The Ministry of Finance published its first Annual Borrowing Plan (ABP) in keeping with new guidelines set by the Public Debt Management Act, 2021, passed by Parliament in March. The new legislation puts teeth behind the government’s commitment to fiscal accountability, and to increasing transparency and borrowing predictability in debt operations.
“Since the new law took effect on July 1, we set up the new Debt Management Office (DMO), which now has overall responsibility for the management of the government’s debt. We also published the first ABP, which is a key component of the government’s new debt management system,” said Kwasi Thompson, Minister of State for Finance.
“Our objective for public debt management is to provide for the government’s borrowing needs at the lowest cost, while maintaining prudent levels of risk and contributing to a well-functioning government domestic securities market. To better achieve these objectives, our debt management activities are going to be more transparent, moving forward. The publication of our medium-term debt management strategy every November and our annual borrowing plan every July will clearly articulate how we intend to eventually attain sustainability in our debt position,” said Minister Thompson.
The ABP outlines the projected borrowing needs of the government for the current financial year; the various categories of debt instruments to be issued by the government and the estimated nominal amounts under each category of debt instruments.
As part of the FY2021/22 budget exercise, Parliament approved a borrowing resolution for an estimated $1,851.6 million to cover the shortfall between the government’s projected revenue targets and its total expenditure and debt refinancing needs. During FY2021/22, the government will seek to maximize domestic fund raising activities, having regard to liquidity conditions and investor preferences. The plan is to also leverage strategic foreign currency borrowing opportunities, given the scale of the financing
required and the current domestic economic climate, although not with the explicit objective of supporting the countries’ external reserves.
“On an ongoing basis, we will assess domestic market conditions and investor sentiment to capitalize on opportunities for achieving a greater proportion of the financing from domestic sources,” said Minister Thompson. As it stands, approximately $892.4 million (48.2 percent) of borrowing needs will be sourced in Bahamian Dollars and the remaining $959.2 million (51.8 percent) in foreign currency.
Through the provision of a Fiscal Agency Agreement, the Central Bank of The Bahamas will continue to support debt management operations on behalf of the government. These activities include, with input from the DMO, issuances, buybacks, switches and redemption of bonds and Treasury bills, and publication of outcomes.