Lack of foresight leads to cyclical debt

THE EDITOR: In response to the recent announcement of the Government's plan to raise US$100 million through a local bond issue with Republic Bank and First Citizens Bank as co-lead arrangers, one cannot help but question the continuous lack of foresight and prudent financial management exhibited by the Government.

This move raises concerns about our country's ability to navigate its financial obligations without falling into a cycle of debt. The Government in effect is borrowing to pay off debt. The end result is that the country is no better off. To add insult to injury, this debt is US denominated and so will have to be repaid in US dollars. The very same forex that ordinary citizens cannot access because the US dollars are being used to repay never-ending debt.

Furthermore, the Government's decision to issue a new bond, merely months after boasting about the success of a US$560 million international bond issued in September 2023, seems contradictory and raises questions about the strategic planning in managing the country's debt. Boasting about putting the country in a debt trap? Is that the Government’s communication strategy?

Therefore, the recent announcement of another bond issuance of US$100 million to assist in repaying an existing US$550 million international bond due in January 2024 suggests a lack of foresight in managing the Government's financial commitments.

The Ministry of Finance in its official release on September 13, 2023, on the US$560 million international bond issued in September 2023, stated that “proceeds from the issuance and sale of the notes will be used for refinancing the country’s outstanding 4.375 per cent notes due January 2024.”

One must question why the Government did not allocate a portion of the September bond proceeds to cover the upcoming debt maturity, thus avoiding the need for additional borrowing and interest payments.

How is it that the bond of US$560 million issued in September 2023 to repay the US$550 million bond requires an additional issuance of US$100 million in January 2024 – in just three months? A comprehensive explanation is required. What is happening with our foreign exchange management?

To compound the issue, the Government’s controversial negotiation to sell Methanol Holdings shares for US$347 million to Proman rather than the people through the NIF (National Investment Fund) raises serious questions. The Government must come clean!

Furthermore, the terms of the new bond raise concerns. The decision to issue a partially amortising bond with a principal repayment structure that spans over three years – coupled with an interest rate of 6.65 per cent – seems to reflect a short-term focus at the expense of long-term financial stability.

This Government's apparent willingness to incur additional debt without clear plans for sustainable repayment could lead to a cycle of borrowing, making it challenging to break free from the burden of accumulating interest.

The security for the new bond, charged upon the Consolidated Fund of TT and secured on the country's revenues and assets, indicates a potential strain on public finances. While it is not uncommon for governments to issue bonds to manage debt, the frequency and timing of TT's recent moves raise red flags about the country's overall financial strategy.

To further add insult to injury and to clearly show the position of the Government, this US denominated bond will only be offered to high net worth individuals and pension funds. In other words, only a one per cent of the population stands to benefit.

There are so many ordinary working class people with small US dollar savings in the banks earning less than one per cent. Couldn't the Government have opened it up so that everyone with small US savings could have participated? Instead the bias of the Government towards its financiers and the likelihood of only a small percentage of the population benefiting is clearly demonstrated by this decision.

In conclusion, this Government's decision to issue a new bond shortly after a supposedly successful international bond issuance – coupled with the terms and security of the new bond – reveals a lack of foresight and strategic financial planning on its (Government’s) part. This approach risks trapping the country in a cycle of debt, potentially compromising its fiscal health in the long run.

On behalf of the people of TT I say that it is imperative for the Government to demonstrate prudence, transparency and a comprehensive understanding of the long-term consequences of its financial decisions to ensure the economic well-being of the country.

DINESH RAMBALLY

MP, Chaguanas West