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New Finance Chief: 'Do More With Less'

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

The newly-appointed Financial Secretary sees the Bahamas' strained finances as "an opportunity" rather than a challenge, as the Government borrowed a further US$250 million.

Marlon Johnson told Tribune Business that the syndicated loan taken out on September 14, 2017, was part of the total $722 million borrowing approved by Parliament to cover the forecast 2016-2017 and 2017-2018 deficits.

He declined to comment further on what appears to be a 12-month 'bridge financing' facility, based on the Ministry of Finance's press statement, or the remainder of the Minnis administration's borrowing plans.

While the Government is hoping its recently-announced austerity measures will slash the $722 million borrowing requirement, capital markets sources suggested last week's loan would ultimately be replaced by longer-term financing.

One financier, speaking on condition of anonymity, told Tribune Business that the Government was likely to go to the international capital markets for up to $500 million - or two-thirds - of its financing needs this fiscal year.

They suggested the Government had approached Royal Bank of Canada (RBC), its bankers, to help arrange a large foreign currency bond issue - something Mr Johnson said he "cannot deny or confirm" when Tribune Business raised the matter with him.

"The local market can only really support a small fraction of that," the financier said of the Government's borrowing requirements, "so the decision was made to go to the international markets for the bulk of it.

"The expectation was to raise up to $500 million on the international markets, and the balance - a couple hundred million - locally. There's just not the capacity here, and the banks, insurance companies and NIB to some extent have been tapped out and have no ability for further exposure."

The National Insurance Board (NIB), together with the banks and insurance companies, already have significant holdings of Bahamas Government Registered Stock (BGRS) and other public sector debt instruments. There are regulations and prudential norms that limit such holdings, preventing them from acquiring more government paper.

The US$250 million loan, which is priced at LIBOR (London Interbank Offer Rate) plus 3 per cent, was billed as helping "to meet capital and other budgetary requirements" of the Government during the 2017-2018 financial year. Interest payments are to be made every six months, with principal paid one year later.

The financier agreed that using foreign currency borrowing to finance the Government's deficits "is not ideal, but that kind of money is not available to them".

The proceeds from the $250 million loan will initially give a boost to the Bahamas' external reserves, which the International Monetary Fund (IMF) last week described as "below traditional adequacy benchmarks" in providing 2.4 months' worth of import coverage.

But, medium and long-term, the extra foreign currency borrowing will increase the drain on the external reserves to finance interest and debt payments.

Central Bank data showed that the Bahamas' total foreign currency debt was already $2.645 billion, or 29.3 per cent, of the total $7 billion-plus national debt at year-end 2016. This ratio is likely to increase as a result of the latest loan and the Government's financing plans.

Mr Johnson told Tribune Business that the Central Bank dealt primarily with the external reserves, but the Government's latest information indicated there were no issues with their coverage level.

"From all the information we have, there are no issues at all with the external reserve holdings," he said. "They're well within prudential norms. I can only confirm the reserves are healthy."

However, another financial analyst, also speaking on condition of anonymity, expressed concern about the Government's increased foreign currency borrowing.

"That's not good," they said. "They'll have to manage that carefully. I'm not happy about that."

Kenwood Kerr, Providence Advisors' chief executive, told Tribune Business that the $250 million facility's interest rate was cheaper than the Government would obtain in the domestic debt market.

He added that the loan would help "shore up" the external reserves, pointing out: "Reserves are expected to be called on during the rebuilding as a result of Hurricane Irma, coupled with Christmas season shopping and inventory build-up

"Also, while liquidity is generally available, credit criteria for the most part remains tight/rigid at the local commercial banks, and may impact consumers and, to some extent, Government's borrowing ability in local currency."

Mr Kerr said the Central Bank was also moving to reduce its exposure to government bonds, and added: "The key is that the new administration must stick to the plan to be prudent, and address all necessary debt obligations and not over spend."

Mr Johnson, meanwhile, said he was focused on implementing the Government's fiscal policy agenda, and providing mechanisms to help it achieve its objectives.

He told Tribune Business that the Minnis administration was "so far on track" with its bid to slash recurrent spending by 10 per cent 'across-the-board' this fiscal year, an initiative which Moody's is projecting as delivering $100 million in extra savings.

