The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

The Government is placing $205 million in debt financing within a 16-day period prior to the credit rating agencies’ arrival in Nassau before July’s end.

The Minnis administration is today launching a $75 million Bahamas Government Registered Stock (BGRS) issue, with the Minister of Finance yesterday confirming it marks the start of 2017-2018 fiscal year borrowing.

The issue, which is due to close on Wednesday, July 12, follows swiftly behind a $130 million Treasury Bill offering which the Central Bank has confirmed was fully placed.

Capital markets sources yesterday told Tribune Business not to read too much into the timing of both issues, explaining that the Treasury Bills - which are short-term government paper, typically maturing by 90 days - were effectively a ‘rollover’ or refinancing of existing debt.

They added that the BGRS issue, which is divided into five tranches, each with its own maturity (principal repayment) date, is also part of the Central Bank’s efforts to establish a yield curve for long-term government bond offerings.

“It’s government borrowing, but is also part of this yield curve initiative,” one source, speaking on condition of anonymity, said. “If you notice, this five-year BGRS has three, five, seven, 10 and 20-year maturities. The Central Bank has been releasing bonds in different spots to establish a yield curve, which is important for the economy.”

This, together with the Central Bank’s efforts to create secondary BGRS market, are part of an initiative to build a more market-driven pricing and issuing mechanism for longer term government debt.

The 20-year portion of the latest BRGS accounts for two-thirds, or $50 million, of the offering. It also carries the highest interest coupon of 5.2 per cent to compensate investors for both the risk they are taking and for locking up their money for two decades.

The BGRS offering document, though, notes that the national debt breached the $7 billion mark before year-end 2016 - emphasising how much work the Government has to do, with the arrival of Moody’s and Standard & Poor’s (S&P) imminent.

“They should be here by the end of the month,” K P Turnquest, minister of finance, told Tribune Business of their annual visits. With Moody’s, in particular, spooked by the new administration’s $722 million borrowing and higher-than-expected $500 million deficit for 2016-2017, confirmation that the national debt will not be far off $8 billion by end-June 2018 is further unwelcome news.

Mr Turnquest said the Minnis administration would seek to persuade the rating agencies that there had been a change in the Bahamas, and that it would execute on fiscal consolidation unlike its predecessor.

“It’s incumbent upon us, and necessary for us, to be able to convey a positive message, and one that is grounded on concrete beliefs such that we are real with our assessment and, at the same time, persuade them on the initiative we plan to take to grow the economy, rein in expenditure and improve revenue yield,” the Minister of Finance told Tribune Business.

“We’re fairly confident about all of those areas based upon what we’ve discussed thus far, and initiatives ongoing in the Ministry. I am hopeful we will be able to convince the agencies we are a different administration with different policies on how to grow the economy and deal with the debt situation.

“Hopefully they will give us an opportunity to do that, and not judge us by the past performance over the last five years.”

Mr Turnquest conceded that the Bahamas would not be able to escape its fiscal crisis “overnight”. He added: “We are confident we are beginning to arrest the situation, and hopefully will be able to chart a course to recovery.

“This is not easy work, this is not overnight work, but we believe the policies and processes we are putting in place are going to result in better fiscal discipline and better fiscal results at the end of 2017-2018.”