By NEIL HARTNELL
Tribune Business Editor
Listing $3bn in bonds on the Bahamas International Securities Exchange (BISX) links directly to plans for "more structure and rigour" in managing government debt, it was revealed yesterday.
K Peter Turnquest, deputy prime minister, told Tribune Business that listing all the government's outstanding medium and long-term debt securities on the exchange was part of a wider strategy to create a "more efficient" secondary market that better distributes wealth among more Bahamians.
Explaining that the listing of over 200 Bahamas Government Registered Stock (BGRS) issues will make these instruments more attractive to retail investors, Mr Turnquest said the move also ties in with the initiative to lower The Bahamas' debt servicing costs through more proactive management.
"We've been working on this project for over a year, and have finally arrived at that point where all the legislation and processes have allowed us to make this move," he told this newspaper. "It frees up some of the debt that is sitting with the Central Bank, and allows for participation by a broader sector of the public in these instruments.
"It gives us the opportunity to hopefully find a more efficient way to encourage a broader investment portfolio for the average Bahamian investor. It will support the advancement of BISX and hopefully free-up additional capital for investment purposes.
"I think it is a bold move. It is a creative step that we are taking, and it provides an opportunity for transparency in the market. It allows the Central Bank to divest some of the loans and government debt obligations they carry for us; the short-term loans."
Mr Turnquest said the legislative package intended to reform the government's debt management strategies is being targeted for completion by this fall, with the three Bills issued for public consultation before being taken to Cabinet for placing on Parliament's legislative agenda.
Confirming that the listing, and eventual trading, of government debt securities on BISX links directly to this initiative, he added: "We are actively working on debt management legislation to rationalise the way we deal with government debt, and to sustain it and make it more efficient, and hopefully lower the cost of debt.
"This [BISX listing] ties into the overall strategy of putting more strategy and rigour around debt management." Asked when the Bills would be ready for Parliament, Mr Turnquest replied: "Hopefully we can accomplish that in the fall; by the end of the year. The legislative process, agenda is still very packed. It all depends on how that works out."
The three Bills, namely the Public Financial Management (PFM) Bill, Public Debt Management Bill and Public Procurement Bill, are designed to completely revamp the existing Financial Administration and Audit Act.
Meanwhile, the 200-plus BGRS issues set for listing on BISX represent the entire portfolio of outstanding medium and long-term bonds issued by the Government since 1999. Once trading begins, Bahamians will be able to buy and sell government bonds via the exchange's secondary market and track the value of their investments. They will need to use a broker/dealer to trade.
"This will stimulate the entire Bahamian capital market, improve our financial market infrastructure and increase accessibility to government-backed investments for all Bahamians," said Mr Turnquest in a statement.
"This is another area where the Government is making good on its promise to modernise and keep pace with the digital transformation happening globally, and introduce more efficiency to the Government's borrowing.
"Centralised market trading of government bonds is an important component for the growth of the entire Bahamian capital market. It's been a long time in the making and I am proud that this government's leadership has helped to finally bring this project to fruition."
The listing, and eventual trading, of government debt on BISX is part of the Financial Markets Modernisation Project. This is a collaboration between the Ministry of Finance, the Central Bank of The Bahamas and BISX, and aims to create a centralised marketplace for all Bahamian dollar securities.
The project's phases include the listing of BGRS on BISX and the launch of a Bahamas Government Registered Stock Depository (BGSD), which will facilitate competitive bidding and other market improvements. There will be a transition to a paperless registry, involving the introduction of digital certificates for Government bonds, and electronic trading.
"With this modernisation of the country's financial market infrastructure, Bahamians will now have easy access to investment information and market activity on all Government bonds, and there will be transparency around the pricing of Government securities. Lastly, Bahamians will be able to see and have an opportunity to trade outstanding securities on an open market," said Mr Turnquest.
Andrew Strachan, BISX's chairman, added: "This is a very positive move on the part of the Government of The Bahamas, and we are grateful for their support of BISX. The listing of government securities was always a goal of the exchange and represents a momentous moment not just for the exchange but for the entire Bahamian capital markets."