THE Government in just six weeks accrued $24 billion in interest payments on high -ost debt for which it will finalise the exchange for cheaper bonds today, according to Business Observer sources.

Under the Jamaica Debt Exchange (JDX) offer, the Government offered to pay cash amounts due on old notes that would be exchanged for cheaper bonds up to but excluding the final settlement date,

The JDX was launched on January 14 and closed today — the settlement date — after a one-week extension. So the Government accrued the interest payments in less than six weeks.

But, having garnered more than 99 per cent participation from financial institutions and retail investors in its JDX, the Government has already started cutting cheques to pay out creditors.

The Government also achieved its target of reducing the maturity profile of existing debt over the next three years by $300 billion while reducing the number of bonds from 350 to 25 in number.

What’s more, based on the combination of bonds that investors took in exchange for existing debt, the Government expects it will save $42 billion in interest payments even before taxes are flowed back into its coffers.

Holders of public sector debt were given a matrix of offerings which mapped existing debentures and bonds to new benchmark bonds, which ultimately guided them towards meeting another of the government’s objective — reducing the amount of variable rate debt it would carry going forward.

Under the JDX, variable rate debt was reduced from approximately $378 billion to $322 billion, or from 54 per cent to 46 per cent of the total $701 billion in local debt that was targeted.

At the same time, fixed rate instruments increased in value from $238 billion to $273 billion, even while locking in investors to longer tenors and lower rates, which were reduced from rates well above 20 per cent to a range of 12-13 per cent on average.

Interestingly, investors, who were also given the option to take up long-term, consumer price indexed bonds, took up approximately $21 billion.

Those bonds will carry three different rates throughout the various tenors — 12 years and 30 years — and would be fixed at two per cent and 2.5 per cent, respectively through to 2012.

Thereafter, the rates are adjusted upward by one percentage point and fixed for another two years before being increased by another 100 basis points where it would stay for the remainder of the life of the bond.

The Government, however, will have to pay bondholders interest based on inflation adjusted principal and repay creditors the adjusted principal at the end of the tenor.

The success of the JDX was critical to the Government attaining a 27-month, US$1.27 billion Stand-By arrangement with the International Monetary Fund (IMF), which would open access to another US$1.1 billion in multilateral funding for budgetary support in the medium-term.

Even then, Finance Minister Audley Shaw remained cautiously optimistic over Jamaica’s medium-term prospects, not wanting to hinge future developments on reducing cost of debt now.

Yesterday, while speaking at the European Union’s press briefing on the results of its Fluctuation in Export Earnings (FLEX) programme, from which it will provide Jamaica with a grant to offset falloff in export earnings from the bauxite and alumina sector, Shaw said the JDSX was only part of the solution.

“Make no mistake… the only sustainable way forward is growing our way out.”