so, for how long. These are the matters that would provide a financial justification for the loan and help determine whether the Airport Authority is in a position to repay.
Second, what are the broader economic implications of this loan? Normally when a loan of this kind is being considered, a debt sustainability analysis is first done to determine its impact on the economy as a basis for deciding whether to go forward.
Recently, we lost the case against Grenlec, thanks to Gregory Bowen, and have to pay them over $200m, inclusive of interest. We have just ended a structural adjustment program with some of the measures still in place. This included a ‘haircut’ on our debts. These two debt obligations alone, totaling almost half a billion dollars are likely to put us right back to where we started, with our debt to GDP ratio in excess of 100%. Can the same Bowen come up with a strategy to pay these debts? Must we saddle ourselves, our children and grandchildren with this massive debt at this time?
Third, there is no transparency surrounding this loan as good governance requires. There is talk of the loan being given on concessionary terms. If so, why not provide the details of its softness to the people? Persons can then do their own calculations and determine whether it makes sense to undertake such a major expenditure at this time, in the midst of a world economy that is unlikely to return to pre covid level in the foreseeable future.
Fourth, were other funding agencies approached to finance this loan? It is well known that institutions like the World Bank and Caribbean Development Bank offer very concessionary loans with long periods of repayment and moratorium as long as ten years, to developing countries. Their terms and conditions are often much softer than those of other institutions. Could the government get better terms and conditions from the World Bank or CDB? According to one report, the General Manager at the airport seems to think so!
Because of the size of the loan, the monthly payment of interest and principal will be high, even if the loan is given on soft terms. Will the Airport Authority be able to generate enough income in this period of falling world travel?
A loan of such magnitude will immediately raise the debt to GDP ratio in excess of 100%, well above the acceptable benchmark of 60%. In this regard, it is fitting to ask whether the loan is guaranteed by the Government of Grenada. Since the Airport Authority is a Statutory Body, this is most likely the case. If this is so and the Airport Authority fails to on time or at all, the Government of Grenada will have to do so, placing greater pressure on the falling Government revenues in this difficult period. No wonder they are taking in front to bleed us with Tax Tickets!
Fifth, the Government is silent about the implementation of the project. Here the question must be asked: who was awarded the contract for the works? Have proper international procurement guidelines been followed? How many Grenadian construction workers will be employed on the project?
Additionally, who is monitoring the implementation of the project to ensure that the money is spent on what it was intended for and that we get value for money? Will any of it be diverted to other areas that will benefit one political party?
Sixth, COVID-19 is directing countries on what to do, where to spend their money and what sectors should be developed. It has brought a renewed sense of nationalism, of looking inward and economic independence and has changed the contemporary economic thinking to one where countries focus more on providing themselves with the basic consumption needs. What then is the opportunity cost of borrowing such a large sum of money at this time and for this purpose?
In the face of changing global realities, Government continues to place a stubborn and almost blind emphasis on tourism. At the launch, the Prime Minister said: “This is a necessary investment and the timing is right. The provision of the most modern and technologically advanced facility is crucial for the tourism industry”. Hasn’t he noticed what’s happening with global tourism?
Why not invest so heavily in diversifying the economy in agriculture and its associated sectors. Tourism in not likely to return to its pre-COVID-19 level any time soon. How then is the airport to generate the needed revenue to repay this debt? What security was put up for this loan? Do we stand to lose the airport or some other prized asset in the event of default?
It is bad governance, recklessness and plainly unfair to place a financial burden on this and future generations, without any transparency whatsoever. This is an immoral debt. It is time our people reject such high levels of disregard and disrespect from those entrusted with managing our affairs.
Decisions must be objective. That’s why the NDC calls on the government to make the loan agreement public. Let it be the subject of public discourse and scrutiny, just like the NDC did with the sale of the Grenlec shares in 1994. Let us see whether this loan at this time is what the situation calls for.