The Jamaican Government successfully floated its first-ever Jamaican dollar-linked bond in the international capital markets valued at J$46.6 billion.

In a statement on Monday, November 6, the finance ministry noted that the bond issue is part of the second phase of a liability management operation where the proceeds of the Jamaican dollar-linked bond were used to buy back outstanding U.S. dollar-denominated bonds.

It said this local currency bond will help to reduce the Government’s exposure to US dollar-denominated debt, as interest and principal payments will now be linked to the value of the Jamaican dollar.

“It should be noted that while the issue is denominated in Jamaican dollars, debt service payments to bondholders will be in USD determined by the average of the prevailing Jamaican dollar exchange rate over the 10 business days prior to each payment date. This effectively means that international investors in this bond take on Jamaican dollar exchange rate risk,” the finance ministry explained.

The finance ministry also noted that the bond issue, which was oversubscribed 1.4 times, consists of senior unsecured notes due 2030, which are registered with the Securities Exchange Commission in the United States.

“International bond investors investing in a Jamaican dollar-linked bond, and accepting Jamaican-dollar currency risk, would have been unimaginable only five years ago. This is an extremely significant transaction that opens new frontiers and offers new possibilities for Jamaica. The development represents a substantial policy dividend emanating from Jamaica’s substantially improved macro-economic fundamentals and from the deepening of monetary policy transparency, and the establishment of the pursuit of low, stable, and predictable inflation, as the objective of monetary policy, through the law that established central bank independence,”

Minister of Finance Nigel Clarke

This Jamaican dollar-linked bond issue marks the first time Jamaica is returning to the international capital markets since 2019.

“The Government of Jamaica’s new ability to tap international investors for local currency-linked debt broadens, deepens, and diversifies the GOJ’s funding sources while providing the opportunity, over time, of altering the currency mix of the national debt. This makes Jamaica more robust. In addition, the greater the proportion of our national debt that is denominated in, or linked to, Jamaican Dollars, the stronger, and more resilient Jamaica will be. This transaction, therefore, enhances Jamaica’s resilience and paves the way for similar international issues in the future,” Clarke added.

International investors accounted for 93.5 per cent of all participants in the Jamaican dollar-link bond, with 6.5 per cent coming from domestic investors.

Globally, this represents the largest participation rate by international investors in a local currency bond issue during 2023.