It was hailed as the engine in the tremendous machine called growth economics, but now it is the albatross of ruin around a broke government's neck and today after years of increasing difficulties it took only 52 words to say "it's over" for the DFC.
Government sent out the news in a Cabinet brief this morning. It reads "on the recommendation of the Cabinet Finance Committee, Cabinet has agreed to liquidate the Development Finance Corporation. Arrangements will be made for the continuation of the student loans programme and the housing programme. The saleable assets and loan portfolio of DFC will be packaged and put out to tender for sale."
This amounts to the rebuttal of two major plans of government. First, that DFC's portfolio was to have been privatized, but because of the abysmal profile of this portfolio this effort failed to attract any credible buyers in the 15 months that it had been offered on the international market. Second, will never return to its core functions. This is another reversal of the position from the finance regime of past minister Fonseca who envisioned DFC as just over-extended and not insolvent and hoped that after the portfolio was sold, DFC could remain. But it will not and there will be no privatization. The loans and assets will be sold off for salvage prices and government will take over other investments and functions.
What about those who have housing and student loans with DFC? Well that is still unclear, but it is believed that those will now be administered by related government agencies. The good news is that those with cash at hand can probably buy out their loan for a fraction of its value. But the bigger issue is who will foot the bill for the collapse. By all accounts, it will be those same folks who've been paying to keep the DFC afloat, and those are taxpayers.
In that regard, the Opposition issued a release today warning that the liquidation could mean losses in excess of $50 million which, by the UDP's logic, could result in increased taxation to compensate for those losses. With that, the Opposition today called for an independent inquiry into the DFC's accounts.
And while there has been and will be a cost for taxpayers and government, there is also a cost for Social Security. When Social Security's loans and investment portfolio was published in July, it showed that DFC had defaulted on debt payments to Social Security for 13 months.