Jamaica's Finance Minister Fayval Williams Touts Responsible Government Spending In Budget Speech But Defends Vinci's High-Interest Rate Water Contract
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Jamaica’s Finance Minister Fayval Williams kept touting her government’s fiscal discipline during her March 11 budget speech. She said “we are a responsible government” three times to drive home the point.
But that mantra went out the door as she proudly defended greenlighting a 15.16% weighted average fixed interest rate for the Rio Cobre Water Treatment Plant at a time of declining interest rates that caused the project’s cost to balloon from US$76 million (J$12.22 billion) in November 2022 to US$92 million (J$14.75 billion) as of December 2024.
The surge in interest rate was first reported by 18⁰ North last month.
The project is a public-private partnership (PPP) between the state-owned National Water Commission (NWC) and a private consortium operating as Rio Cobre Water Limited (RCWL) that’s led by a local subsidiary of French construction giant Vinci Group.
While technically structured to keep the debt off the government’s books, critics argue the cost could still end up being borne by Jamaican taxpayers.
Despite that possibility, Williams brushed aside those concerns and stridently proclaimed during her budget presentation, “I will defend this project anytime.”
She said in a few years when water is needed as the population in Kingston & St. Andrew and Portmore grows, it’ll be “water versus no water,” not “high versus low interest rate.”
Video: Fayval Williams defends high-interest rate water project during her budget speech March 11.
Experts Sound the Alarm
But economist Donovan Dowie, who has consulted in the water sector, said, “That makes no sense” because “the water is not being delivered for free.”
He said Williams’ job as finance minister is to make the water as cheap as possible so it can be a productive input to the economy.
Even Darlene Morrison, the top technocrat in Williams’ own finance ministry, flagged the increase in interest rate from 9.5% to 15.16% as “exorbitant” in a letter in December, warning that the new terms would add pressure to NWC’s “already-strained cash resources.”
The new terms also require the maintenance of an escrow account to cover six months of debt payments, which, together with the higher interest rate, means the NWC’s monthly capital cost payments tied to the project will now be nearly J$100 million (US$625,000) more than before.
What About the Bidding Process?
Even more concerning is that there appears to have been no competitive bidding for this multibillion-dollar contract — a deviation from standard public procurement and PPP guidelines.
At the groundbreaking of the project in March 2024, Prime Minister Andrew Holness, who is also the minister responsible for water, revealed that from 2009 when NWC submitted its plan for the project, “the submission was approved and authorized the NWC to enter into contract with Vinci Construction Grand Projects.” However, he said it was delayed after his party lost the election in 2011. He implied it only regained traction in 2016 upon his party’s return to office.
The Office of Utilities Regulation (OUR), NWC’s regulator, told 18⁰ North that in 2017, when it first heard about the project, it had indicated a preference for competitive bidding, but said the decision was out of its hands.
The Ministry of Finance’s guidelines generally require open bidding for contracts unless exceptions apply — and it’s not clear which exception would have applied in this case.
The government’s published guidelines on establishing PPPs also call for a bidding process, which is subject to Cabinet approval. But a request from 18⁰ North to know whether Cabinet had approved the project was denied on the basis that Cabinet decisions are exempt from disclosure.
The NWC didn’t respond to inquiries about the process and also denied a request under the Access To Information Act for a copy of the PPP agreement that was signed in 2022 between RCWL and NWC. The reason given was that it contains commercially-sensitive information, which is exempt under the law. 18⁰ North has since requested a review of that decision.
Asked at a February 26 post-Cabinet press briefing to confirm whether there was a competitive process, Minister Matthew Samuda, who shares responsibility for the water sector with Prime Minister Holness, was quick to point out that a local competitive process for financing had been done after the 2022 contract was signed but that effort largely failed, forcing the consortium to seek financing internationally.
However, when pinned down on specifically whether Vinci was awarded the contract without a competitive tender, Samuda, who was with the ministry in November 2022 when the contract signing took place, was more vague: “Vinci is the largest infrastructure developer in the world. They are well known to have particular competencies in water systems.” He said he couldn’t speak to the evaluation of 2009 “as it predates me.”
Video: Minister Matthew Samuda answering questions from 18⁰ North about the Rio Cobre Water Treatment Plant project at a post-Cabinet press briefing on Feb. 26, 2025.
