Proceeds will be used for general budget expenses for the remainder of the 2021-22 fiscal year

The Bahamas has entered into a repurchase agreement (repo) with investment bank and financial services company, Goldman Sachs International (GSI).

The repo agreement is to cover general budget expenses for The Bahamas for the remainder of the 2021-22 fiscal year. Under the terms of the agreement, the Bahamian government sold and transferred US$235,916,000 in American Treasury securities, which are a part of Goldman Sachs’ sinking funds.

These securities will then be considered for purchase in 24 months at a price of $206,458,850.71from Goldman Sachs. The two-year bridging finance facility is being utilised until international bond markets are deemed to be more favourable.

This repo purchase comes in lieu of a US$700 million foreign currency bond orchestrated by the Minnis administration that was supposed to be placed last October. However, Minister of Economic Affairs Michael Halkitis has explained that the Government did not go this route as it was felt that “the revenue was performing really well and the condition on the market wasn’t great”.

Government’s medium-term debt management strategy

He noted that as part of the government’s medium-term debt management strategy, the administration “will be using different financing instruments to diversify our sources of financing. So our sources will be not only loans and bonds, but other instruments like repurchase agreements to manage costs and flexibility”.

Speaking with The Guardian Business, Minister of Economic Affairs Michael Halkitis pointed out that the administration has agreed with Goldman Sachs “to purchase some securities that we have, and we agreed to repurchase them in two years. It’s a commonly used short-term instrument. We didn’t want to go to the bond market right now because we don’t feel the market conditions are quite right at this time, given all the turmoil that’s going on”.

 He reiterated that the country is still going to international bond markets before the end of the fiscal year.