Where is the Sovereign Guarantee?

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Senate Pro Tempore, Albert Tugbe Chie

Senate holds special session today on US$536.4m ETON Finance loan agreement

Amid  heightened public concerns and debate about the official non disclosure of the “Sovereign Guarantee” demanded by financiers of the proposed Eton loan agreement, the Senate yesterday voted unanimously to convene a special session today, June 8, to deliberate on an engrossed Bill (#4) from the House of Representatives, requesting the Senate’s concurrence to ratify the US$536.4 million loan/financing agreement between Eton Finance Ltd. and Government of Liberia.

According to the motion proffered by Grand Kru County Senator Peter S. Coleman, the Senate agreed to constitute itself into a committee of the whole to deliberate on the agreement starting at 12p.m. today in the Chambers of the Senate.

On Tuesday, June 5, the House of Representatives passed the loan agreement with a vote of over 40 members. The vote took place a day after the Lower House conducted a public hearing in the Joint Chamber of the Legislature, considered by political commentators as a mere formality.

It can be recalled that President George Weah recently submitted the loan agreement to the Legislature and was immediately hit with many questions, mainly on the legitimacy and existence of Eton Finance LTE.

Amidst controversies, President Weah informed the lawmakers that the objective of this loan is to finance the coastal corridor connection of the country’s county capitals’ road project viz construction of the Buchanan-Cestos City-Barclayville Road, the Barclayville-Sasstown Road; the Barclayville-Pleebo Road; the Medina-Robertsport Road; the Tubmanburg-Bopolu Road.

According to the plan, also to be constructed are rest stops and roadside service areas; the construction of a vocational training center in Greenville, Sinoe County; the construction of mini soccer (football) stadiums in Harper, Maryland County, Barclayville, Grand Kru County; Greenville, Sinoe County; Cestos City, Rivercess County; Zwedru, Grand Gedeh County; Robertsport, Grand Cape Mount County; and Bopolu, Gbarpolu County.

President Weah informed the lawmakers that the principal amount of the loan is payable in 15 years by level payment at an interest rate of 1.46% per annum, with a seven-year interest-free and principal-free grace period.

The contractor of the Project, according to the communication, shall be the Joint Venture Consortium (JVC) comprising MAEIL, Liberia Construction Co., Ltd., a major Chinese Engineering, Procurement and Construction Company; and subcontractors comprising Liberian-owned and operated construction and engineering companies, all to be vetted and confirmed by the Ministry of Public Works (MPW) in respect of their technical capacities.

In another development, the Senate went into Executive session yesterday to deliberate on two resolutions sent from the House of Representatives. The first resolution is known as “A joint Resolution (Leg-003/2018) of the Senate and House of Representatives of the 54th Legislature on Article 37 of the 1986 Constitution for the purpose of postponing the May 8, 2018, Senatorial by-elections in Montserrado and Bong counties.”

The other resolution, for which the Senate went into executive session, involves a joint resolution on the extension of the 2018 census.

Meanwhile concerns about the kind of sovereign guarantee requirement demanded by the creditors have remained unanswered by the Ministry of Finance, the Central Bank of Liberia as well as the Legislature which approved the loan.

The apparent refusal of these institutions have led to public speculations that the money being provided is actually drug money, portion of which the source stated may have probably been used to pay hush-hush and signature fees to the Legislators for the passage of the loan agreement into law.

This is why, according to a source with links to  the Financial Intelligence Unit, government officials are refusing to disclose the kind of sovereign guarantee being requested by the lenders.

Further, according to the source, the Eton Finance company does not have a Dunn and Bradstreet rating which makes it difficult to ascertain the financial standing of the lending company.

The Dun & Bradstreet (D&B) ratings are like credit scores for businesses, giving vendors, consumers and partner businesses a snapshot of the creditworthiness of a business.

A D&B report compiles available business data to measure the creditworthiness of a company. D&B reports are like personal credit reports for businesses and are issued by the credit reporting agency Dun & Bradstreet. Companies typically check a D&B report when negotiating payment terms and lenders will also sometimes check when assessing a business borrower.

The source further points out the fact that the lending institutions do not have a Dun and Brad rating suggests that the money could very well be drug money which its providers are attempting to launder under the purported loan scheme.

This view, according to sources, is strengthened by the apparent refusal of the Minister of Finance and the Legislature to provide details about the kind and value of the “Sovereign Guarantee” it is offering to the lenders, virtually unknown and unrecognized in the world of legitimate finance.

12 COMMENTS

  1. The story is full of perceptions and probably it was not written by a journalist or the editor should have made it an editorial.

  2. Seriously, now Rep. Snowe, whose anger at supposedly being left in the living room while Russian investors he had accompanied to President Sirleaf’s residence were having a meeting with her and Robert elsewhere, is now the conscience of the Lower House’s oversight responsibilities? The last time we heard, Snowe had called a press conference to complain that he was angry about the snob, because he wanted part of the Russsian deal in order to buy his own jet just like the Nigerian who made borku millions at the expense of Liberia from buying an oil block for a song.

