Venezuela writes off SVG’s debt to PetroCaribe

The likelihood exists for this country’s debt to GDP ratio to decrease to as low as 88 per cent, now that all of St Vincent and the Grenadines’ remaining debt to PetroCaribe has been forgiven. 

Prime Minister, Dr Ralph Gonsalves announced this week that Venezuela made the decision to completely write off the debt of St Vincent and the Grenadines (SVG) which is approximately EC$190 million. 

And yesterday, Minister of Finance, Camillo Gonsalves said the write off will result in an overall reduction of SVG’s debt to GDP ratio by between five and nine percentage points. 

Currently, the debt to GDP ratio sits at about 97.5 per cent — a supposed consequence of the government’s necessity to borrow funds to deal with the fallout of the COVID-19 pandemic and volcanic eruption. 

“Now, with this PetroCaribe relief, we will be moving down to at least 92 per cent and probably as low as 88 per cent debt to GDP ratio, which is a significant debt reduction, at a time when throughout the region, debt to GDP is rising, it’s rising globally and ours now, thanks to this debt relief will actually be trending downwards instead of trending upwards,” Gonsalves said during a press conference at Cabinet room. 

The finance minister added that the debt relief will give the government more fiscal space “which essentially means that money we were going to use to pay the debt, you can use the money to do other things in the economy”. 

Agreements reached between Venezuela and St Vincent and the Grenadines will also see other participating OECS countries receiving a 50 per cent relief on their remaining debt. 

And other initiatives negotiated involve, among other things, the revival of the PetroCaribe programme, and donations of 150 prefabricated houses, as well as shipments of free asphalt for road repairs and free urea for farmers.

Under the new PetroCaribe arrangements, SVG and other participating OECS countries will receive a 35 per cent discount on fuel. 

In the current climate where oil prices have risen by at least 60 per cent in 2022 it means that the St Vincent Electricity Services Limited (VINLEC), will spend 35 per cent less on fuel to generate electricity once the PetroCaribe deliveries begin. 

“Last year, VINLEC purchased about 7 million barrels of diesel. They spent on that diesel, about $48 million. If you take 35 per cent off of that cost, which is at last year prices, not at this year prices, VINLEC would’ve saved over $17 million and those are savings that pass on to the consumer in the form of fuel surcharges and other costs,” Gonsalves explained. 

“This year with fuel prices higher, that 35 per cent will represent an even larger dollar amount and once those deliveries begin, VINLEC will be able to save that money and be able to pass that savings on to electricity consumers.” 

He added that “it’s a very, very significant concession by PetroCaribe that will be felt favourably by every single Vincentian that uses electricity, and will be felt favourably by every business in the country, every manufacturer for whom electricity is a major part of their cost…” 

The finance minister said under the programme, Venezuela has agreed to send 1000 barrels per day, which is in excess of VINLEC’s daily usage by at least half. 

The minister further pointed out that this will have significant impacts on SVG’s energy security moving forward. 

And the Cabinet has already begun talks on measures that can be implemented to utilise what will be significant reserves in fuel. 

Minister Gonsalves also provided a breakdown in the quantity of free urea and asphalt that will be provided in coming months. 

He said free urea being given to SVG for farmers will number in excess of 2000 sacks per month, while asphalt will number up to 2000 tonnes per month. 

“To put that 2000 tonnes per month in perspective, BRAGSA currently uses about 200 tonnes per month and sometimes as high as 600 tonnes per month. So that means that BRAGSA [the Roads, Buildings and General Services Authority] and the state will have tremendous free asphalt to engage in road repairs across the country,” the finance minister said, adding that the price of asphalt has also increased tremendously, which has resulted in this year’s budgeted funds buying less asphalt than anticipated. 

Meanwhile, Prime Minister Gonsalves has noted that Venezuela is receiving nothing from the arrangement, other than the knowledge that they stood in solidarity with this nation during its time of hardship. 

“There are governments which are formed in a particular manner and they believe in deepening regionalism and regional solidarity and the Bolivarian Republic of Venezuela, they have weathered a particularly difficult storm and they have found ways in which to survive and thrive. They are in a position now to help a little more and particularly in our own situation, with our objective circumstances; with COVID, the volcano, the hurricane and of course, the impact — for those of us who don’t have fuel, have to import fuel and wheat and the like…” 

The prime minister noted SVG’s advocacy for South American country at the international level, particularly in the context of the sanctions that have been imposed over the years. 

He added however that “we’re not getting 100 per cent debt relief because of anything political which we do”, but because of the challenges this country has faced as a result of the impacts of the volcanic eruption and Hurricane Elsa.