Gov’t to Offer Debt Exchange to Domestic Bond Holders

The Government has started briefing stakeholders and the media on a domestic debt exchange offer, which will make or break an agreement with the International Monetary Fund (IMF) this year.
Details of the Jamaica Debt Exchange are to be revealed by Prime Minister the Hon. Bruce Golding in his national broadcast on Wednesday night. It will be launched Thursday at the Bank of Jamaica’s (BOJ) Auditorium and is slated to save the country $40 billion in interest payment on domestic debt over the next financial year.
Mr. Golding, Minister of Finance and the Public Service, Hon Audley Shaw, and other representatives of the Government met with the Opposition, media owners, journalists and trade union leaders, on Monday (January 11), at Jamaica House in Kingston, to discuss the proposal. The meetings will continue today.
Government sources are insisting that, if they do not complete the exchange offer, there will be no IMF programme, as the offer is integral to the Medium Term Economic Programme it has developed in partnership with the IMF. The programme is aimed at bringing into a sustainable range, the amount of Government resources devoted to servicing local debt, and reducing the debt in a manner that is fair to all holders of Government paper.
The offer is structured as par for the primacy of Jamaica’s commitment to fully repay all amounts borrowed. Each holder of J$100 of old bonds will receive J$100 in new bonds. The Government is obligated to repay every dollar of the principal borrowed.
The Board of the IMF is scheduled to approve Jamaica’s programme on January 27, if the offer succeeds. Failure would cost the country the IMF’s US$1.3 billion standby facility support, required to plug the balance of payment gap created by the loss in foreign exchange revenues.
However, in order to achieve a sustainable debt structure, secure IMF and other multilateral support and to be fair to participating investors, the Government says it will not accept the transaction unless it receives, substantially, 100% participation.
The Government also plans to use US$40 million from the IMF and multilateral funding to create a Financial Sector Support Fund, to provide a source of liquidity to eligible financial institutions that may be affected by the issuing of new bonds in the exchange.