Government, banks close to pact in rice rescue talks By Gitanjali Singh
Stabroek News
December 4, 2001

Finance Minister, Saisnarine Kowlessar, hopes to have the discussions with the Guyana Bankers Association concluded soon to institute a package to rescue the rice sector out of its current state of debt overhang.

Kowlessar told Stabroek News and the Guyana Broadcasting Corporation at a Guyana Information Services-organised television interview that the discussions on the proposal by the bankers are far advanced and should conclude next week. However, he did not want to prejudice the discussions by confirming any of the elements of the rescue package.

Stabroek News understands that the bankers want a waiver of the 45% tax on the $6 billion in provision to be written back in their books as a result of the bad debt portfolio with the rice sector. In return the banks will write off $5 billion in accrued interest and restructure the loans to the rice industry over a ten-year period at a variable rate of interest starting at ten per cent.

Kowlessar expects that the package to be announced shortly will go a far way to stimulate the rice sector. He also expects that there will be an element of capitalisation.

The minister also said that he has no information on a request by the forestry sector for similar treatment as the rice sector by having a waiver of the guideline #5 accompanying the Financial Institutions Act to allow the banks to restructure loans to that sector as well. He said that the matter was one for the Bank of Guyana's attention but he would be happy to consult on the issue. The rice and forestry sectors are especially hard hit by lower commodity prices and a heavy debt overhang, stifling their production.

Meanwhile, Kowlessar said that the government was willing to provide the necessary fiscal package to attract new investments and to stimulate the economy. He said that in the next several years, attracting new investments would remain on the government's front burner of initiatives to diversify the economy and to improve the well-being of its citizens.

He said that the government was working on a programme to diversify the economic base and modernise the traditional sectors and was currently looking at proposals for investment in the information technology and tourism sectors as these should help in the job creation drive.

Kowlessar said that the pursuit of the $18 billion Public Sector Investment Programme (PSIP) this year was also expected to have helped to alleviate the unemployment problem but was in no position to say how many new jobs were created this year. However, he saw the benefit of the PSIP as allowing for private sector initiatives.

He said that the government had secured a commitment for the financing of the Guyana Sugar Corporation expansion project from the Department For International Development, the Commonwealth Development Bank and the World Bank and this project will also create more jobs.

The finance minister said that the government will pursue aggressively, new growth areas in the new year to capitalise on private sector initiative.

Kowlessar said the government is further willing to provide generous incentives for pioneering activities and plans to create shells to house garment and other light type of industries across the country. He said that the industrial estates would be pushed in the new year as well.

He was in no position to say if a special stimulus package will be considered for the economy, saying that the government was open to suggestions.

The minister expects that the 2.8% growth projection for this year will not be met given the slow down in the economy but he expects growth to be positive. Growth for the first half of the year was 1.3%. He debunks that the economy was in recession, noting that two successive quarters had not seen negative growth.

While he acknowledged the impact of the world recession on the economy, Kowlessar said the government had tried to minimise the deceleration in the domestic economy. He confessed that he could not say whether there had been an increase in investments in Guyana but said there had been a number of small investments. He said that the political situation in the country had impacted on investors' confidence in the economy. However, he said the government was working to create the right economic climate in terms of ensuring the macro economic fundamentals are all right. He said that the government was willing to provide the necessary incentives and all that was left was for investors to pick up the mantle. He said that Wieting and Richter, Banks DIH, DDL and Didco had all made investments recently and also referred to several investments in aquaculture. He expects the economy to fare better in the new year when a number of proposed investments get off the ground.

Meanwhile, Kowlessar said that the government intends to look comprehensively at tax reform to allow the economy to benefit from increased private initiative.