"We're working hard to put that policy provision in place," Mr Johnson said, "and we're working with all the Ministries to do our best to control expenditure growth."

Conceding that it was "a challenging job to hold the line on spending", the Financial Secretary said governments throughout the world were facing similar fiscal challenges to the Bahamas.

"The way I look at is not to look at it as a challenge, but as an opportunity to see how we can do better and see how we can get more out of what happens," he told this newspaper.

"We all have to take this as an opportunity to do more with less, and make sure we maximise the resources we have. That's the way to look at it positively; see what we can do better with what we have."

Comments

ThisIsOurs 2 months, 3 weeks ago

Does anyone remember Ishmael Lightbourne and how the entire country thought he was completely unsuitable for the post of VAT Czar, collecting large sums of money while he owed hundreds of thousands of dollars to creditors?

All I am saying is FNM supporters speak up while it's early, a different colour won't shield the country from persons in compromised positions who will use their post to benefit themselves or ease the pressure from their creditors.

That situation was a standard audit red flag, I wonder if the auditor general should have had an input.....

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Well_mudda_take_sic 2 months, 3 weeks ago

Marlon Johnson must be given the boot. Minnis made a colossal mistake in allowing Marlon to be appointed Financial Secretary.

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DDK 2 months, 3 weeks ago

"The proceeds from the $250 million loan will initially give a boost to the Bahamas' external reserves, which the International Monetary Fund (IMF) last week described as "below traditional adequacy benchmarks" in providing 2.4 months' worth of import coverage."

Have we yet been told how these monies are to be repaid or are we to assume we will have to relinquish further Bahamian assets when the loans cannot be repaid on a timely basis? I see no signs of curbing of spending on the part of either government officials or the civil service contingent, but the lack of expenditure for many public necessities and substandard public service continues unabated.

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BahamasForBahamians 2 months, 3 weeks ago

Our nation's finances is too important to risk a novice like Marlon Johnson in the financial secretary seat.

Lets all saddle up for this ride.

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CatIslandBoy 2 months, 3 weeks ago

Marlon Johnson is not a novice by any stretch of the imagination. He has worked alongside both former Financial Secretaries, and was well groomed for this position before leaving the Treasury for BTC. Stop wishing bad on the guy before he even get started. Ye know not of what ye speak!

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ThisIsOurs 2 months, 3 weeks ago

Actually... Many people know, if Dr Minnis doesn't we are in deep deep trouble. We just came out of five years with persons using the treasury as a personal piggy bank and contract handout haven. They said the next five years would be different...I really had to scratch my head when I heard the news and I came up with two options, Dr Minnis knows the details or he doesn't know the details, both options are equally ominous.

as an aside, would be interesting to hear what the financial secretaries would have to say about his "wealth of experience".

"groomed"-lol

Liking someone's personality and reviewing their suitability for a key role are two different things.

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CatIslandBoy 2 months, 3 weeks ago

I don't know Marlon Johnson personally, and have never engaged him in a conversation. However, as a Bahamian who keeps abreast of local upwardly mobile professional talent, I have paid very close attention to his work. Not only is he a policy wonk, but can stand shoulder to shoulder with any of the past financial secretaries. Academically, he is light years beyond most of them. The Treasury needs to go in a different direction, and I believe that Mr. Johnson is just the person to chart that course.

It is so sad that many of you chose to bash the good gentleman without even researching his background. That just seems to be the order of the day in the Bahamas. Because he doesn't have a household name, or the requisite political pedigree, he must not be up to the task? What backward thinking!

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ThisIsOurs 2 months, 3 weeks ago

This is not about personality Or political pedigree CatIsland. This is about the Bahamas. At this time in our history, the most important position in the country is the financial secretary, more so than the Minister. He runs the Ministry of Finance. He has control over 2 billion dollars. That position should have been filled by the best person available in the country. This is no time to "give anyone a chance", some people shouldn't have a chance. I am saying FNM supporters need to speak up and quickly. I don't know him either. FNM supporters need to speak up. If you want to give him a job find another slot for him, not FS.

Btw, I've also said I don't think KP should be there and I don't know him either.

