Foreign currency bond the most favorable arrangement, notes MOF

The almost nine percent cost of raising $600 million on the international market was what market forces dictated, The Ministry of Finance (MOF) stated in a press statement yesterday, adding that the government always seeks the most favorable arrangements for the country.

The MOF added in its statement that though there have been offers to raise the money in other ways and through other investors, many of those avenues have not stood up to scrutiny.

“The Ministry of Finance receives 15 to 20 offers every year, especially around post-budget time, offering very low interest rates to total debt forgiveness,” the statement noted.

“These offers are considered when the investors have track records and sufficient background information on which to do due diligence. Transparency is required regarding the sources of funding and proposed financing structures.

“Unfortunately, many offers are from middlemen with no money themselves. Despite advertised low interest rates, oftentimes their extraordinary upfront administrative and arrangement fees are not disclosed transparently and negate any rate savings they potentially bring.”

The MOF contended in its statement that the public can be confident that the government has made the decision to raise the $600 million in a “responsible manner” and in a way that “minimizes investment risks that might call into question the country’s fiscal integrity”.

The statement added: “Bahamian governments have a long-standing track record of engaging top tier investors and multilateral institutions for which we are shareholding members.

“Successive governments have been guided by the expertise of the Ministry of Finance, the Central Bank of The Bahamas (CBOB) and a number of other credible investment experts.”

Former CBOB Governor Julian Francis told Guardian Business yesterday that this country is deemed to be highly vulnerable and therefore should expect short-term borrowing to be much higher than more developed countries. 

“The major countries can still borrow money at very favorable interest rates, but countries which are similar to The Bahamas in their exposure to the economic ravages of this current environment, they have seen the perception of their credit worthiness drastically decline in the capital markets,” Francis said.

‘When you’re trying to raise $600 million dollars and you’re The Bahamas, you don’t have a lot of wiggle room. You have to move reasonably quickly, you have to decide on what it is you’re willing to pay based on the advice you get and then you go for it.”

The Ministry of Finance stated it will provide an update on the government’s borrowing activities at the next sitting of Parliament. It also encouraged Bahamians to provide feedback on the recently published Draft Public Debt Management Bill, 2020 on the Ministry of Finance’s website.

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Chester Robards

Chester Robards rejoined The Nassau Guardian in November 2017 as a senior business reporter. He has covered myriad topics and events for The Nassau Guardian. Education: Florida International University, BS in Journalism

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