The Government will finance 70 per cent of its $7.7 billion fiscal deficit by borrowing from the Inter American Development Bank. Finance Minister Winston Dookeran said the Government had been engaged in talks with multi-lateral lending agencies and interest rates were now attractive for borrowing.
He expects to source 30 per cent of the deficit on the local market. In an interview at his Ministry of Finance offices yesterday, Dookeran said Government hoped to create growth in many ways which would ease the debt burden next year. Should the oil price, pegged at US$65, fall, the Finance Minister said adjustments would have to be made to the budget. That, he said, could materialise in lower public expenditure or a possible tax increase.
However, he was quick to dismiss the speculation, stating that the option remained to borrow more. He described the method adopted by the Government to deal with Clico as a "creative plan." While there's some doubt about how the plan is to be executed, Dookeran sought to clear the air. He explained that Clico depositors would be guaranteed a cheque of $75,000 and 20 bond receipts (one for each year). He said the bond receipts would be honoured by the Government but should the depositor choose to get cash up front, the receipt could be cashed at the commercial banks. The only challenge, he said, was that depositors would have to accept the bank's value on bond. He acknowledged depositors stood to lose a percentage of the money invested in Clico.
He said it was not a problem the PP Government created but that formula was the best option. His other option, he said, was to walk away from the mess but the Government did not. He said some people took a risk in investing in Clico and in a market economy there was a price for failure. He said Government could not give the guarantee that people would get all their investments but they would be able to get some of it. He said, from that point, Clico depositors would not get any interest on their investment. Dookeran's focus is now on recouping the Government's $7.3 billion investment in the company.
He said the Bob Lindquist forensic report into CL Financial and Clico was in the hands of the DPP. With regard to the Hindu Credit Union, Dookeran said, the Government stood the risk of not regaining its $300 million which it will pay out to HCU shareholders.
He said for now the assets of HCU remained tied up in the courts. The Government intent, he added, was to pay HCU depositors and let them sign over their HCU shares. Dookeran explained that once the assets became free, the Government would be able to sell them off and recoup its investment. Given the legal challenges, Dookeran acknowledged the Government could loose that $300 million. But once the depositors accepted the payout, the Government would have the rights to HCU assets. As for Alutrint, the Finance Minister said the decision to scrap the project was because there were concerns on whether it was the right strategy for natural gas. He said the Government decided to cut its losses. Instead, he said, a new industrial estate would be set up as part of the People's Partnership plan to develop the south-west peninsula. With regard to the $1,000 special allowance for police officers, Dookeran said that was done to boost the morale of the officers. He said the country needed a strong police force at this time yet the morale was low. That allowance was sperate from any salary negotiations for the officers, he added.
