Dr. Omar Davies, Minister of Finance and Planning speaks in Parliament in this May 10 file photo.
Jamaican Government has already onlent more than 80 per cent of the US$174 million,
which converts to J$9.1 billion of J$11.5 billion of receipts since February
under the Venezuelan oil pact, PetroCaribe Agreement.
The oil funds represent debt the country will eventually have to repay at a concessionary one per pent.
More than 40 per cent of the advances, which were made ahead of the establishment of the vehicle that would manage the loans, the PetroCaribe Development Fund (PDF), were disbursed to loss-making government firms and not to "self-financing public bodies for approved projects" as was outlined in ministry paper tabled by the finance ministry in Parliament on Tuesday.
The cabinet in its decision on June 19, 2006 gave the go ahead for the disbursements under an interim arrangement.
Air Jamaica received US$27 million (J$1.8 billion) Ñ US$20 million at 3.0 per cent interest over six years and US$7 million at 1.0 per cent interest over 25 years, to be used for working capital.
Some of the loan represented 2,500 additional barrels of oil per day which the government took on in June this year to support the ailing airline, resulting in "loan financing to the company of approximately US$20 million annually," said Davies in documentation tabled in Parliament.
The Sugar Company of Jamaica (SCJ) also received $34.7 million (J$2.3 billion) at 3.0 per cent interest per annum for 15 years, to "assist with working capital needs and preparation of company for privatisation."
But the sugar producer which racked up nearly $10 billion in losses up to September this year, according to Financial Gleaner estimates, has been haemorrhaging over the last decade. The divestment which was to have entered the negotiation phase in October, has been significantly delayed, with the Sugar Enterprise Team responsible for the privatisation having pushed back the prequalification bidding process from July to December.
Moreover, opposition spokesman on finance, Audley Shaw, in discussions with Gleaner editors last week, said the SCJ bank overdraft had reached $3.5 billion, suggesting the cheap PetroCaribe funds were not used to pay off or reduce the overdraft.
The finance ministry also used the PetroCaribe funds to refinance US$11 million in existing loans taken on by Port Authority of Jamaica for its expansion of the Kingston Container Terminal, lowering its cost on those funds to 5.0 per cent per annum, which the PAJ won't start repaying until 2008.
The US$34 million (J$2.3 billion) that was used as interim financing for Clarendon Alumina Production, which is participating in the US$1.8 billion expansion of Jamalco alumina refinery in Clarendon, the largest expansion in Jamaica's history, was lent to the entity at 6.0 per cent, cheaper than the 8.5 per cent coupon rate on the US$200 million CAP raised from an international bond issue at the beginning of November.
CAP repaid the loan in full last week.
Inflows from PetroCaribe only stated in February this year, according to the finance ministry paper.
The agreement signed in June last year allows Jamaica to convert 40 per cent of oil purchase payments for the 23,500 barrels per day Ñ supplied since June this year Ñ into a long-term soft loan for national development projects.
The Petroleum Corporation of Jamaica, which manages the fund while the government seeks to formally establish the PDF, held the resources as deposits and short-term instruments which earned interest income of J$218 million in the interim.
Apart from the J$7.1 billion which was advanced to the four public entities, J$2 billion was allocated for a special flood damage programme, Lift up Jamaica, and projects located in Kingston such as the Urban Transportation Centre in half Way Tree.
Another J$18 million was used by the finance ministry to refinance a loan facility with PanCaribbean Financial Services to reduce debt servicing costs.