St Lucia government borrows from National Insurance fund to repay maturing bonds

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By Melanius Alphonse
Caribbean News Now associate editor
melanius@caribbeannewsnow.com

CASTRIES, St Lucia — In a letter dated July 3, 2018, the government of Saint Lucia has asked for “a bridging finance facility with the National Insurance Corporation in [sic] ranging from EC$70-100 million” for the purpose of repaying two bonds maturing July 30 and 31 totalling EC$117 million on the Regional Government Securities Market.

It is understood that the National Insurance Corporation (NIC) board has approved the request, notwithstanding some reported misgivings on the part of its director, Matthew Mathurin.

While such a loan may technically be within the power of the NIC board to grant, not surprisingly the fact that the government has to resort to using pension funds to repay its obligations has created a firestorm of debate.

In particular, opposition leader Philip J Pierre, who warned last year of the dangers in raiding the national insurance fund, asked a number of questions in this regard in an op-ed piece published today.

Former Cabinet minister Richard Frederick asked where will the pensioners get their money back from, adding that what is happening now clearly shows that Prime Minister Allen Chastanet has not a clue about governance and finances.

“If you know you have a debt to satisfy at a given date, for heaven’s sake, you make provisions in your budget allocations to satisfy that debt, which falls within the period of your budget cycle,” he said.

Furthermore, parliamentary approval is required to borrow money that binds the state/ consolidated fund and the NIC has in the past lent money to central government and deposited in the consolidated fund for infrastructure development, which was approved by parliament.

However, in this case, no such approval has yet been sought or obtained and, while parliament is due to meet on Tuesday, no motion to approve such borrowing yet appears on the order paper.

Social media users also weighed in on the issue, among other things describing as “highway robbery” that the current interest rate on a treasury bill is 7.5 percent, whereas the government is offering only 3 percent.

Some users asked why the existing bondholders were not prepared to rollover the indebtedness, in which case there would be no need to approach the NIC for financing, leading to concern about what would happen if the market is not interested in bonds from Saint Lucia, because lenders have no confidence in the government’s ability to repay.

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