Jamaica PetroCaribe fund granting millions in unsecured loans

(Jamaica Gleaner) In addition to not having a formal risk-management framework, the PetroCaribe Development Fund (PDF) has been breaching its own guidelines, making US$100 million in unsecured loans available to entities, while at the same time charging commitment fees that are lower than the rate approved.

According to the most recent annual report of the auditor general, the PDF has been in breach of the Lending and Grant Funding policy of the Government, which states that collateral security must be obtained from the borrower prior to disbursement to provide ultimate protection from the risk of default.

In her report to Parliament, tabled in the House of Representatives yesterday, Auditor General Pamela Monroe Ellis implored the fund to take the necessary steps to have the particular entities provide the necessary security and to ensure that all future loans are supported by adequate security or obtain the requisite capital approval in keeping with the Lending and Grant Funding policy.

“We found that unsecured loans amounting to approximately US$100 million were made to four entities, and the PDF reported that Cabinet approvals were not obtained. One of the loans was subsequently assumed by the Ministry of Finance. The PDF explained that credit assessments done for two of the entities disclosed good debt-service record,” the Monroe Ellis-authored report said.

For the period April 2012 to July 18, 2014, the auditor general said there were instances where commitment fees to some borrowers were less than the required 0.5 per cent.

“We noted that for 17 loans granted during the period, PDF applied a commitment of 0.2 per cent for six of these loans and a rate of 0.25 per cent for four. This resulted in commitment fees being reduced by US$43.75 million,” the report said.