The House of Representatives today met in its first regular sessions after a summer recess and at the top of the agenda was a motion to secure a bail out bond for a cash strapped central government. Here's how that went.
Keith Swift Reporting,
As they headed to the first business session of the National Assembly after the G7 split and subsequent reconciliation in August, the deeply riven PUP gave none of that away as the 21 People’s United Party representatives walked over from the Administration building to the National Assembly in a quite contented group, even if the Prime Minister did want to know who was catching the scene
Hon. Said Musa,
“And who do you work for?”
Luis Munoz, 7NEWS Cameraman
“7.”
Hon. Said Musa,
“7. Okay.”
And with that okay, the PUP headed into the House for another blistering session of interrogation, exposure, and somewhere in their, the nuts and bolts of governance, which was today centered on approving a $100 million bond for debt reconsolidation.
Hon. Said Musa,
“Madam Speaker we propose to issue certain debt securities up to a US$100 million through the RBTT Merchant Bank Limited. The proceeds will be used to refinance approximately US$65 million in the mortgage backed securities of the DFC and the balance will be used to refinance other existing commercial obligations of the public sector.”
Hon. John Saldivar, Cayo South Area Rep.
“After the Honorable Prime Minister has sought the advice of the IMF, the IMF has responded after seeing the term sheet prepared by RBTT Merchant Bank Limited and said it is not proposing or it is not recommending that the Government of Belize continue with this refinancing. The IMF has said for instance that the spread on the bond is considerably higher than the spread on Belize’s 2015 bond which it currently has. The spread is also higher than the spread on bonds issued by countries such as Indonesia, Lebanon, and Venezuela. And the reason they have used these countries is because these countries have a similar credit rating to the credit rating which Belize currently enjoys.”
“And the question then has to be why is it that our government is proposing to this honorable house that we approve a financial arrangement or a financing agreement that is going to cost the government and the people of Belize in excess of what other countries of similar credit ratings have paid. Madam Speaker, the terms proposed by the government side talks about an arrangement where the persons who purchase these bonds can actually renege on them after a period of time.”
“I have to ask the question why it is that this government only a week or two ago went to the IMF for their advice and after getting that advice have now decided to not listen to the advice that’s being given by the IMF.”
Hon. Said Musa,
“In all the circumstances, based on the prevailing global economic environment, and in lieu of and in the light of our present debt structure these loans should be pursued, or these bonds as he calls them, at this time and I so move that we move ahead.”
And without another word paid to the IMF’s cautionary note, government moved to consolidate its debt with that bond offering and another refinancing deal with the International Bank of Miami.
While the Prime Minister and Saldivar debated the $100 million fixed rate bond from the Royal Merchant Bank of Trinidad and Tobago, government also approved, a $40 million loan facility to refinance from the International Bank of Miami. Interestingly, government has changed its position on the $100 million bond. Originally, it had said $65 million would be used for refinancing and the remaining $35 million would be used for Capital II projects. But with the Cap II freeze, everything is now going to debt re-profiling.
As Saldivar alluded to in the meeting, the IMF had cautioned government against the terms of the $100 million bond. 7NEWS has obtained a confidential notice to GOB prepared by the International capital markets department of the IMF. It warns that, "The characteristics of this bond do not seem particularly advantageous." It goes on to point out many disadvantageous conditions in the term sheet. The IMF analysts concluded that GOB could save US$1.3 million in up-front fees, and US$2 million in annual interest payments if Belize was getting the rates afforded to a country with our credit rating.
This advice either came too late or was just flatly refused. Of course, there'll be plenty of time to discuss it on Monday when the IMF team hits the ground.