Cooper blasts govt on borrowing; Turnquest responds to Moody’s

Responding to international credit rating agency Moody’s assertion that government’s gross borrowing will likely hit $2 billion, Progressive Liberal Party Deputy Leader Chester Cooper said government’s high coupon, $600 million foreign currency bond and the historic borrowing brought on by COVID-19 and Hurricane Dorian, will likely be a generational albatross around the neck of Bahamians and could impact the value of the country’s dollar.

Cooper, speaking to the media, rehashed that he urged the government to borrow the money back in March or April when the the country might have received a more favorable interest rate, especially as Moody’s most recent downgrade to junk bond status did not happen until June, while credit rating agency Standard and Poor’s lowered the country’s rating in April.

He said the government’s cost to borrow would have been significantly less than the figure the country will pay back for the $600 million bond, at almost nine percent interest.

Cooper also released a statement yesterday commenting on Moody’s report. “We note the comments of Moody’s that appear in today’s paper forecasting that the government would need to borrow $2 billion this fiscal year. We note that the government is still stubbornly sticking to its forecasts of $1.3 billion. Had this not been such a dire set of circumstances we would say, ‘I told you so’.

“In March, we forecasted the same and advised the government ‘to go hard and to go early’. By being reactive they will cost the Bahamian people handsomely. For example, we forecasted that in the recent $600 million loan the Bahamian people will pay at least $200 million more over the life of the loan than they would have, had borrowing taken place earlier.”

Deputy Prime Minister and Minister of Finance Peter Turnquest told Guardian Business yesterday that the government does not expect to borrow outside of its stated $1.3 billion mark. 

“Moody’s assertion is based upon their analysis, the basis for which we do not have access to,” Turnquest said.

“We have presented a budget calling for $1.3 billion, the allocation of which we have outlined in the budget. Our forecast is based upon publicly stated assumptions and priorities. At this point we do not anticipate exceeding that projection.”

He added that the financing needs of the government have been fully disclosed to the country, adding that Moody’s $2 billion prediction might take into account the refinancing of the country’s existing debt.

“The deficit represents net financing needs which the government disclosed,” Turnquest said. 

“The government also disclosed debt repayment needs. Together these give gross financing needs. The approved budget is transparent in this respect and somewhere in the ERC (Economic Recovery Committee) Structural Reform Report, this is acknowledged relative to importance of access to financial markets.

“Moody’s may be referring to gross financing needs, which includes refinancing of existing debt which I disclosed in my communication last week.”

Cooper called on the government to “be forthright and truthful in the forecasting of the government’s financial needs”, contending that the social programs coming to the end of their funding “tells the current reality”.

“The truth is that decisions made today will have a generational impact on the value of our dollar, the sustainability of our economy and our way of life,” he said.

“Crisis management requires vision, forecasting and strategy. We renew our call for a debt management committee to assist the government in managing, structuring and negotiating its current and future debt.”

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source https://thenassauguardian.com/cooper-blasts-govt-on-borrowing-turnquest-responds-to-moodys/