Analyst warns against heading to markets without IMF deal
Published:Thursday | September 27, 2012 | 12:00 AM
Daraine Luton, Senior Staff Reporter
FINANCE MINISTER Dr Peter Phillips has said the country will be heading to the capital markets later this year to seek credit.
However, financial analyst Ralston Hyman is advising the minister to focus on securing an agreement with the International Monetary Fund (IMF) before heading to the markets.
"He can't go to the market without an IMF agreement. The market is more skittish now based on what is taking place in the global economy," Hyman said.
Speaking in the House of Representatives on Tuesday, Phillips said "all things being equal", the Government intends to go to the capital market to source funds.
Phillips was responding to questions posed by his opposition counterpart, Audley Shaw, on how a matured €200-million (US$265 million) bond in July was settled.
He said the payment was settled through the use of loan proceeds of US$150 million that were secured from the National Commercial Bank (NCB) and Scotia Group during the month of July and balances held by the Central Government prior to July 2012.
NCB loaned the Government US$100 million while Scotia provided US$50 million. Both loans are issued at a rate of 6.375 per cent and are to be repaid over a period of 18 months.
Shaw said the interest rates indicate that the period of the loan itself was very short.
"Normally, we would be looking at replacing loans of this nature, the €200 million, with long-term money ... . The shortest possible term would be 10 years, with 18-20 years being the more appropriate loan period," he said before going on to ask Phillips about his plans to replace the loans after the 18 months.
SECURING ADDITIONAL LOANS
Phillips said the Debt Management Unit within the finance ministry has a profile for securing additional loans in the course of this fiscal year and beyond.
He said that would "lead to the payout of these loans as we enter the private capital markets locally and overseas in the course of this fiscal year and the next fiscal year".
However, Hyman told The Gleaner that investors were seeking shelter in US Treasury bills, precious metals and commodities.
"The minister should concentrate on getting an agreement with the IMF before he thinks about the international capital market. Investors will not lend Jamaica any money at affordable rate at this point in time without an IMF agreement," Hyman said.
Jamaica is currently negotiating with the multilateral agency for a facility which would assist it with balance-of-payment support.
The country is also seeking the IMF's stamp of approval in order to draw down on funds from organisations such as the European Union.