- Overview of the petrocaribe development fund
The PetroCaribe Development Fund (The Fund), is a body corporate created by the Government of Jamaica in December 2006 to manage the proceeds which accrue to Jamaica under the PetroCaribe Energy Cooperation Agreement through an Amendment to the Petroleum Act in 2006. Under the Agreement, the Government of Venezuela agreed to convert a portion of each payment due for petroleum products supplied to PetroJam Ltd., the state owned refinery, into a long term concessionary loan.
The amount financed from each invoice, the interest rate and the repayment period depend on the prevailing price of oil in the international market place. When the price of oil exceeds US$40 per barrel, between 30% and 70% of each invoice is financed and the loan is repaid over 25 years at 1% interest rate per annum. Below US$40, between 5% and 25% of each invoice would be financed over 17 years at a 2% interest rate per annum.
The inflows that accrue to Jamaica under the arrangement are managed by the Fund and are used to provide loan financing to the Ministry of Finance and Planning and self-financing public bodies for critical development projects. The Fund also maintains a portfolio of investments to enhance its overall returns and provide liquidity for GOJ debt servicing and operational expenses.
The strategic objective of The Fund is to utilize the available resources to promote the goals of the PetroCaribe Energy Cooperation Agreement which is to contribute to the country’s economic and social transformation. Its operations must be financially sustainable so as to ensure that the resources are available to service the debt obligations to Venezuela as they become due.
The resources of The Fund may be used for the following purposes:
- Upgrading of social and physical infrastructure
- Stimulating economic growth
- Supporting the development of human resources
- Supporting projects which promote the use of alternative source of energy
- Refinancing of public sector domestic debt
The Fund also operates a grant facility through which investments are made in projects and programmes which benefit the most vulnerable in the society and their communities. Resources for this aspect of its operations flow from the surplus generated by its loan financing and investing activities.
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