There are some real funny goings on with these appointments. I'm starting to wonder what is the real objective. Is it really "a new Bahamas" or is it the same old Bahamas with better pictures and a new Marketing strategy. The other day Henfield said he had a meeting with Minnis and KP to speak about the Spy Bill, then he says, "I haven't read it, but I told them to let the GB Human Rights association review it". I'm not sure if many people picked up on thatp. Minnis appointed Henfield to the Senate. What is the only role of a Senator? "To review legislation as a final check before bills are passed". He sat in a meeting with the PM and the Deputy PM, told them he hadn't read a bill they were about to table and he knew someone who was more qualified to do his job. And he says "they listened". And he's still a senator.

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realfreethinker 2 months, 3 weeks ago

Thisisours you say KP and MJ are not suitable for their positions is based on what? and I have not seen you suggest suitable replacements. Why not?

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ThisIsOurs 2 months, 3 weeks ago

Here's what I consider minimum criteria for a person in that role managing issuance of contracts for ALL government business and with responsibility for. 2 billion dollar budget. (Btw, whatever happened to that JUNIOR employee Johnson fella who stole 0.5 million dollars, all by himself, from Ministry of Finance in six months anyway?)

  1. 7 years experience minimum functioning as an economist. As I'm not an economist I can't break down the specific skills an economist should possess, the interviewers should have the details or hire someone who does to conduct the interview

Background Due Diligence: 2. No instances of theft at prior jobs 3. No instances of misappropriation of funds at prior jobs 4. No instances of abuse of contracts awards system to the benefit your friends or yourself through shell companies at prior jobs 5.. Manageable personal debt levels 6. No webshops loans 7. No addictions, drugs, gambling, sex etc

Now I can't have that information, the only people who can get it are the persons offering the job with releases from the interviewee (unless you're one of the creditors and you take them to court). If the interviewee refuses to give the necessary releases, they're not suitable for the job.

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BahamasForBahamians 2 months, 3 weeks ago

Marlon was never in charge of the treasury at BTC, they never trusted him that much..

As a past Marketing Director with sales in his porfolio (at BTC) , Marlon has no experience in public finances.

His theoretic understanding through his studies has never been tested for practicality. Our nations finances is too great to gamble on Marlon in the FS seat!

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ThisIsOurs 2 months, 3 weeks ago

Gee you must have read my mind

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Well_mudda_take_sic 2 months, 3 weeks ago

You obviously know nothing about Marlon Johnson and all of the undesirable baggage he brings with him to the Financial Secretary post. When you think of Marlon Johnson, just think of Anthony Ferguson. Enough said.

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banker 2 months, 3 weeks ago

The fact that the $200 million is a syndicated loan speaks volumes. Back in the days of Hubigetty, the Royal Bank thought nothing of giving him $250 million. A syndicated loan means that the risk is such, that a single lender doesn't want to underwrite it because of risk of default. $200 million is pretty much peanuts to syndicate for someone like RBC, however our degradation to junk status makes them want to lay it off with partners. That means that we will be paying higher interest.

I am totally dismayed that Turnquest and Minnis have not put a moratorium on spending. I am dismayed that Minnis is moving so slowly with a situation that requires resolve and speed.Where is the transparency? Where is the FOI? Honeymoon is over. They need to get on with it.

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sheeprunner12 2 months, 3 weeks ago

Do more with less?????? When you have a $2 billion budget with 80% of it as personal emoluments??????? ......... How much more skinny can you get??? ........ Except - you cut the civil service by 20%?????? ......... Can government run efficiently if you cut 20% of its budget/workers?????? ........... That should be the issue ......... case in point: Is BTC better off now than before its pre-Cable & Wireless lay-off/sale????????

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ThisIsOurs 2 months, 3 weeks ago

General statement: As an aside, I wish companies would stop the practice of hiding people who either misappropriate funds by way of employment or use their positions to send business to their own shadow companies. There should be a section in every paper with names and position of shysters, yes a "National Shyster List". Because these people continue to move from job to job continuing their path of misconduct unbeknownst to their current employers.

People deserve second chances, but you must work your way there and re-earn trust along the way. This secrecy is doing so much damage to the country, these business believe they are maintaining their image and public trust by keeping silent, but they must also exist within the country where the people they allow to repeat their schemes over and over again.

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