Govt to spend $6b on covid19 relief

PAULA LINDO AND NARISSA FRASER

Finance Minister Colm Imbert said government is projecting a total expenditure of $6 billion on covid19 relief and other needs between now and September. He said $934 million had been spent to date on covid19 relief.

He broke down spending by various ministries and departments, with projected expenditure up to September 2020.

Imbert said a figure for the health ministry could not yet be determined, especially if there was an increase in cases, or if students allowed to come home from university had to be quarantined. He said there was an additional provision of $250 million for the ministry, although its actual expenditure was projected to be $137 million. He said government was giving the ministry every cent it needed to deal with the pandemic.

He said a $100 million loan had been provided to credit unions that might be increased with another provision geared towards small-business lending. He said VAT refunds of $700 million in cash had been paid out thus far and bonds of $3 billion should start this week. He said, following receipt and evaluation of tenders, $5 million will be allocated for purchase of face masks to be distributed by NGOs.

Help for Caribbean Airlines, WASA

Imbert said a $442 million loan had been secured to assist Caribbean Airlines adding that WASA and TTEC might also need assistance. He said $50 million has been given to the TRHA and $5 million to the THA, with an additional $50 million for hotel upgrades. He said the micro-, small-, and medium-enterprise sector would receive $300 million through a loan programme, where the government would subsidise the interest and provide partial collateral. He said micro-enterprises would also be given additional support in terms of grants, as it was understood that they were less able to stand the shocks of the times.

Imbert said he was confident those initiatives could be funded as the ministry had done projections up to the year 2023 and it was satisfied that there was more than adequate financing available to cover both the budget deficit and debt servicing.

He said some of the financing facilities were generous in terms of their terms and conditions. He said loans being accessed from the Andean Development Bank (CAF), the Inter-American Development Bank, and the World Bank, have a 20-year repayment period, a five-year moratorium on repayments and a generous interest rate of just over three per cent.

Imbert said this is not the first time the government has had to recover from a shock to the economy, as this occurred in 2016. He said government was determined to keep the economy moving along during covid19 by getting additional funding from international agencies to spend the original budget, as well as amending the Heritage and Stabilisation Fund Act to allow withdrawals when required.

Economist: $6b not enough

But speaking with Newsday on Tuesday afternoon, economist Dr Valmiki Arjoon said he believed the $6 billion projection might be much too low.

He said time was a major factor.

"We may very well end up having to spend more depending on how long they take to ensure that the relief packages they've agreed upon are dispersed at this time. The longer you have SMEs (small-medium enterprises) out of business, the longer you have persons being unemployed, the greater the relief packages and the future of fiscal stimulus packages are going to be. A greater need for it and a greater overall expenditure amount."

He said while some SMEs were partially in operation, many others were not and still had "overheads to pay, rent to pay.

"Many of them have exorbitant rent to pay. They're not escaping that, they can't escape that at this point in time. And many of them don't have significant savings to fall back on, especially given the fact that many of them have been quite unprofitable over the past four to five years."

Loans for SMEs 'fantastic' but...

He said while Imbert's hint at the possibility of loan guarantees to the SME sector is a "fantastic idea," it begs the question: Is it going to be for new loans in the future?

"Many of them will have no choice but to take new loans in the future in order to get a fresh stream of cash flow to finance their operations temporarily. Is it that they're going to guarantee these new loans or is it that they're going to back existing loans so far?"

He said when companies reopen, they will not be able to pick up where they left off and sale revenues will not be "as attractive" as they hope for it to be.

"This is why it's important for these companies to start back working or start back their operations as quickly as possible. But equally important, it is why the State needs to provide them with fiscal relief so they still have some sort of cash flow or cash stream coming in for their survival. But where is the money going to come from? That is the billion-dollar question, or should I say multi-billion-dollar question."

PLACE IN A BOX

Ministry $ Spent (million) Projected expenditure

Social development 98.1 400

OPM (to religious bodies) 10 30

Agriculture (fresh produce) 1.3 10.7 plus

National security 3.7 8.3

Health 55 137 (+ 250)

Finance (salary relief grant) 12 490