A $43 million government obligation related to infrastructure works carried out under a public-private partnership (PPP) arrangement has become the latest point of contention between the government and the Opposition, with Minister of Finance Michael Halkitis defending the transaction as standard financial practice, while Free National Movement (FNM) Leader Michael Pintard is questioning why the arrangement was structured in the way it was.
The issue stems from contractors involved in infrastructure projects selling receivables owed by the government to African Export-Import Bank (Afreximbank) through a factoring arrangement.
Pintard, who made the remarks in the House of Assembly on Thursday during the budget debate, said questions remain about why Afreximbank became involved in the arrangement between the government and the contractor, and whether the government adequately explained its obligation.
“We raised this during the budget contribution. We did not get a proper explanation as to how the government remains on the hook,” Pintard said.
Pintard questioned whether the government was aware beforehand that the contractors intended to sell the receivables to Afreximbank.
“Prior to the vendor making the determination to go that route in terms of settling their accounts, or making sure that they were made whole, the government had no prior knowledge that such an arrangement was in fact being made?”
The Opposition leader argued that the contractors may have been able to secure financing without Afreximbank’s involvement.
“Quite frankly, the transaction could have been done without the export-import bank being involved,” Pintard said.
“So the question is, why didn’t the government go that route from the beginning?”
According to Halkitis, the government’s liability did not change as a result of the factoring arrangement, because the work had already been completed and payment was already due.
“The work has been completed and monies are owing,” Halkitis said.
“Those vendors did a factoring operation with Afreximbank, basically selling the receivables that they have with the government to Afreximbank for a total of $43 million.”
He added: “That is a standard operation in these sorts of transactions, it’s nothing unusual.”
The matter of contingent liabilities caused by PPP arrangements was raised when the Fiscal Responsibility Council mentioned it in its Pre-Election Economic and Fiscal Update (PEFU), disclosing what it called a “potential contingent liability” of $140 million linked to financing arrangements involving Bahamas Striping Group of Companies and Cat Island Infrastructure Company Limited.
The PEFU stated that the liability would crystallize if invoices submitted by the contractors were not settled within specified time periods.
While the PEFU called the impending transactions a potential contingent liability, it is held that the government either knows it has one and has legally prepared through proper parliamentary procedures to settle the liability, or it does not have one, leading Pintard to ask whether the government knew its PPP partners would sell the receivables to Afreximbank.
