Parliament approves negotiation of US$450 Million Loan To Consolidate Debt

Prime Minister Introduces Borrowing Authorization Bill to Parliament

Prime Minister Gaston Browne has presented a new bill to Parliament, titled the Borrowing Authorization 2025 Budget Bill 2024. The proposed legislation aims to enhance fiscal management by regularizing the rollover of treasury bills and bonds while addressing high-interest debt to create additional fiscal space.

Prime Minister Browne explained that the government has been rolling over short-term securities, such as treasury bills and bonds, since 2006. This practice involves paying interest and extending the obligations annually without reducing the principal debt. The bill seeks parliamentary approval for these rollovers and introduces measures to consolidate the government’s liabilities.

The proposed plan includes issuing a long-term bond of up to $450 million USD. This bond would replace the current short-term instruments, providing an opportunity to restructure debt and lower the government’s overall debt service ratio.

Browne highlighted that while Antigua and Barbuda has made progress in reducing its debt-to-GDP ratio, the high cost of servicing debt remains a challenge. Interest rates on existing domestic loans reportedly range between 7% and 8%. The Prime Minister noted that renegotiating these debts at lower interest rates could reduce the need for external borrowing.

The bill outlines two key objectives:

1. The rollover of up to $100 million USD or its EC equivalent on the Eastern Caribbean Securities Exchange.
2. Negotiations for a $450 million USD bond to consolidate existing debt and fund liability management operations.

The Prime Minister issued a warning to domestic commercial banks, urging them to proactively negotiate lower interest rates. He cautioned that failing to do so could result in the government securing lower-cost international financing, leading to an influx of liquidity in local banks and a potential reduction in their profitability.

Browne emphasized that the government’s goal is not to harm the banking sector but to streamline resources and create fiscal space. This space, he added, would enable the government to address pressing financial obligations, including the payment of outstanding arrears to public sector creditors.

The bill, described as a “precursor to negotiations,” provides interim authority for the government to proceed with discussions on the proposed bond. Browne assured Parliament that once negotiations are finalized, the government would return to the House to seek approval for the finalized terms.

“This is part of our liability management operations to create fiscal space,” Browne stated. He reaffirmed the government’s commitment to transparency and collaboration, noting that the bill keeps Parliament informed throughout the process.

If passed in the Upper House, the Borrowing Authorization 2025 Budget Bill 2024 would pave the way for a significant restructuring of Antigua and Barbuda’s debt portfolio, potentially reducing interest costs and improving fiscal flexibility. The Prime Minister urged lawmakers to support the bill, emphasizing its importance for the country’s financial stability and economic growth.

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