While there is still high liquidity in the domestic market, the government will have to present a convincing sales pitch to Bahamian retail investors if it wants to achieve its domestic financing objectives this fiscal year, Chief Executive Officer of Fidelity Bank Gowon Bowe said yesterday.
The government is seeking to raise $1.7 billion in financing this fiscal year. It is seeking to source approximately $996.1 million in Bahamian dollars and around $764.7 million in foreign currency.
Traditionally, government debt has been a lynchpin of institutional investment in The Bahamas, but Bowe said the government may have exhausted that segment of the market over many years.
“The reality is that has already taken up a significant portion of the debt, and now it’s a circumstance of whether they can convince more retail customers to pool resources and extend lending to the government. It’s a partnership that has to be established, but there can’t be an arrogance to take the position that you are unpatriotic if you do not lend it. It has to be more that this is a worthwhile investment that you can see positive returns from,” Bowe told Guardian Business yesterday.
That’s not to say government securities are not performing well. The latest Treasury Bill Auction results for January 2023 shows that the majority of the total public offering of $286.9 million was subscribed; and just $37.5 million undersubscribed.
Additionally, in late 2022 The Central Bank of The Bahamas said it approved more than $200 million worth of investment transactions for local investors applying to invest in US dollar-dominated Bahamas government bonds, which were trading in the international capital markets.
Bowe said government debt securities remain a strong investment with an equally strong return. But he said the government’s success right now is in the hands of retail investors.
“I think what you are seeing domestically is, unfortunately, because government debt was such an attractive instrument, financial institutions, pension plans and the like already had high concentrations of government debt, because there was no real attractive alternative. But what that does mean is a limit on how much further those institutions are willing to go in terms of investment.
“There is significant excess liquidity in the domestic market, but that’s in the hands of the retail customer. Government really has the task of gaining the confidence from individuals like you and me, to say instead of having my money in a retirement policy or in a savings account, I am prepared to invest more into government securities,” Bowe said.
“It’s not as simple as saying there’s a lot of money in the system, because every individual has risk [considerations] and if the government takes an arrogant stance of the money is there so it should be lent if you are patriotic, that’s the wrong position to take. The government should be taking a more humble stance in terms of, if there is money there we believe we are a good investment because we’ll give a good return. We should be stable in our credit worthiness and more importantly this is how we’re going to employ it in a productive manner for the country. So, it’s a sales pitch on how to promote and advise on what is good for the country and the economy.”