Thu | Aug 17, 2017

World Banks rep suggests rollover of NDX bonds

Published:Sunday | December 13, 2015 | 12:00 AM
Galina Sotirova, World Bank country representative for Jamaica.

Country representative for the World Bank, Galina Sotirova, is urging Jamaica to consider another round of debt restructuring, or more specifically a rollover of upcoming bond maturities, saying it would create room for the country to grow.

In a speech to corporate bosses on Thursday, Sotirova said the strategy should be considered for upcoming debt repayments in 2016 and 2017.

Jamaica faces a massive $60-billion payout on NDX bond maturities next February, plus billions more in interest payments, as well as another $72-billion maturity in May 2017, alongside other regular debt-servicing obligations.

"You should look at the rollover or restructuring of the debt in a way which would lead to longer term repayments. This would be spread out the more evenly than the current repayment requirements for Jamaica," she said.

Sotirova also sees the prudent use of fiscal tools as one avenue of spurring much needed economic growth.

"It will be very important that this expanded fiscal space is used for priority investments in growth-enhancing measures; this is while continuing at the same time the discipline and reforms that would promote the private sector," she said in a speech at the Christmas luncheon of the Private Sector Organisation of Jamaica on Thursday.

She called for prudent debt management that will act as a companion measure to the programme of fiscal consolidation, while pointing to the US$1.5 billion PetroCaribe debt buy-back as one good move that has dramatically reduced the debt overhang.

DEBTSWAPS

Jamaica has structured two debts swaps in the past five years, both preceding agreements with the IMF and confined to domestic bonds. In both cases, bondholders were not asked to take a haircut but the coupons on the bonds were reduced and the maturity structures extended.

Sotirova also emphasised that Jamaica needed to start growing its way out of debt, saying prudent debt management alone was not enough to resolve the problem.

The debt to GDP ratio now stands at 130 per cent, and cutting it will also require increasing the stock of goods and services available in the economy, she said.

"The economy has to grow. It is one way of working on the debt stock in that there should also be improvements in growth, so that the debt to GDP becomes more favourable," Sotirova said.

She also warned that the tightening of US monetary policy is expected to lead to increased borrowing rates and increased debt servicing for Jamaica.

neville.graham@gleanerjm.com