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Bus bills threaten health budget

Published:Monday | March 26, 2012 | 12:00 AM

When finance Minister Dr Peter Phillips sits down with his team to craft the 2012-2013 Budget, he will have to pencil $2.5 billion for buses which Jamaica credited as part of move to create a rural transportation system.

The financial secretary, Dr Wesley Hughes, has already cautioned that critical sectors such as health, education and security could suffer as a result of the bus debt incurred.

"The approval is granted on the premise that there will be no drawdown in the current financial year and the disbursement is to be phased over three years commencing 2012-13," said the financial secretary in response to a Cabinet submission.

"However, given the existing financial challenges and the cuts which will need to take place on the Government of Jamaica expenditure budget in 2012-13 in order to close the fiscal gap, the purchase of the buses can only be accommodated at the expense of spending in other sectors such as health, education and security."

Four instalments

Under the loan agreement for the 230 buses, $2.5 billion is due in 2012-2013 fiscal year, $2.5 billion is due in 2013-14; and two equal tranches of $3.1 billion are not due until the 2015-2016 fiscal year.

The debt has been incurred under a Belgian loan agreement to finance the purchase of 230 new Jonckheere buses.

The loan agreement was signed by former Finance Minister Audley Shaw on October 18, 2011 and lender Commerzbank AGM Brussels branch in the principal amount of J$11.3 billion.

The money is to be disbursed in four instalments between 2012-2013 to 2015-2016. The arrangement was entered into at a fixed interest rate of 3.99 per cent per annum.

Having taken note of the comments by the Ministry of Finance, the infrastructure subcommittee of Cabinet at its meeting held on July 25, 2011, decided that the submission be deferred.

Notwithstanding Cabinet not giving approval for the purchase of the buses, then Finance Minister Audley Shaw committed Jamaica to the debt.

Now, Transport, Works and Housing Minister Dr Omar Davies said the new administration desires to renegotiate the contract, which Shaw signed on December 30, 2010.

"I have reviewed the contract and whilst the Government of Jamaica honours obligations, we have concerns about certain elements of the contract and we will be seeking to have discussions with the institutions on the other side about changes," Davies said.

The loan agreement is financing the purchase of 230 buses, two workshops, spare parts, special tools and technical and managerial assistance.

"I have been advised that 15 of the buses are on their way, as per the contract," Davies told The Gleaner.