Roughly four years after becoming a $50 million loan guarantor for the cruise pier project, the Dr D Orlando Smith-led government is now seeking approval to guarantee an additional $5.8 million loan for the BVI Ports Authority (BVIPA).
Effectively, a loan guarantor is a person or entity (BVI Government) that promises to repay a loan if the original borrower (BVIPA) fails to pay.
Section 33 of the Public Finance Management Act says government is powerless to guarantee loans unless they are given approval from BVI parliament.
Premier Smith will, therefore, be seeking to get the proverbial green light from the members of the House of Assembly on Thursday, September 13.
Purpose of the loan
The BVIPA is seeking the loan from the First Caribbean International Bank (Cayman) Limited and its affiliates.
The Premier said the purpose of the loan is for the BVIPA to purchase ‘port equipment’, guarantee an unspecified ‘a line of credit’ or loan from the bank, and to fund what are known as ‘interest and net swap payments’ of an existing loan.
A total of $1.7 million is to be used to purchase the port equipment, $2.1 million to be used for the so-called interest and net swap payments, and the BVIPA will use the remaining $2 million to guarantee the unspecified line of credit.
Notably, government is seeking approval to be a $5.8 million loan guarantor for the BVIPA at a time when it is also seeking an unrelated £300 million loan guarantee from the United Kingdom.
That £300 million loan guarantee is so the BVI can borrow to fund its recovery and development plan.
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