Reading the loan fine print

Desperate times call for desperate remedies.

But even so, there is a lot to take note of with regard to Finance Minister Colm Imbert’s mention of a Chinese loan facility, proceeds of which are to be diverted for use in procuring vaccines, among other Chinese goods and services.

At a virtual event on Monday, Mr Imbert said the Government had been working on accessing a loan facility for about a year. It has recently been approved. The State has borrowed in excess of US$200 million.

“The Chinese facility is part of our portfolio of borrowing,” the minister said. “We borrow internationally and locally.”

Mr Imbert further said, “They put a stipulation in place so that of the US$207 million, 15 per cent must go to ‘Chinese elements,’ which was later defined as goods and services. At the time they did indicate that vaccines would be considered as ‘Chinese elements.’”

Aside from the minister’s disclosures, how transparent are these arrangements? Can we afford this? What about other details such as interest rates? Is this a brand-new venture, or are we tapping into a pre-existing framework?

While every little counts, Mr Imbert’s own mention of the price of vaccines to be acquired under this loan facility points to perennial questions on value for money.

By way of comparison, the arrangements surrounding the World Health Organization’s Covax facility are well known in theory, even if that programme has buckled under the heavy demand and problems of supply.

This country has a long history of opaque government-to-government deals. Discussions relating to public procurement law reform have consistently focused on the need for such arrangements to be subject to regulation, with equally consistent resistance to the idea of such regulation, given the cultures, terms and conditions imposed by foreign entities.

It’s no secret some prefer things to remain secret.

But Mr Imbert has signalled his desire to negotiate downwards the US$15 cost per shot of the Sinopharm vaccine which is to be funded by part of the proceeds of this facility. That price is already three times what the Government paid for AstraZeneca vaccines.

Given the shortage of vaccines locally, some might say beggars cannot be choosers. It is laudable that the minister has his eye on keeping costs down.

It would be equally laudable if this country had a culture where we did not need a law to force the State to publish the fine print of its arrangements with other countries.

It is clear that the revamped procurement regime remains in enforcement limbo.

Meanwhile, it is important to note the size of this loan and to question what the rest of it will be used for, as well as how it will be repaid and under what rates.

With revenues down and the need for economic stimulus measures up, loans are to be expected. But will this money be used to service existing obligations and subsidies? Or will it help the State finance an emergency injection into the economy?

The paltry level of grant funding going forward suggests the former. But it should not be for us to guess.