Investors show confidence in gov’t fiscal policies

ec dollarsThe Government of Dominica continues to attain record low rates for Treasury Bills on the Regional Government Securities Market (RGSM), according to a release from the Office of the Prime MNinister.

On Wednesday, June 18, 2014 the Government of Dominica received a rate of 1.999% when it raised $EC20 million through the second of a series of three, 91 day Treasury bill offerings. This is the second time that such a low rate has been attained. On Monday, March 17, 2014 the Government of Dominica raised $EC20 million in the first of the series of three Treasury bills on the RGSM at the rate of 1.999%. This rate was 50 basis points below the previous record of 2.49%.

The release states that Prime Minister and Minister for Finance, Roosevelt Skerrit, views this as a vote of confidence in the Dominica Labour Party’s administration fiscal policies.

“The government has had to face our own challenges but we have worked vigorously to build a strong platform for our sustained economic growth,” he said. “While we have not been spared entirely the effects of the global financial crisis, our prudent fiscal and economic policies have insulated us from the more severe effects. The rate achieved in the most recent Treasury bill offering further cements Government’s ability to raise the financing it needs at a lower cost to the taxpayers of Dominica.”

The release further states that Government is encouraged by this success of raising revenue and will offer another 91 day Treasury bill later this year. It says this is to finance part of government’s operating budget and refinance existing government debt, the interest rate on which is much higher than the interest rate government obtains on its Treasury bills.

Government is committed to creating a local economy that develops the lives of the people of Dominica without creating unsustainable debt burdens, the releases says.

It adds that Treasury bills present an avenue to invest outside the normal banking system.

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42 Comments

  1. policeman
    June 27, 2014

    what does the pm know about T bills? he is unqualified to discuss this, he did not take ac101.

  2. June 26, 2014

    Mr. PM, Oh oh, Venezuela money finish? China money finish too? Is that why you taking loan to pay off your debts, I warned you and told you Dominica is not a shop. You shouting how Dominica doing so good but you borrowing money to give handouts and the little working population has to pay it back with interest. Ah magway ca u wicked eh.

    Is English you studied at school so I don’t know who forgot to explain this to you and making you think is something so great. I guess you fooled the people so much the civil servants starting to make you look like a fool now you offer them 0%. Guess the news had to come out one way or another, truth cannot hide.

  3. Truth be Told
    June 25, 2014

    But where are the investors? Dominica has the lowest Foreign Direct Investment rate in the Caribbean, so where are the investors that you are attracting? Name them?

    • Research
      June 25, 2014

      My dear if you do your research properly, you will realize that we have always been the last / have a very low rate, our lowest being from 1997 – 2000. From there, our rate started increasing, Now look at the article where it says that the FDI rate world wide will decrease, Dominica’s decrease along with all the other countries…
      Please go on http://www.cepal.org/ and do your own investigation.
      Maybe if Dominicans started following articles posted on Cepal and the IMF page, they would be so biased against their own country’s development and downfalls. I’m really trying to comprehend why we celebrate the downfalls and we disregard the good. We feed into the negative that are shoved down our throats and we throw away the positive. Like i said visit CEPAL or IMF and do the research my dear.

  4. FORKIT
    June 25, 2014

    that was the worst skerrit propaganda tactic I hear. mr lying so much he actually thinks that Dominicans are foolish people and is that smart…. what a joke

  5. Anonymous
    June 25, 2014

    So its seems that they are in essence rolling over the T-Bill. They will use the one for this month to pay the one issued 91 days ago in March. Hmmmm. I wonder how they would fair if they offered a medium to long term security. That is the true test of confidence.

    And are we borrowing to just meet our recurring expenses? As a former loan underwriter I must say that this is a red flag.

    • Anonymous
      June 25, 2014

      That is exactly what it looks like. Short term debt to cover recurring expenses. For obvious reasons mr. Skerrit does not want to retrench his direct labour force as this would cost him dearly in an election year. Worse, he has created fictitious jobs through the NEP programme, which do not contribute anything to the national economy but instead help to drain the treasury. This makes me believe that he will be compelled to call elections sooner rather than later so he can administer the bad medicine of austerity measures/tax hikes once he is back in the saddle for another term.

  6. ?
    June 25, 2014

    Man, the Govt. can pave the streets of Dominica with gold, here we will still have a problem with it. This is just politics. Making every good thing look bad. We are just killing our country. Anything to get in power.

