Lead Stories

Daraine Luton, Senior Staff Reporter

TAXPAYERS may have to fork out US$57 million or approximately J$4.8 billion as exit fees from a currency-swop arrangement.

Parliament yesterday approved a loan guarantee to refinance a €204.4-million loan from Bandes - the development bank of Venezuela - which goes towards the financing of Highway 2000.

Peter Bunting, the member of parliament for Central Manchester, told Parliament yesterday it was his understanding that "the cost of unwinding the cross-currency swop, were it done yesterday, would have been US$57 million or J$5 billion in losses".

Prime Minister Bruce Golding did not contest the figure, but said that even in that ballpark, the taxpayer might still not be hard hit.

Discounted buy

Golding told the House of Representatives that Government intends to repurchase the Bandes bonds at a discounted price.

"Given the nature of the market and the nature of the bonds, we would be able to purchase them at a significant discount," Golding said.

"Even in that (Bunting's speculated) ballpark, we expect to be able to pay out that cost and still end up with US$30 to US$35 million to finance NROCC's (National Road Operating and Constructing Company) obligation for the extension of Highway 2000."

The refinancing of the loan guarantee became necessary after the Development Bank of Jamaica, in 2008, entered into a debt-swop arrangement to protect itself against a devaluing euro in which the debt was denominated.

But the deal went belly-up during the recession when the euro regained its position, leading to losses for the Government on the interest due on the debt as well as the interest. At the time of the debt swop, it cost US$1.54 to purchase the euro. The rate has since gone down to US$1.10.

Bunting, an investment banker, argued that the country needs to be given an accounting of the cost of the transaction to the country. He argued that while the losses may be close to US$60 million at this point, the interest losses to the country have not yet been taken into account.

daraine.luton@gleanerjm.com