Okay.
Mr. Massé.
Evidence of meeting #184 for Finance in the 42nd Parliament, 1st Session. (The original version is on Parliament’s site, as are the minutes.) The winning word was proposed.
A recording is available from Parliament.
Evidence of meeting #184 for Finance in the 42nd Parliament, 1st Session. (The original version is on Parliament’s site, as are the minutes.) The winning word was proposed.
A recording is available from Parliament.
Liberal
Rémi Massé Liberal Avignon—La Mitis—Matane—Matapédia, QC
Thank you, Mr. Chair.
This is my first appearance at the Standing Committee on Finance. I hope my questions will be appropriate.
Regarding the proposed amendment, Mr. Lusignan mentioned that we would be granting sovereign loans to developing countries through new programs, on condition that those loans be guaranteed by the governments of these foreign states. Perhaps it was a translation error. If we grant a loan to a state, and if that state has to guarantee that loan, how does that work? Maybe I misunderstood.
Director General, Grants and contributions Management, Department of Foreign Affairs and International Trade (International Trade)
Allow me to clarify that. Canada may grant a loan, either directly to the foreign government, or to an entity in the other country, or in the context of a project in that other country that is guaranteed by the foreign government, and on condition that that country will benefit.
Liberal
Rémi Massé Liberal Avignon—La Mitis—Matane—Matapédia, QC
What I understand is that this mechanism did not exist before. To support a project abroad, we could not grant this type of loan or guarantee before.
Director General, Grants and contributions Management, Department of Foreign Affairs and International Trade (International Trade)
Indeed. The department's current powers are limited to non-refundable subsidies and contributions. That mechanism will thus apply to projects that are not sufficiently commercially viable. This will allow us to mobilize capital. Moreover, this has the advantage of making it possible to redirect direct aid amounts or subsidies to other projects.
Liberal
The Chair Liberal Wayne Easter
Are there any other questions?
We'll have Ms. Rudd, Mr. Kmiec and then Mr. Julian.
Ms. Rudd.
Northumberland—Peterborough South, Lib.
This is in terms of the thinking behind this. Is it the anticipation that this makes money available to provide supports for developing countries? Is there “more bang for your buck”, if I can use that expression?
It actually extends the amount of projects and the amount of opportunities we have to support those countries because loans are repaid. I assume the loans go back into that fund. Is that correct?
Director General, Grants and contributions Management, Department of Foreign Affairs and International Trade (International Trade)
They don't go back into the fund. They return to the fiscal framework.
Michelle Kaminski Director, Office of Innovative Finance, Grants and Contributions Management, Department of Foreign Affairs, Trade and Development
On this point I would add that the authorities are limited to the envelopes. These new authorities are limited to the sovereign loans program as well as the international assistance innovation program as opposed to across Global Affairs Canada's development programming.
Northumberland—Peterborough South, Lib.
Okay.
What are those envelopes? How much are they each?
Director, Office of Innovative Finance, Grants and Contributions Management, Department of Foreign Affairs, Trade and Development
Over the five-year period for the international assistance innovation program, the cash profile is $873.4 million. For the sovereign loans pilot program, it's $626.6 million.
Conservative
Tom Kmiec Conservative Calgary Shepard, AB
Under proposed subsection 6(2), the Service Fees Act doesn't apply. Can I get an explanation of why it doesn't apply? Why isn't it effective in this case?
Chantal Larocque Deputy Director, Development Finance, Grants and Contributions Financial Policy, Foreign Affairs Canada
First, it is not certain that these are service fees as defined in the law, because these fees do not cover our internal costs for the provision of those services, but rather the anticipated losses resulting from the guarantee. For that reason, those fees will be applied in keeping with the loss, on a case-by-case basis. This could not apply to a complaint mechanism in the law, nor to a consumer price index update applied without consultation on the rates. This would apply very specifically to anticipated losses resulting from the guarantee.
Conservative
Tom Kmiec Conservative Calgary Shepard, AB
The issue of fees and interest is raised in section 6(1) of the International Financial Assistance Act, which says that “the competent minister may charge fees and interest as determined under the regulations.”
Section 6(2) states, however, that “the Service Fees Act does not apply to any fees or interest referred to in subsection (1)”.
Is that because they are donations to foreign organizations? Is it because it is not clear that those amounts could be recovered? Is it because this donation or guarantee does not include fees to be recovered? If so, I want to know why it is worded that way, namely, that it can apply, but not as provided in the Service Fees Act.
Deputy Director, Development Finance, Grants and Contributions Financial Policy, Foreign Affairs Canada
The full text of section 6(1) is as follows:
The competent minister may charge fees and interest as determined under the regulations for the purposes of sections 3 and 4.
That's right. That means that fees can be charged. That said, the only fees we expect are those resulting from anticipated losses on guarantees, which are not covered in practice by the provisions of the Service Fees Act.
Deputy Director, Development Finance, Grants and Contributions Financial Policy, Foreign Affairs Canada
You're welcome.
NDP
Peter Julian NDP New Westminster—Burnaby, BC
We are really talking about increasing development partnerships with the private sector, and that seems to be the basis for the approach taken in the bill. The goal is to increase private sector investments, but at the same time, as I understand it, the bill does not refer to limiting profits. It refers to the private sector, but not to limiting potential profits.
Unless I am mistaken, that represents a change in direction for our international assistance, does it not?
Director, Office of Innovative Finance, Grants and Contributions Management, Department of Foreign Affairs, Trade and Development
Thank you.
The objective, as you note, in particular for the international assistance innovation program, is to mobilize additional financing in support of sustainable development. What we would be doing through this is providing risk-absorbing capital to catalyze private sector investments that would otherwise not take place. The intention is not to necessarily enrich the private sector. Of course, there will be profits, but when we provide this funding, we will be applying blended finance principles, which include, for example, ensuring that the funding is additional and is not displacing private sector resources, assuring that the amount of concessionality provided to catalyze this private sector investment is the minimum amount necessary.
This, of course, contrasts with what we currently do, which is that, as Mark was saying, we provide grants for everything. Now what we're trying to do is expand our tool kit to allow us to tailor the type of assistance we provide to be appropriate to the particular instances—the capacity of recipients and also their needs.
Liberal
The Chair Liberal Wayne Easter
Just on that point, related to what Peter asked, is the private sector money guaranteed? Is the Government of Canada obligated to repay the private sector if the loan goes into default?