By NEIL HARTNELL:

Tribune Business Editor -

THE Bahamas is "unique" among its peers because of its relatively low level of foreign currency indebtedness, the minister of state for finance has told Tribune Business, adding that the recent $300 million sovereign bond issue had still left the Government's foreign debt at around $600 million - below 10 per cent of per annum GDP.

"Our level of foreign currency debt is less than 10 per cent of our GDP," the minister told Tribune Business subsequent to last week's $300 million sovereign bond issue, which was exclusively revealed by this newspaper.

"There is no objective analyst in the world who would regard that as problematic. The Bahamas stands as unique in that regard - that low level of foreign currency indebtedness. Our indebtedness, as a ratio of debt-to-GDP, remains a far cry from many in the developing world."

Mr Laing, responding to Opposition-led charges that last week's $300 million, US-dollar denominated sovereign bond issue showed the Government was "going on a spending spree" and saddling future Bahamian generations with an unsustainable debt burden, told Tribune Business that the end result was a "net $100 million increase" in the public debt load.

This was because some two-thirds, or $200 million, of the principal raised was being used to refinance - essentially, pay-off - a $200 million foreign currency bridging loan that the Government took out last year from a syndicate of Bahamas-based banks, when it realised the global recession might create some holes in the public finances.

The $300 million sovereign bond "now turns out an existing $200 million loan and adds $100 million to fund a planned deficit", Mr Laing said. "Once this is done, [foreign currency debt] will be of the order of $600 million."

Recalling the Government's other outstanding foreign currency debt, the minister said the former PLP government had issued its own $200 million US dollar-denominated foreign currency bond back in 2003.

Prior to that, the first Ingraham administration had left in place a $125 million syndicated loan with Bahamas-based commercial banks that the successor Christie government eventually drew down upon to minimise the impact of the September 11, 2001, terror attacks.

This had also been refinanced, while a further $100 million in foreign currency was borrowed in 2007-2008, Mr Laing said. The Central Bank of the Bahamas' statistics appear to support his position, as they show that the Government owed some $421.03 million to foreign creditors at the end of the 2009 second quarter.

Some $121 million of this debt consisted of foreign currency bank loans, with the remainder some $300 million in government securities or bonds. Thus the "net $100 million increase" in the Bahamas' foreign currency indebtedness will, based on that data, take the total to between $500-$600 million - in line with Mr Laing's figures.

The Government chose to issue the $300 million sovereign bond, priced at between 7-7.125 per cent with a 20-year maturity to 2030, in US dollars to ensure it did not draw down on local system liquidity - standing at $464 million at end-September 2009 - and crowd out the private sector.

The borrowings were also likely to provide a temporary boost to the Bahamas' foreign reserves, and the existing low level of foreign currency indebtedness, coupled with this nation's relatively strong credit rating and capital markets position, provided further compelling reasons.

"In the circumstances, it is a financing management arrangement that just makes sense," Mr Laing told Tribune Business. "We were pleased with the fact that investors responded so swiftly to the offering, and that the Bahamas had a unique story. If we had put out more, that would have sold, too. We were oversubscribed by $83 million."

November 23, 2009

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