The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

The government's revenues for the 2019-2020 fiscal year's final quarter dropped by "50 percent or so" compared to normal, the deputy prime minister said yesterday.

K Peter Turnquest, responding to a series of messaged Tribune Business questions, said the Public Treasury's income for the three months to end-June had maintained the same trend seen at the onset of the COVID-19 economic lockdown during end-March and April.

"Government revenues for the final quarter of the year based on preliminary numbers seem to be down about 50 percent or so. Numbers are still being finalised, however," he added, while confirming that the proceeds from the $252m International Monetary Fund (IMF) loan had helped to carry the Government to that year-end.

"The proceeds from the IMF facility were received days after it was approved by the IMF board," Mr Turnquest said. "It has been utilised to cover budgetary needs from the fiscal period just ended."

This means that the IMF loan covered the government's COVID-created fiscal holes, bridging the gap between sharply reduced income and government spending in the final weeks of the 2019-2020 fiscal year prior to the new budget and borrowing authorisations being approved by Parliament.

Mr Turnquest, meanwhile, said the market for the Bahamas' foreign currency-denominated debt appears to have "stabilised" with Moody's recent two-notch downgrade of the government's sovereign creditworthiness to so-called "junk" status having no impact on yields or spreads.

"The market for Bahamian bonds has stabilised, even after the Moody's release," the deputy prime minister told this newspaper. "They're now trading with a yield of 8 percent, down from the double digit yields of a month ago. The reopening of the tourism sector should lead to further moderation."

Given that Moody's had placed The Bahamas under "downgrade review" from early April 2020 as a result of COVID-19's fall-out, international capital markets will likely have priced-in the impact well ahead of the rating agency's June 25 confirmation.

However, the strength and timing of any tourism industry rebound will be critical to the price (debt servicing costs that Bahamian taxpayers will have to pay) when the Government goes out for the bulk of the foreign currency financing needed to cover its $1.3bn deficit and bolster the foreign currency reserves in late 2020.

"The Government is executing its financing plan and has already begun sourcing short and long-term facilities," Mr Turnquest told Tribune Business. "What is being considered for the late fall or early winter is the placement of the bond offering. But the Government will secure some financing well before then."

That latter financing will be critical to paying the Government's obligations, and covering any financial gaps, amid a July-November 2020 period when revenues are expected to be at their weakest as tourism and the wider economy slowly rebound.

The IMF recently estimated that its $252m loan, together with $180m and $50m provided by the Inter-American Development Bank (IDB) and Caribbean Development Bank (CDB), respectively, and $88m obtained from foreign lenders under a World Bank guarantee initiative, will cover some $570m - or nearly 60 percent - of The Bahamas' balance of payments financing needs. The remainder, or $442m of the total $1.012bn need during the 2020-2021 fiscal year, would come from the drawdown on existing foreign currency reserves.

Referring to the Government's deficit financing plans, the IMF added: "The increased fiscal needs will be financed by a combination of domestic and external debt issuance, as well as financial support from the Fund and other IFIs (international financial institutions).

"Despite the recent S&P downgrade by one notch to 'BB', The Bahamas is expected to continue to have access to international bond markets albeit at significantly higher rates than before. The authorities plan a long-term external bond issuance in fiscal year 2020-2021.

"They are also seeking two guarantees from the World Bank's Multilateral Investment Guarantee Agency (MIGA) for COVID-19 healthcare expenses and capital spending. The associated guaranteed commercial bank loans would have maturities exceeding five years. Discussions are ongoing with the Inter-American Development Bank (IDB) for new credit facilities amounting to $320m in fiscal year 2020-2021 for policy loans and investment loans, with maturities exceeding 20 years."

Mr Turnquest said yesterday: "We are still finalising the sums to be raised from the multilateral financial institutions. The related appropriations for these have been accommodated in the Budget just passed.

"The Government will soon sign the loans for the IDB Small Business loan facility, which is to be administered through the Small Business Development Centre, and the energy sector loan, which is to cover the ongoing resilient power reconstruction in selected Family Islands, and the early roll-out of commercial solar power."

The IDB's small business loan facility is for around $25m, while the energy sector loan facility totals around $170m. This was to be drawn down in three phases, with the first involving around $70-$80m.