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If Mr Shaw practises what he preaches...
Wednesday, October 21, 2009
While in Opposition, Mr Audley Shaw correctly pointed to the People's National Party Government's penchant for borrowing at commercial rates when it could have used concessional resources from bilateral agencies and multilateral financial institutions.
One frequently cited example was financing or guaranteeing commercial rate loans for highway construction.
Now finance minister, Mr Shaw has resorted to borrowing from concessional sources but has not weaned the country from its deleterious addiction to foreign borrowing. However, there was a recent notable development which demonstrates that the finance minister has a point.
The Transjamaica Highway Project (TJH) was financed in part by commercial loans which inflated the construction and operation of that part of the highway which is extant and put in jeopardy the execution of the next phase of construction. The completion of the next phase required reducing the cost of debt servicing and less expensive money for future construction.
According to a press release from the Inter-American Development Bank (IDB), on September 30, 2009 it approved a loan of US$70 million to Bouygues Travaux Publics SA of France, as its part of a financing package by international development finance institutions aimed at refinancing debt associated with the existing highway and funding the next phase of construction.
This financing package represents a co-ordinated response by these institutions to support a high priority programme that will provide substantial benefits to the road-using public and to the Government. This is good news.
The next phase is the extension of the existing highway by 17 km westward from Sandy Bay to Four Paths, Clarendon. The project has an important role in the development of Jamaica as it enhances connectivity between Kingston and major towns in central Jamaica. The project will reduce travel times, lower vehicle costs, and provide a safer means of travel for leisure and business users alike.
It will provide additional economic impact by creating 600 direct jobs during construction and sourcing raw materials from local suppliers. The project will be executed almost entirely by Jamaican engineers and workers. Not to count the development of small businesses which follow such projects worldwide.
The refinancing of existing indebtedness of TJH constitutes a significant financial benefit to the Government of Jamaica since it puts TJH Ltd on more sustainable financial footing. Their current financing package has two debt facilities that have large "bullet" payments in 2011 and 2014.
The Government, through National Road Operating and Construction Company, will also benefit from the conversion of a deeply subordinated loan to a participatory "equity type" security.
We are happy to note that the loan has been approved at a time when it is extremely difficult and costly to get financing from commercial sources for long-term infrastructure projects, given the state of international financial markets.
This type of financial restructuring, in which less expensive money is substituted for high cost loans, is urgently needed throughout the public sector.
It is our considered view that Mr Shaw should practise the gospel he preaches by starting with a comprehensive liability management programme for the debt of the Government of Jamaica.
http://www.jamaicaobserver.com/edito...REACHES___.asp#
Wednesday, October 21, 2009
While in Opposition, Mr Audley Shaw correctly pointed to the People's National Party Government's penchant for borrowing at commercial rates when it could have used concessional resources from bilateral agencies and multilateral financial institutions.
One frequently cited example was financing or guaranteeing commercial rate loans for highway construction.
Now finance minister, Mr Shaw has resorted to borrowing from concessional sources but has not weaned the country from its deleterious addiction to foreign borrowing. However, there was a recent notable development which demonstrates that the finance minister has a point.
The Transjamaica Highway Project (TJH) was financed in part by commercial loans which inflated the construction and operation of that part of the highway which is extant and put in jeopardy the execution of the next phase of construction. The completion of the next phase required reducing the cost of debt servicing and less expensive money for future construction.
According to a press release from the Inter-American Development Bank (IDB), on September 30, 2009 it approved a loan of US$70 million to Bouygues Travaux Publics SA of France, as its part of a financing package by international development finance institutions aimed at refinancing debt associated with the existing highway and funding the next phase of construction.
This financing package represents a co-ordinated response by these institutions to support a high priority programme that will provide substantial benefits to the road-using public and to the Government. This is good news.
The next phase is the extension of the existing highway by 17 km westward from Sandy Bay to Four Paths, Clarendon. The project has an important role in the development of Jamaica as it enhances connectivity between Kingston and major towns in central Jamaica. The project will reduce travel times, lower vehicle costs, and provide a safer means of travel for leisure and business users alike.
It will provide additional economic impact by creating 600 direct jobs during construction and sourcing raw materials from local suppliers. The project will be executed almost entirely by Jamaican engineers and workers. Not to count the development of small businesses which follow such projects worldwide.
The refinancing of existing indebtedness of TJH constitutes a significant financial benefit to the Government of Jamaica since it puts TJH Ltd on more sustainable financial footing. Their current financing package has two debt facilities that have large "bullet" payments in 2011 and 2014.
The Government, through National Road Operating and Construction Company, will also benefit from the conversion of a deeply subordinated loan to a participatory "equity type" security.
We are happy to note that the loan has been approved at a time when it is extremely difficult and costly to get financing from commercial sources for long-term infrastructure projects, given the state of international financial markets.
This type of financial restructuring, in which less expensive money is substituted for high cost loans, is urgently needed throughout the public sector.
It is our considered view that Mr Shaw should practise the gospel he preaches by starting with a comprehensive liability management programme for the debt of the Government of Jamaica.
http://www.jamaicaobserver.com/edito...REACHES___.asp#
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