The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

A senior accountant yesterday said the 6 per cent interest rate attached to the Government's $750 million bond showed the Bahamas is "holding our own".

Gowon Bowe, the Bahamas Institute of Chartered Accountants (BICA) president, told Tribune Business this nation could "take greater comfort" from the cost of its latest sovereign debt raising as opposed to the fact 'investor indications' were near-four times' the principal amount. "What we should take comfort in is that we were able to price it relatively cheaply at 6 per cent, given that US interest rates are increasing," he said. "It's not about investor appetite; it's about the rate.

"I think we should temper this with a very realistic understanding of international capital markets versus Bahamian capital markets. Internationally, as long as as it's priced right relative to the risk it will be taken up."

Mr Bowe continued: "What we should take comfort in is we didn't have to excessively price it. US interest rates have increased by 100 basis points in 15 months, so really 6 per cent is not a bad price given that we were at 5 per cent before this raising.

"It indicates we are holding our own. We're not cheapening our debt, but certainly not increasing it."

The BICA president said the $750 million bond's successful placement suggested that the international capital markets were more bullish on the Bahamas' growth and fiscal consolidation prospects than the rating agencies, one of whom, Standard & Poor's (S&P), downgraded this nation to 'junk' status at Christmas 2016.

Moody's almost followed its counterpart this summer, but Mr Bowe said: "If you take away the rating agencies there's still a tremendous amount of interest being expressed in the Bahamas.

"That's indicative of an economy still attractive to foreign investors. I'd like to see Bahamians take greater advantage of it as opposed to letting international investors prosper from our resources."

Still, Mr Bowe suggested that "there needs to be more information given" as to why the Government felt it necessary to tap the international capital markets for its $750 million bond when some $1.7 billion in excess liquidity exists in the Bahamian commercial banking system.

"That could come from a balance of payments deficit we may be running," he said. "It may be in terms of what they consider to be liquidity in the system and the ability of local investors to take it up. When you look at banks being the largest purchasers of that funding, if we're challenged with banks being at the upper limits of their holdings, could they have looked to the local market?

"There are a number of matters that could be settled in a timely document setting out the strategy and how we ensure revenues are strong enough to repay this in nine-10 years' time."

Backing the Government's intention to create a US dollar 'sinking fund' in the 2018-2019 Budget, so as to generate monies that will repay the $750 million bond, Mr Bowe suggested it open this to investments by Bahamas-based banks and other financial institutions.

Pointing out that "a picture is worth a thousand words", Mr Bowe suggested that the Government use simple maths tables to demonstrate the rationale and impact of such capital raisings, rather than trying to explain it in words.

He told Tribune Business that it should provide figures for indicators such as the Bahamas' total debt before, and after, the $750 million bond raise, together with ratios such as the percentage of national debt now denominated in foreign currency.

"I would encourage them to be a bit clearer using the reconciliation of certain financial numbers to articulate their point," the BICA president explained. "What they really should be striving for, and what we want, is understanding in financial matters and reporting from the Government.

"Often times words can be manipulated and cause confusion, intentionally or unintentionally, and don't provide the clarity that's needed. I think that [the use of maths] would be beneficial, especially if we're talking about accountability and transparency."