Story by Chevon Campbell and Kalilah Enriquez
The International Monetary Fund, IMF is fully endorsing the move by the Jamaican government to buy back its PetroCaribe debt.
At a press briefing in Washington DC yesterday, the IMF’s Communications Director, Gerry Rice, said the buyback is an important step in reducing the country’s public debt.
Two billion US dollars!
That’s how much the Jamaican government was able to raise on the international capital markets yesterday.
It’s the biggest bond issue in Jamaica’s history, dwarfing last year’s impressive 800-million US dollar deal.
The bulk of that amount, some 1-point-5 billion dollars, is to be used to buy back the country’s Petrocaribe debt with Venezuela at a steep discount.
The debt is now close to 3-billion dollars.
The deal is projected to lower Jamaica’s debt-to-GDP ratio by more than 10%, the equivalent of the last two years of austerity under the IMF.
IMF Communications Director Gerry Rice says it’s a step in the right direction.
The deal has been months in the making.
The Jamaican government, led by Finance Minister Dr. Peter Phillips, had shopped the bond offer to investors in America and Europe during a road show last month.
But talks of a buyback emerged in January, after the Dominican Republic successfully purchased its PetroCaribe debt for less than half price.
Dr. Phillips has not yet said what the remaining 500-million US dollars raised will be used for.
But the IMF is pleased.
Rice is crediting Jamaica’s implementation of the Economic Reform Programme, for the country’s ability to access the funds on the international capital markets.
Meanwhile, the Managing Director at a leading investment bank is calling the deal one of Jamaica’s finest moments.
Gregory Fisher is Co-Head of Institutional Emerging Markets Fixed Income Sales at Oppenheimer and Company.
Gregory Fisher says the strong demand for Jamaica’s bonds shows that the country continues to have strong international support.
He says it will possibly result in a ratings upgrade for Jamaica.
Of the 2-billion dollars raised, 1-point-35 billion is on a coupon maturing in 2028.
That carries an interest rate of 6-point-7-5 percent.
The other coupon, for 650-million US dollars, doesn’t mature until 2045.
Interest on that one is 7-point-875 percent.
Fisher says Jamaican bonds usually mature after 10 years.
Last year’s 800-million US dollar euro-bond matures in 2025.
Despite this, the question many are now asking, is how much will this deal benefit Jamaica in real terms.
Petrocaribe loans carry very low interest, between 1 and 2 percent.
But the new bonds range between 6 and 8 percent.
Fisher says he expects that when the numbers are crunched, it will be a significant benefit.