  7. dominican uk
    June 25, 2014

    What would you guys do if you need money America borowing money all you want Skerrit to make paper money.
    You not as educated as you are saying otherwise you would read world news and see that tout moun ka pweta.
    Sac Sort ke zo ye

    • JoJo
      June 25, 2014

      Boy wake up. You know anything about credit rating? Ask people, who are refused a credit card or a loan about that. America has a much superior credit rating to Dominica and till people are reluctant to take their treasury bill because the discount is so low.
      Money is cheap right now but not in Dominica because our risk is far higher. Go and ask the banks and credit unions about non-performing loans. Every week you seeing ads in the paper for people being taken to court for not paying their loan. You think our govt is in a different situation? How can people pay tax if they have no income to tax? Go and vote Skerrit and I guarantee you will see Vat rise to 17.5 % immediately and civil servants being laid off.

      • Rubbish
        June 25, 2014

        What are you talking about? Did you actually READ your comment before posting it?
        A. You cannot compare America with Dominica my friend, why? Because Dominica has to have 3 EC dollars in her purse to match America’s 1 US dollar, plus America has a Higher Population with billions of people to our thousands, plus, while we are an under-develop island, America is a developed country… no wait A CONTINENT. SO COULD WE STOP COMPARING DOMINICA TO AMERICA.
        moving on, If u want to talk about credit ratings, you are actually complimenting the comment above you and you would have known that if you tried understanding what was said, instead of being against the comment cause it seemed too “Labourite”, That the government must borrow from other organizations and developed countries to sustain the island, just like you and I for certain aspects of life, plus for you to have a Good credit rating, you have to be a good and constant creditor (since you want to seem so into America’s life style you would know that and good credit rating is not crediting now and pay it tomorrow either)
        Next to the non performing loans, look at the names of the people in the paper and their lifestyle, if you might have observed, Humans, the average consumer loves to “put their heart where their hand cant reach” Why is it in such an under develop country, houses are bigger than the state house and everyone these days have a car or two, all types or technology (and i can go on), when we know we have mortgage, light, water, food and more. From my experience working in a bank, when we say, “I think you need to go lower, how will you cover food and bills after mortgage” they respond “my boyfriend, mother, cousin, friend and I living together, they will pay that” now when the boyfriend leave, the cousin travel, the friend find their own spot, mother dies, they cant afford and their names are on newspaper, they blame government when in the first instance you were warned.
        Next VAT every country’s favorite topic especially Dominica. Now, Dominicans are not financially motivated. They expect the government to provide jobs and everything for Every body. If economics were offered in high schools, all of us would know, any country where government employs most of it’s population is not going to do so well unless…. and that’s where our favorite topic comes in… How does government pay? Through Treasury. Where do they get money to fill the treasury to pay? Loans, Money made through schools, hospitals etc, VAT and Taxes, stuff that us Dominicans dont like paying Now do we.

        So… Before posting comments please ensure that you understand what was said and review what you are going to say.

  8. IFF I WUZ.
    June 24, 2014

    Parry, I would tell the Prime Minister, the fact you borrowed $20 millions at a 1.999% rate does not necessarily prove that you fiscal policies are top class. Your ability to repay that short term borrowing is what matters. Having received such a short term borrowing, shouldn’t the people who have to repay the money be told the reasons for your actions.

  9. Anonymous
    June 24, 2014

    But DNO what is happening? Did’t the original story purport to come from the Prime Minister’s Office? Why change that? is that Charlie Jong at work again?

  10. JoJo
    June 24, 2014

    Looks like Government is robbing Peter to pay Paul. He was badly advised to publish that.Maybe they think simple folk don’t really understand this so they can present it as positive news. Glad to we are not all illiterate again. That is what education does for us. Thank you Skerrit!

  11. Doc. Love
    June 24, 2014

    What is the big hooray. The man borrows EC$20 million from the Regional Government Security Market at a rate of 1.999%. While Skerrit is beating his chest as regards Government’s fiscal policies, he cleverly does not tell us the reasons for this short term emergency borrowing. I am a working man, I am broke, I cannot feed my children, I take a short term payday loan from a friend at a lower rate then the bank, that is no cause to be over joyed.

