BDS$ 150M hunt
Thursday February 24 2011 | 11:49 PM

Government is moving to raise $150 million to help finance a number developmental projects and lessen its dependence on foreign borrowing.

Last October Minister of Finance Chris Sinckler went to Parliament and got its approval to raise Government's local borrowing limit from $4 billion to $5 billion, and yesterday the Central Bank of Barbados announced that in keeping with the plan to avoid foreign borrowing in favour of raising funds locally, investors would from today be able to purchase an issue of $100 million Government Debentures and $50 million Treasury Notes.

The decision has come with Barbados' public debt having reached more than $8 billion, including almost $977 in outstanding Treasury Bills, by last October and the island on the verge of having its credit rating examined.

While debentures are debt instruments usually issued to allow governments and large institutions to raise funds in the medium to long term, Treasury Notes are also similar investments which individuals and organisations invest in for the long-term gain while earning interest over time.

In separate documents made available to individual and institutional investors this morning, the Central Bank said the debentures, together with the notes, which will mature in 2026 and 2015 respectively, formed part of Government's efforts to raise money locally "to assist with the financing of the Development Plan".

"Debentures under this issue will be in denominations of one thousand dollars or a multiple thereof and will before being issued, be recorded in the Register of Securities at the Central Bank of Barbados," the financial institution said.

"Each debenture and the right to receive principal and interest represented thereby will be transferable. Debentures are eligible securities for trading on the Securities Exchange of Barbados," it added.

It also told people with pension funds who had exercised their option to purchase this government security to apply directly to the Central Bank of Barbados.

The interest due to pensioners 60 years and older living in Barbados will not be subject to withholding tax.

The bank said the funds were "secured on the Consolidated Fund and assets of the Government of Barbados".

"A sinking fund will be established by half-yearly appropriations out of the Consolidated Fund with accumulations of interest to enable the debentures to be redeemed when they fall due," it noted.

As part of its plans to finance its Public Sector Investment Programme under its Medium Term Development Strategy, Government said the overall financing "will be through a combination of external loans ... and domestic sources" comprising "a range of financing instruments including treasury bills, bonds, debentures, current government revenues and or loans from local financial institutions".

Late last year in piloting a legislative amendment to raise the local borrowing limit to $5 billion, Sinckler said Government intended to concentrate on borrowing from local institutions instead of international agencies, something be believe would help the administration in its debt management plans.

The minister said the shift from external borrowing to domestic sources would increase liquidity and give the Government greater flexibility.

"External debt is extremely harsh -- simply because you have very little control over the impending variables which impact on that debt," he said.

"So if we borrow on the international market the rates are often extremely high and very volatile and you have very little flexibility once you have contracted that particular debt and the interest associated with it."