The Inter-American Development Bank (IDB) announced on Friday that it has assisted The Bahamas in the brokering of oil hedges designed to ease the strain on the government’s budget and to allow fiscal headroom during the ongoing COVID-19 pandemic.
Oil hedging will allow the country to take advantage of low oil prices on the international markets, an IDB release on the hedging initiative stated, adding that Bahamas Power and Light (BPL) will be able to take advantage of affordable crude oil for the next 3.5 years.
“These unprecedented operations allowed the government to take advantage of low oil prices in the international markets and protect itself against abrupt oil price movements, ultimately offering consumers protection against unexpected increases in energy costs,” the release noted.
“It also protects the government’s budget resources by allowing it to implement better financial risk management over the next 3.5 years, with a series of Asian call options purchased by the government from the ban on approximately 7.2 million barrels of crude oil.”
This year, global crude oil prices dropped to historic lows at the onset of the COVID-19 pandemic, prompting BPL to look to hedging to lower its costs.
The IDB facilitated the first hedging transaction in July.
IDB’s representative in The Bahamas Daniela Carrera-Marquis said in the release that the new hedges is part of the bank’s innovative strategy to support member countries, especially given the economic uncertainty caused by the pandemic.
“Through these new transactions, the government of The Bahamas can further strengthen its risk management tools to protect its public finances and best support the people of The Bahamas,” said Carrera-Marquis.
The post IDB assists Bahamas in brokering of oil hedges appeared first on The Nassau Guardian.
source https://thenassauguardian.com/idb-assists-bahamas-in-brokering-of-oil-hedges/
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