Deferred loan payments used to repurchase Grenlec shares

by Linda Straker

• Ministerial projects and debt payment allocations used to repurchase majority shares in Grenlec
• World Bank and International Monetary Fund called on bilateral creditors to provide debt relief
• Paris Club Debt Service Suspension Initiative (DSSI) suspended May and December 2020 repayment

Prime Minister Dr Keith Mitchell has indicated that Government’s US$60 million payment to repurchase the majority shares in Grenlec from WRB Enterprises included allocations from ministerial projects that failed to be implemented in 2020 because of Covid-19 and from allocations that were initially scheduled for debt payment.

When asked to provide specific areas where Government reallocated funding to pay to the company for its approximately 63% of the shares, he said, “There is one category in the budget, I don’t understand how that seems to be an unknown fact to some people; there is one thing in the budget, debt payment is one vote.”

Dr Mitchell, who served as Finance Minister up to September 2020 explained that a debt payment which is part of the Government’s overall commitment, is covered in the annual estimates of revenue and expenditure under the section for debt payment.

In March 2020 following the announcement from the World Health Organisation that Covid-19 has become a global pandemic, the World Bank and the International Monetary Fund called on bilateral creditors to provide debt relief for IDA countries like Grenada, suspending payments on loans and allowing them to use available resources to fight the pandemic.

In May, the Paris Club Debt Service Suspension Initiative (DSSI) announced through a press release that it would suspend Grenada’s repayment for the May and December 2020. Though the formal announcement was not made about the terms and conditions for all debt repayments to the Paris Club, a recent news release from the US Embassy in Grenada confirmed an agreement with one member of the Club.

The release said that a Bilateral Debt Agreement was signed with the USA that provides for the island to consolidate and reschedule debt payments that were due between May and December 2020. A review of the 2020 Estimates and Expenditure has shown that the Paris Club loans are labelled as rescheduled.

Speaking with journalists as part of his annual new year’s interview schedule, Dr Mitchell explained that the repurchasing was something that Government could not have refused.

“It was known that any change the Government signed onto, any change in that purchase agreement the force majeure clause with be initiated by the buyer and it means that we will be forced to buy back,” he said while pointing out that failure to reach an agreement could have had negative implement for the current government and the country.

“The buyback decision was not a government decision, in a time of pandemic where we have serious issues to deal with, we will not want to spend that kind of money to buy back any kind of national asset, so we were forced to do it and had we not done it,” he said, pointing out possible penalties.

“Of course the name of the country will be brought into disrepute; no one wants to know that an international tribunal indicates the Government must pay and that if we refuse to pay, that has serious implications to the image of the country. They will not be able to come and take us and sell us individually, but they can certainly do a lot to embarrass the Government and the country, and I will not want to be part of this, so clearly, that was one of the serious considerations,” said the Prime Minister.

Under the final settlement agreement Government paid WRB Enterprises US$60 million of the agreed US$63 million in full within a short period and the remaining US$3 million over a 2-year period.