The government has yet to finalize the terms of planned borrowing to fund the nearly $700 million deficit projected in the mid-year budget, Deputy Prime Minister and Minister of Finance Peter Turnquest disclosed yesterday.
Turnquest was answering an inquiry from Exumas and Ragged Island Member of Parliament Chester Cooper, who is also the Progressive Liberal Party’s shadow minister of finance.
During debate on supplementary borrowing and appropriations bills, Cooper asked if a projected $5.5 million increase in public debt servicing was an accurate reflection of what the government expects to pay on roughly $507 million in new borrowing and $80 million in debt refinancing.
Cooper asked for the rates and terms under which the $587 million will be borrowed.
However, Turnquest said those are yet to be determined.
“Obviously, we are in the process right now of getting approval to borrow these funds,” Turnquest said.
“We would not know right now what the final rate is until such time as we go out in a formal way to the market to determine what the rates are going to be.
“It’s probably going to be around five percent if we consider what we’ve been able to get in the bond market previously.
“But again, this is an estimation because we do not have the final indications yet of what the mix of the loans may be and what the fixed interest rates may end up being.
“So, we estimate what we consider to be a reasonable figure for the interest costs as a result of this additional borrowing.”
During the supplementary budget communication last month, Turnquest did give an indication as to where the funds would be raised and the potential interest rates of some of the borrowing.
He said $80 million would likely come from the credit line of the Inter-American Development Bank’s $100 million catastrophic contingency loan that carries is repaid at the London Inter-bank Offered Rate (LIBOR).
He also disclosed a $50 million loan from the Caribbean Development Bank would carry an interest rate of 4.8 percent over an eight-year repayment term.
He said another $200 million would come from a club loan from a consortium of domestic bank lenders.
He added that the remaining $177.9 million “will be sourced by way of other instruments”.
Turnquest indicated a list of all the loans and the terms would be forthcoming before the fiscal year ends.
“With respect to the listing of all of the debts that are outstanding – all of the bonds, of all the loans – that is included in the annual budget. It will be included in this annual budget,” he said.
As for the $80 million in treasury bills advanced from the Central Bank that the government is looking to convert to long-term debt, Turnquest said he doesn’t have details about what rate that would attract at this time.
“We have not engaged in the long-term refinancing yet, so there is no rate and there are no details to give him,” he said.
“We have said that we have $80 million of short-term loans that we want to convert to a long term. As soon as we have that information, it will be presented. In the upcoming annual budget, he will see exactly what has been converted to long term, what the tenor of that is and what the interest rate is. So, again, there is no mystery in that.”
Turnquest said the debt conversion is necessary to give the government “headroom” with the Central Bank to engage in short-term financing when necessary.
The supplementary resolutions passed in the House yesterday.