    Regardless of reservations of sceptics, naysayers, and assorted politically-motivated opponents of the loan, financing the southeastern projects is going to be one of the most scrutinized by the residents themselves. Needless to say, Representative Snowe isn’t known in the House to be a fiscal hawk.

  3. “Sovereign Guarantee is a promise by the Government to discharge the liability of a third person in case of his default. Sovereign Guarantees are contingent liabilities of the Central and State Governments that come into play on the occurrence of an event covered by the guarantee. Mar 10, 2015” So what is the problem? Liberia is a state. The government of Liberia is state Government!
    Why the splitting of hair? Moot point…honorable legislators, you did the right thing by our people…let’s move on and start implementing…Good bless Liberia.

  4. “According to the source, the Eton Finance company does not have a Dunn and Bradstreet rating which makes it difficult to ascertain the financial standing of the lending company. This President must be commended.

    We don’t need Dunn and Bradstreet rating due to the nature of the financing. Not important…Don’t waste Liberia’s time with you mean-less inquiries. This is a new era of financing be it public or privative. The issues have already been settled and stop rehashing your mean-less…

    • Ben, just by your response to the story, you are either a blind supporter of the CDC led administration or you are just another idiot and novice, both of which are economic and social vices. All well meaning Liberians MUST and are interested in the Liberian Government taking but reasonable loans for development purposes; unfortunately, the current loan is very worrisome, especially all conditions for responsible borrowing and lending are being circumvented in this loan agreement.

  5. An anonymous philosopher once said, “Colleges don’t teach economics properly. Unfortunately we learn little from the experience of the past. A veteran economist must know, besides his subject, ethics, logic, philosophy, law, politics, the humanities and sociology, in fact everything that is part of how we live and react to one another.”

    Unlike some of these rapidly developing (China) and developed economies (South Korea, Japan) of Asia that have Monolithic cultures where mostly everyone shares the same culture, language, similar worldview that makes it a little easier for these countries to work in harmony towards economic development; Africa on the other hand, is a vast continent. It has complex cultural systems that were influenced by suppressive colonialism that ultimately affects an efficient implementation of western economic system (pure capitalism).

    Therefore, if Liberia wants to develop like other fast growing Asian countries that went through similar fate like brutal wars (China: Cultural Revolution, South Korea, Japan, Vietnam, etc.) and yet resurrected their economies, Liberia economists should look at the totality of our cultural ecosystems.

    They should look at our ethics, our logic, our religions, our laws, our social system, and last but not all, look at key economic indicators on how to integrate the whole ecosystem and implement the best economic strategy that will give Liberians good return on their investment (ROI).

    Liberia is in dire economic need. This (U.S.$536.4M) loan with added national development budget should be utilized wisely, invested wisely (built more technical colleges, teacher training colleges, health clinics, roads, water and electricity, etc.) unlike previous government that squandered money borrowed and left the country in massive debt.

    May I recommend this economic book: “Beating the Odds: Jump-Starting Developing Countries” by Justin Yifu Lin, the former chief economist of the World Bank, and Célestin Monga, the chief economist of the African Development Bank.

    They tell us how poor countries like Liberia can ignite economic growth, boost economic growth without waiting for global action or the creation of ideal local conditions like having well-built infrastructure.

    On a side note: Government could establish a “National Development Fund” for only two years” ensuring transparency and accountability to help boost our weak economy.

    Every working Liberian and those Liberians in business (in Liberia) should make mandatory monthly payroll contribution about 10% of their paycheck (income) towards the National Development Fund for only two years.

    Liberians in the Diaspora (including retiree like me) and foreigners living in Liberia could make voluntary contributions into this account. This will help minimize the constant borrowing of money for national development. If we want our country to develop, we all have to chip in and stop waiting for foreign aid!!!!

    • Konneh, you are very analytical in your comment; unfortunately, our government is not interested in the priority areas you have mentioned, rather, the road connectivity to the southeastern corridor, or may I say, it’s just the idea of the kind but may not be realized? The idea sounds plausible but very much impracticable, especially with level of dishonesty in our governing system.

      It’s an interesting response, I recommend you posting it on your Facebook Page for your contacts to read. Thanks.

  6. Fahn Boima, ask “God’s banker” at the Vatican City for the amount so that the government would return the “terrorist money”.

  7. Some may say, if we need to borrow money for development, and it is available at cheap rate, then why not just take the money and develop? It doesn’t matter where it comes from. Would it be better if we got more from the world bank and get less after being obligated to pay hefty salary and the lion share given to their so-called experts?

    But the alternative of taking money from shady ventures and possible criminal cartels has its side effects.
    1. What will the country have to give away (sovereign guarantee) when we fail to pay back?
    2. Are there internal government controls to ensure that it is spent for the intended purposes?
    3. What are the chances that the money may be eaten in exchange for cheap roads which could be washed out in a single rainy season? If this happens, then what economic benefit will it bring to poor Liberians?
    4. With the current state of mismanagement, what are the chances that we will not default on the loans, and consequently mortgage our entire country for possible low standard roads?
    5. Did the legislature get brown envelopes as payment to rush this controversial debt burden?

    A good legislature would have made sure that the proper structure is in place to guarantee the future security of the nation instead of rushing to ratify this controversial loan deal for selfish gains.

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