But Dowie wasn’t buying that answer since there are other qualified water contractors around the world.
“Can someone do it better than these people? You don’t know. Suppose someone can do it for half the price? You don’t know.”
Furthermore, he says, contractor selection typically includes evaluating their ability to secure financing upfront. In this case, however, it appears there was an effort to find financing after approval. If financing had really been in place, he questioned, “How can the interest rate move from A to B?”
Neither Minister Samuda, Minister Williams, Prime Minister Holness nor a representative from Vinci answered that question sent by email.
However, the OUR did say the previous 9.5% interest rate loan secured by RCWL was in US dollars and this one was in Jamaican currency, which would eliminate the foreign exchange risk.
Market Comparisons: 15% Too High?
Even so, Dowie notes that the 15.16% interest rate over a 22-year term is out of line with the market. Other recent private-sector or quasi-government deals denominated in Jamaican dollars have secured financing at 10% or less, even for terms of 15 years or more.
And although this debt isn't officially on the government’s books because RCWL has assumed the debt, the project’s cost will affect how much the NWC pays RCWL for the water, according to Williams’ December 2024 approval letter, which is why the project needed the finance ministry's approval in the first place.
Despite assurances from Samuda that the project won’t spillover to consumers “in any major way,” Dowie disagreed, saying, “YES,” higher rates will come because of this project, even if not right away.
The OUR also told 18⁰ North that unless the NWC is able to “significantly reduce” its non-revenue water rate in the supply area “this poses a risk for higher rates.”
For decades, this non-revenue water rate has hovered at around 70%, which means most of the water NWC produces is lost due to issues like leaks and theft and therefore isn’t sold. However, the OUR says, in recent years the NWC has made progress on reducing that rate to the desired mid-40% range in some of the supply area, and if it continues this trend, the Rio Cobre project could be viable.
But even if the project succeeds in being able to sell most of the expected additional 15 million gallons of water per day, the steep borrowing costs will mean less financial benefit—doing little to ease NWC’s chronic dependence on government subsidies because of losses. A 2021 Gleaner editorial said, save and except one year, the NWC had lost money for 15 years.
In her budget speech for the upcoming 2025-2026 year, Williams confirmed that a grant of J$10 billion (US$63.8 million) will be allocated to the NWC for other capital projects. She failed to mention, however, that part of the reason this allocation was necessary is that the NWC is set to lose J$1.9 billion (US$12 million) in the same fiscal year.
Political Finger-Pointing
Both this government and previous ones have presided over NWC’s losses.
Seemingly in a bid to also share blame for the process around the Rio Cobre project, Samuda emphasized at the post-Cabinet press briefing on February 26 that “both administrations” had no difficulty with Vinci’s proposal.
But while the former People’s National Party (PNP) minister for water, Robert Pickersgill, said he couldn’t recall, former junior minister, Ian Hayles, said when asked if his then government had agreed that Vinci should be the sole-source contractor for the project, “I’m almost 100% sure that nutt’n no go suh.” He conceded, however, that due to budget constraints tied to the agreement with the International Monetary Fund at the time to get the country’s debt under control, certain projects “had to be shelved.”
Rhetoric versus Reality
The Holness-led administration has continued Jamaica’s program of fiscal discipline, and has been able to further cut the country’s debt-to-GDP ratio from around 123% when it took over from the PNP in 2016 to below 70% in the last fiscal year. (It was over 140% in 2012 when the PNP came to power.)
But after such hard-won gains, Minister Williams’ recent approval of a 15.16% interest rate for this Rio Cobre water project, without clear evidence of competitive bidding, now calls into question whether fiscal responsibility is still a guiding policy of the government or just a political line?
“The people are going to have to pay back for it anyway,” Dowie maintains.
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Editor’s Notes
The exchange rate used for the first reference to the project cost being US$76 million (J$12.22 billion) in November 2022 and US$92 million (J$14.75 billion) in December 2024 was based on conversions in Samuda’s letter in December 2024. Otherwise, the exchange rate used for other conversions was 156.81, the average sell rate on the Bank of Jamaica’s website for Dec. 2024.
ChatGPT helped with editing.
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