At 97 per cent compliance, the Jamaica Debt Exchange (JDX) is among the most successful debt swapping initiatives in the world, according to Bank of Jamaica Governor Brian Wynter.

Wynter made the comments at the Jamaica Exporters’ Association’s Quarterly Luncheon, held at the Eden Gardens in Kingston on Wednesday.

“The exceptionally high participation rate in the exchange makes the Jamaica Debt Exchange one of the most successful debt exchanges in the world”, Wynter told the gathering. “Significant savings to the Government and the Jamaican tax payers will ensue from this exchange.”

The JDX replaces 350 high priced Government of Jamaica (GOJ) domestic bonds with 24 new bonds, priced at a lower interest rate- approximately 12.25 per cent- and longer maturities. The successful Exchange should save the government $40 billion in interest payments. Wynter said that the exchange, which is expected to be settled by February 16, 2010, would also provide more liquidity in the market and facilitate greater trading of securities and development of the domestic financial markets.

“Central Government interest payments, in particular, will fall sharply from 16.2 per cent of GDP in this fiscal year (ending March 31, 2010) to 9.7 per cent of GDP by fiscal year 2013/14. Additionally, the magnitude of maturing debt is expected to decline by 65 per cent over the next three years. The significant reduction in Government’s refinancing needs will ease the crowding-out effect of the Government debt and the upward pressure that this would have placed on domestic rates,” Wynter said.

Pamela McLaren, senior director, Debt Management Unit, Ministry of Finance and the Public Service yesterday lauded the financial institutions ,which she said participated 100 per cent in the exchange, and the Jamaican public for its remarkable response to the JDX. She said Jamaica’s situation was even more remarkable because countries which have managed to get the level of participation that is close to the 97 per cent take up recorded by Jamaica, were in more dire situations and on the brink of default. “In Jamaica that was not so, so to have this level of participation is remarkable,” McLaren said.

In January this year, the Government of the Republic of Seychelles announced that its debt exchange had received “overwhelming support” following a 89 per cent participation by holders of debts totalling US$283 million. The participants had agreed to provide extensive debt relief to Seychelles by exchanging their claims on the country for new notes. Uruguay in 2004 recorded participation of 92.9 per cent of bondholders in its debt exchange programme which included both domestic and foreign bond categories. Russia on the other hand defaulted on about US$40 billion in domestic debt in 1998 according to Bloomberg.net. Since then it has had four debt swaps up to 2000 to restructure debt to its London Club of Creditors.

Claudette Crooks, president of Money Masters Limited, told CBR yesterday that her clients participated willingly in the debt exchange. She said there was a ‘nationalistic’ sentiment that ran through the efforts to move the country forward. “We were at a point where most Jamaicans felt that we would do what was necessary to make this country a better place to live,” she said. Crooks added that following the success of the JDX, if the other factors such as government spending are managed well the country should be performing better than it has been doing.

The official action on the remainder of the bonds that have not been restructured remains to be seen. McLaren explained that with the level of participation from the financial institutions and the support from the individual bondholders, it is likely that those persons who did not take up the exchange offer may be either still unaware of the issue, or living overseas. “The Minister (of Finance and the Public Service, Audley Shaw) will speak on that at the appropriate time but there are different options that we are looking at,” McLaren said about the actions to be taken on outstanding bonds.