Prime Minister David Thompson (right), initialing??a US$120 million bond with Scotiatrust and Merchant Bank Trinidad and Tobago Limited. At left is General Manager, Origination at Scotiatrust, Mitchell De Silva.

Government’s signing of a US$120 million bond with Scotiatrust and Merchant Bank Trinidad and Tobago Limited will help to boost Barbados’ international reserves and contribute to the financing of its capital works’ programmes.

Prime Minister David Thompson announced this today, after signing the bond with General Manager, Scotiatrust & Merchant Bank, Trinidad and Tobago Limited, Mitchell De Silva, at Government Headquarters.

Expressing appreciation to Scotiatrust for raising the bond, he said: "I am sure that the success of this effort provides an opportunity for further strengthening and deepening of our well-established relationship."

The Prime Minister revealed that the bond would be divided into two tranches, with US $80 million for five years and US $40 million for 10 years. "Both tranches will be amortised, the five-year with quarterly repayments and the 10-year with 14 semi-annual repayments.?? The coupons are 6.75 and 7.80 per cent, respectively," he disclosed.

Mr. Thompson explained that Government was seeking to raise the funds at a time when the global economy was facing trying times, with adverse consequences for the Barbados economy. He cited tourism and private sector capital flows, which had significantly influenced economic activity in recent years, as two of the areas that had contracted.

He stated: "The Government of Barbados, mindful of the need to maintain a mix of policies that contribute to the stabilisation of economic activity and employment and foster continued confidence in the domestic economy, has therefore undertaken this fundraising at this time to boost our international reserves and contribute to the financing of our capital works programmes."

The Prime Minister stressed that although Government funded part of its capital budget with project loans from international financial institutions, it was conscious of the need to undertake "periodic and judicious external borrowings to supplement these resources in the furtherance of national development.

"I believe that this loan is consistent with this objective and in line with the Government of Barbados’ medium term debt strategy. In recent years, the Government has sought to maintain a manageable external debt profile, reflected in periodic borrowings and a maturity structure designed to minimise excessive bunching of debt repayments.???? As a result, government and government guaranteed external debt-service ratios have been relatively stable over the period 2004-08," he observed.

Mr. Thompson said he expected the ratio to rise significantly in 2010 because of the repayment of a US $100 million loan. He added, however, that he was satisfied, that with the precautionary borrowing, reserves would continue to be maintained at acceptable levels. ????

The Prime Minister opined that the trend of channelling regional liquidity into viable projects augured well for the future success of integration efforts, and the funding of the development of the region.

"The Government of Barbados will, therefore, when the opportunities arise, continue to use the regional market as one of its primary sources of financing," he stated.

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