Shaw warns against waste of excess US$300 million borrowed
OPPOSITION spokesman on finance and planning, Audley Shaw, has asked the Government to explain how it plans to utilise the excess US$300 million ($30 billion) borrowed on the international capital market on Tuesday.
Shaw was referring to the US$800 million ($89.6 billion) the Jamaican government borrowed from the international capital market. The loan was originally meant to be a US$500 million deal, but was upsized to accommodate the final order book of over US$3.8 billion, it appeared.
The new global SEC registered Eurobond was Jamaica's largest international bond issue on record, and carries a 7.625 per cent interest rate.
Government says that the proceeds are to be used to pay off a (Euro)150 million bond, which carries an interest rate of 10.5 per cent and which is due at the end of October. Receipts are also to be used for general budgetary purposes, including financial investment and the refinancing of domestic and external indebtedness.
But, the Opposition spokesman, while acknowledging the successful placement, felt that additional money should not be borrowed simply because the issue was oversubscribed.
"These are not earnings, but borrowings that add to our debt stock and must be paid back," Shaw said yesterday.
He said that in 2011, when the former Government borrowed US$400 million at an interest rate of less than 8 per cent, the issue was oversubscribed with orders for US$1.2 billion.
"But we resisted the temptation to borrow more than was required to close the financing gap," he said. "The only way it makes sense to borrow these additional funds is if is used to retire existing expensive debt instruments."
Shaw also expressed the hope that the injection of foreign exchange will stem the rapid depreciation of the local currency and halt the negative trend that has now developed, where interest rates on business and personal loans are rising.
He said that the Government must not squander the opportunity offered by passing International Monetary Fund tests by raising funds at attractive interest rates.
"The Government must now hasten to put in place aggressive growth inducement policies, that can quickly turn the country's attention to investing, working and earning our way out of our difficulties, instead of borrowing more and more whether on the local or international capital markets," Shaw said yesterday.