House Approved Loans for Development Programmes

The House of Representatives approved the government's guarantee of a number of loans to state agencies last year, to carry out development programmes and provide small business support.

Port Expansion

            The Port Authority of Jamaica secured three loans from the Export Import Bank (EX-IM) of China and Citibank, to finance the purchase of four ship-to-shore gantry cranes for the fifth stage expansion of the Kingston Container Terminal.

            The House of Representatives in September unanimously approved government's guarantee of the loans, which amount to US$30.1 million. Earlier in the month, Cabinet approved the Authority's request for a government guarantee.

            State Minister for Finance and Planning, Fitz Jackson, who moved the resolution, seeking support for the guarantee, explained that the loan “will facilitate the commissioning of the cranes in order for the Port Authority to meet the schedule in the expansion    currently being pursued at the port”.

            He noted that the Port Authority possessed an excellent repayment record, and “from all indications, it continues to meet its financial obligations.”

            On September 28, the House also approved a government guarantee of a US$5 million loan to the Development Bank of Jamaica (DBJ) from the Organisation of Petroleum Exporting Countries (OPEC).

            The money will be on loan to approved financial intermediaries (AFIs), which will in turn, disburse funds to small and medium sized entities involved in agriculture, agro-processing, manufacturing, mining and quarrying, and tourism.

            Finance and Planning Minister, Dr. Omar Davies, who tabled a Ministry Paper outlining the details of the loan guarantee, informed that the loan term was seven and a half years, inclusive of a two year moratorium and repayment.

            The loan, Dr. Davies informed, represented the second line of credit from OPEC, as the organisation had provided funds to the DBJ in 2002, the proceeds of which, “were taken up almost instantly by the different entities and it is against this background that the DBJ sought and obtained the second loan from OPEC”.

Enhancing access to

SLB loans

            In October, a government loan guarantee of $1.775 billion from the Jamaica Bankers' Association (JBA) to the Students' Loan Bureau (SLB) was approved by the House. The loan guarantee would facilitate tuition loans to needy Jamaicans desirous of pursing tertiary studies. 

            Dr. Davies explained to colleague members that the tenure of the loan was for five years at a fixed interest rate of seven per cent per annum.  The loan guarantee will be repaid in nine instalments.

            Participating lenders in the SLB/JBA Loan Scheme include: the Bank of Nova Scotia Jamaica Limited; the National Commercial Bank; RBTT Bank Jamaica Limited; First Caribbean International Bank; Citibank; First Global Bank; Capital and Credit Merchant Bank Limited; Dehring Bunting and Golding Limited; Pan Caribbean Merchant Bank Limited; MFG Trust and Finance   Limited and Citi Merchant Bank Limited.

            Dr. Davies explained that the loan facility originated some three years ago when the Bank of Jamaica (BoJ) imposed a special deposit on deposit-taking institutions for which they are paid interest rates less than the market rate.

            “The commitment made by the government and the BoJ was that as soon as the situation stabilised itself, these special deposits would be released and in 2005, when the BoJ was releasing some of these special deposits, I met with the leadership of the Bankers Association and proposed to them, that since they had no idea when this special deposit would be released, they could become a contributor to this noble facility by allowing a percentage of this special deposit to be used for purposes, which we all agreed to be noble and that came to $1.775 billion,” Dr. Davies informed.

Support for Bauxite Sector

            Further, the House approved a government guarantee for a US$200 million loan, to be raised by Clarendon Alumina Production (CAP) on the international capital market.

            “The proceeds will allow CAP to meet its financial obligations and put it in a position to contribute in terms of the expansion programme, which is envisaged for the Halse Hall Plant,” Dr. Davies explained.

            “CAP has retained the services of Bear, Stearns & Company through a competitive process, to assist in securing funding on the international capital market,” he said, adding that Bear, Stearns & Company had arranged a long-term fixed rate facility for US$200 million, which they would fully underwrite.