Opposition: ‘Bad signal’ over $233m borrowing

As of Friday, January 6, 2023


#Tribune Business Reporter


#The Opposition’s leader yesterday warned that the Government’s “breach of law” in borrowing $233m worth of IMF special drawing rights (SDRs) from the Central Bank sends “a bad signal” to the international financial markets.

#Michael Pintard, returning to the attack on the issue, reiterated that the Free National Movement (FNM) was not opposed to the Government seeking out creative means to access low-cost foreign currency borrowing and save Bahamian taxpayers millions of dollars in interest costs.

#However, he again argued that such transactions must first have full legal standing under Bahamian law. This was not done in the case of the International Monetary Fund (IMF) SDRs, as both the Central Bank and Ministry of Finance have both confirmed that the former’s governing Act will now be amended retroactively to give the borrowing lawful basis.

#Mr Pintard argued that this admission sends a “bad signal to ratings agencies” and the wider international financial community, including The Bahamas’ lenders, creditors and holders of its external foreign currency debt.

#“It is absolutely important that the international community be able to trust the word of policymakers, and to the extent that we act in a manner that is ultra virus of the law – that is, a breach of the law – we then create a credibility issue, and what flows out of that is decisions are made in the credit market that are likely not to be favourable to us.”

#The Opposition has argued that, without the promised legal reforms, the IMF SDR transaction contravenes the Central Bank Act’s section 21. They are now demanding an accounting of how the funds will be used.

#The Ministry of Finance, in a previous statement on the matter, said that when the IMF’s SDRs were first issued in August 2021 it was made clear that they could be used for debt management and other fiscal purposes in the COVID-19 pandemic’s aftermath.

#Mr Pintard, though, described this as a “red herring” because the Ministry of Finance was speaking to what the funds could be used for rather than their actual use. “Quite frankly, this matter shouldn’t arise,” he added. “That money should really be returned, because that there is no basis for them having that in their possession.

#“In August 2021, the Central Bank released a press release that indicated the Bahamas’ SDR allocations are not being earmarked for lending to the government and do not increase the Central Bank’s ability to lend to the Government. The lending limits remain fixed by the law. This is the same law that the IMF has said to member countries like The Bahamas that you need to be compliant with your local laws as you treat with these SDRs.”


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