IMF calls for review of St Kitts-Nevis PetroCaribe agreement
St Kitts and Nevis should review its PetroCaribe arrangement with Venezuela as it is not receiving the full benefits of the program, according to the International Monetary Fund (IMF).
“I think in principle it was a very good idea because then they were developing a sinking fund but if there is no net benefit being derived by the nation why even bother incurring the debt,” said Judith Gold, the IMF chief of mission to St Kitts and Nevis..
The latest IMF report on St Kitts and Nevis raises concerns about the level of debt being accrued under the PetroCaribe arrangement and including new debts incurred by the St Kitts Electricity Company (SKELEC) in purchasing oil under the arrangement. The fund questions whether the original benefits under the program are being achieved.
Several Caribbean countries are beneficiaries to the PetroCaribe arrangement that provides for concessional financing for a portion of the fuel cost, depending on the market price.
Gold argued that the success of the citizenship by investment program may remove the need for PetroCaribe for St Kitts and Nevis.
“The specific circumstances right now in St Kitts are such that since the SIDF has considerable amount of resources, it is doing the investment itself that perhaps the PDV SKN (the local PetroCaribe holding company) was supposed to do so perhaps there is really no need to rely on the PetroCaribe arrangement and then reduce the total potential debt of the country,” Gold added.
With the decline in world oil prices, many economic pundits predict that the subsidies under PetroCaribe would either be reduced or removed, especially if Venezuela continues to experience economic challenges.
However, Gold is of the view that the effects on St Kitts and Nevis, if PetroCaribe subsides are removed, may not be substantial, as the Federation is not benefiting much from the arrangement.
“Cost of imports will go down so the cost of energy for the citizens on a whole should go down,” explained Gold, regarding the drop in the price of oil. “Relative to other countries in the Eastern Caribbean, there won’t be negative impact (on PetroCaribe for St Kitts), which is the good part of this agreement because it didn’t have any benefits… SKELEC is already paying full price (for the oil), the government is not benefiting from any subsidy so there really won’t be any negative implications.”
In a previous interview with WINN in 2012, minister of public works and energy Dr Asim Martin said the funding under PetroCaribe made it possible for the government to undertake a road resurfacing exercise including improvement of roads in Basseterre.