20. On-lending

Subject to the provisions of this Act, the Minister shall have the sole authority to on-lend Government funds to a Provincial Council, local authority, State owned enterprise or any other entity:

The on-lending funds in respect of obligations of any other entity other than Provincial Councils, local authorities or State owned enterprises shall be further subject to the approval of Parliament.

Where the borrower is deemed to be in financial difficulty, based on the credit risk assessment the on-lending transaction shall not take place.

Prior to submitting the on-lending of Government funds to the Cabinet of Ministers for its approval, the Office shall, assess and price the credit risk to the Government in providing such loan and recommend the level of interest rate to cover the funding cost, any currency risk and the credit risk to the Government.

The result of the risk assessment, the method used in the assessment and the proposed interest rate shall be submitted to the Cabinet of Ministers for its approval.

The borrower shall pay an interest at the rate as approved by the Cabinet of Ministers on the recommendation of the Office that covers the funding cost, currency risk and the credit risk to the Government.

Each on-lending transaction shall be supported by relevant legal documentation executed by the borrower and shall include an agreement to service its debt obligations on due dates and other terms and conditions including a clause on penal interest in the event the borrower neglects or fails to honour any payment obligations.