The Minister of Finance, K. Peter Turnquest, went to great lengths yesterday to explain the reason and rationale behind the latest borrowings of the government. The Minister was able to restructure  loans and get the interest rate reduced from six and a quarter to six per cent.

Addressing members of the House of Assembly, Mr. Turnquest said “there were pressing funding needs at the end of the past fiscal year and the outset of the current period, which placed an urgent requirement on policy makers to identify immediate funding sources to meet these obligations”.

“After evaluation of the funding options, the government move expeditiously to source several short-term bridging facilities, which included US dollar bank credits $450 million and domestic treasury bills and bank advances $300 million,” Mr. Turnquest said.

In his explanation, Mr. Turnquest added that these bridging facilities are in an effort to achieve a favourable profile.

“I want to emphasize that these facilities were always contemplated to be short-term in nature, with a subsequent “terming out”, i.e., length of the maturities to achieve a more favourable debt servicing profile.

“And, having considered conditions in the domestic market, and the number of significant rollovers contemplated, the intention was to explore the possibility of rolling up these short-term credits into an international bond issue,” Mr. Turnquest explained.

Mr. Turnquest further explained that the government does acknowledge the need to establish a fund to cover the cost of the new venture.

“The government is cognizant of the need to ensure that resources are available to meet its future debt service obligations, and intends to establish, during the next budget, a sinking fund to cover the principal payments arising from this new borrowing.

“This is part and parcel of our commitment to responsible fiscal practices,” Mr. Turnquest stated.

“We are extremely pleased with the outcome of this transaction. The positive response from investors confirms the market’s confidence in the government’s policy and initiatives for achieving sustainable fiscal outcomes and pursuing the necessary reforms to support growth of the Bahamian economy,” he said.

The bond offering totaled some $750 million at a rate of six percent and is the result of a successful five day road show, which took Mr. Turnquest, along with representatives from the Ministry of Finance to meet with current investors in government paper as well as potential new investors. The trip took the group to London, New York, Boston and Los Angeles.