Prime Minister Ralph Gonsalves on Saturday defended his government’s decision to take EC$6 million from the cash-strapped Building & Loan Association (BLA), saying it is part of almost EC$17 million owed to his government, and the remainder has been written off.
Gonsalves further said that the BLA — which has been under the oversight of a state agency since 2012 — made EC$12 million in operational profit over the past two years.
The BLA, the nation’s oldest indigenous financial institution, when brought to the brink of collapse in 2012 after Luke Browne, then an employee of the Ministry of Finance, wrote a letter asking questions about its financial health and management.
The letter triggered a run on the institution, resulting in the Financial Services Authority, a state agency, taking over its management.
While management has been transitioning back to the BLA, a building society, the FSA maintain oversight and among the conditions imposed, members of the BLA have to give notice and wait months before accessing certain sums of money they have invested in the institution.
But since Leader of the Opposition Arnhim Eustace disclosed on Friday that the government has cashed in on its EC$6 million, members of BLA have expressed concern that the current management is continuing the same preferential access that they claim led to the weakening of the BLA.
On Friday, Eustace, speaking at a rally of his New Democratic Party (NDP) in Rockies, raised questions about the government taking the EC$6 million even as members of the BLA have to wait long periods to access significantly smaller sums.
But Gonsalves, who is also Minister of Finance, told supporters of his Unity Labour Party (ULP) in Sion Hill Saturday night, that his government has actually strengthened the position of the BLA.
“We gave relief and tell them we will wipe off all the debt, just pay us $6 million so that you can clean up your balance sheet. And therefore, by doing so, we have strengthened Building & Loan equity position for them to go forward,” Gonsalves said.
“You ever see a thing like that?” said Gonsalves, who is also Minister of Legal Affairs, adding, “And, under the law, I have the authority to take to Cabinet to waive such payments.
“Is what money they owe us, you know. I tell them just give us six million out of the 17 million or thereabout you owe us to clear it off.”
But Gonsalves expressed concern that the write off will trigger similar requests by other indigenous financial institution, such as the St. Vincent Co-operative Bank.
“In fact, one of the things that I worry about is that other banks and like St. Vincent Co-op Bank will come and say, ‘Well, you give Building & Loan a bligh. What about me? Gi mi a bligh too. As Minister of Finance, that is what I worry about — not the nonsense that Eustace talking.
“But I had to tell the other banks, Building & Loan went through a difficult period, but now, Building & Loan made over the last two years three million and six million in operational profit.
“We took them out of the hole through the Financial Services Authority after Eustace friends — Eustace has a lot of friends who was involved in the Building & Loan — after they run it down to the dogs and we have to save it.”
Gonsalves said John Horne, a former minister under the NDP administration, and others had accused his government of intervening to access the BLA’s money.
“I say, want Building & Loan money and I organise a government guarantee credit of $15 million from the Central Bank for them, to help float them and that we say if you give us some equity, we could give you the entire wipe off of the taxes which you owe.”
Gonsalves said that his government did not introduce the 1 per cent interest levy, which came into effect under the Labour Party, but was halved under the NDP administration.
“And then, when it is reduced to half of one per cent, it is now a tax expense, which means that for every dollar they pay for the interest levy, they will get a relief of 32.5 per cent of it — 32.5 cents out of every dollar.
“So, in addition to all of that, when we saw the balance sheet, we say leh we clean it up, and we are helping the people inBuilding & Loan by giving a great write-off and saying instead of paying us all the money you owe us, just pay us this small portion and we forgive the rest. That is what happened. But it is something gone wrong in Eustace brain. I tell you, the man slowing down. The man don’t understand the simplest things…” Gonsalves said.