Rarawa on US$100B loan proposal - Solomon Star News

Rarawa on US$100B loan proposal

03 March 2020
Denton Rarawa.

FORMER Central Bank governor Denton Rarawa says the country will have problems repaying the US$100 billion loan the Government intends to borrow from a broker in China.

He made the comment during his remarks at a Talk-Back Show on the national broadcaster, Monday.

“It would be pure insanity if the loan is allowed to go ahead taking into account our country’s Gross Domestic Product status,” Rarawa stated.

Rarawa said the country’s economy generates around USD$1 billion in GDP. 

“Gross Domestic Product (GDP) is the monetary value of all finished goods and services made within a country during a specific period and is primarily used to gauge the health of a country's economy,” the former CBSI Governor explained. 

“GDP provides an economic snapshot of a country, used to estimate the size of an economy and growth rate,” he added. 

“With due consideration of our current GDP and the proposed USD$100 billion loan, there is evidently a huge mismatch that if not handled properly could haunt the Solomon Islands down the generations.”

Rarawa said whilst seeking a loan is a normal government policy action, the government must be mindful of the features attached to such an undertaking.

These include the terms of borrowing, maturity structure of the loan and most importantly whether the loan is on concessional or commercial terms.

He added that amongst the important considerations are costs of the borrowing and these include interest rates, fees, charges, commissions, and foreign exchange costs involve in the debt.

“Other considerations involve whether or not a grace period is given or whether the country is going to repay the debt straight after borrowing.”

Rarawa said that it is paramount that the source of debt is identifiable and known – that is to say, whether the funds are from a government overseas, a private firm or from an individual(s).

He said it is important to know the source(s) of the fund in order to avoid partaking in proceeds of criminal origin.

“This is of particular importance as money laundering and terrorism financing are major concerns worldwide. 

“This requires the government to be extra vigilant to avoid landing this country deeper into problems,” he said.