  12. Morihei Ueshiba
    June 24, 2014

    Skerrit where is the US1.7 million for the base to stop drugs from the Americans… DNO why u not reporting this important issue…

    Two years on and Dominica awaits construction of a US $2.0 million Coast Guard facility

  13. LISTEN!!!!!
    June 24, 2014

    Partner we speaking 8% per annum and where are the credible investors. (In your Back Pocket.. :-P)

    Not one thoughtful investor will dare touch our shores and loose their moneys because we have an unhealthy and poor investment climate on island.

    • Roz
      June 25, 2014

      DNO reports that this is below the previous lowest rate of 2.49%. OK. But is that Dominica’s previous lowest rate? How does it compare with other regional governments 30-day T-bill rates?

      • Roz
        June 25, 2014

        90-day. My bad

  14. looking
    June 24, 2014

    What prudent fiscal policies? Vat? and more Vat? and more more more Vat? Treasury bills is more debt because gov’t has to pay the 20 million back plus the interest to the creditor.

    • Cerberus
      June 24, 2014

      No, the Govt. does not pay interest on these short term bills, Instead the investor’s profit is the difference between the discounted price and the full nominal value of the T-Bill. That is if the Govt. redeems in full and on time. However, it practically comes to the same thing because the Govt. has to find that difference, through fiscal revenue (such as Vat) or perhaps another loan or T-bill issue, when it redeems its i.ou. three months later.

      • looking
        June 25, 2014

        Thanks for the explanation, but as you say it comes to the same practically. Although most countries uses debt financing as to equity financing. Example the developed countries have a massive reserve and still resort to debt financing. Does Dominica have a reserve? Just asking. But still does the transaction indicate that Dominica’s economy on a good footing or are there other indicators?

  15. ZOOM ZOOM
    June 24, 2014

    Can someone please post a list of those investors.

  16. Cerberus
    June 24, 2014

    To any banker worth his salt this looks more like an act of desperation rather than a cause for celebration.
    A treasury bill (T-bill) is in essence an i.o.u., a promissory note, in this case redeemable after 91 days. Let’s say the note has a nominal value of $1,000 and at a discount rate of 1.999% the Govt (or its agent) sells this note to an investor for $998 and the latter makes a $20.00 profit after 91 days when the Govt redeems its note and pays back the nominal value of $1,000.
    What it really means is that the Govt. is contracting short term debt at 2% per 3 months, say 8%/annum. An excellent deal for the lender, especially if the return is tax exempt. but less so for the Govt. I would caution them to refrain from crowing over this, especially bearing in mind that the current discount rate for 91 day U.S.Govt. T-bills is a 0.025%.
    Quite a difference.

    • Sierra
      June 24, 2014

      Thank you so much. My thoughts exactly. Treasury bills are the safest form of investment out there. It has nothing to do with investors confidence. All investors are guaranteed their investment plus interest.

    • Anonymous
      June 24, 2014

      The government tries to make it look like 1.999% per annum, similar to a bank loan.

      A few years ago a finance company tries to pull that stunt on me, by offering 2.5% interest, but they were hesitant to disclose it was 2.5% per month.

      • June 24, 2014

        Anonymous June 24, 2014

        2.5% per year is worked out so that you make the payments every month–with interest calculated for that month’s payment. They calculate the interest per month on the balance of your principal amount, but that interest amount is only for the month –not that of the whole year.

    • Voicemail
      June 24, 2014

      All you does just say what all you want. Why are other countries not attaining such rates and did you understand the meaning of oversubscribed?

      • Dominican UK
        June 24, 2014

        Please, take your time and read carefully. Other countries DO get better rates , U.S.A. 0.025 % for 91 day T-bills ( that is 1/4% for three months compared with Dominica 1.999%). The higher the risk the higher the discount rate. In other words the Govt. is selling its debt at a discount but has to pay the full debt amount when it is due. For every $1 million our Govt pulls in through these T-bills it is costing us $20,000 to repay them after three months. Govt is getting cash like you and I going to Fast Cash, paying one issue with another and having to find $400,000 every three months from somewhere, just to stand still. Anyway, that is how I understand it. People in the U.K. can get a mortgage at half that cost. You can get a 10 yr. fixed rate at 3.99% from the Yorkshire Building Society but I doubt they would lend to the Dominica Govt. Too risky I guess.

    • Anonymous
      June 24, 2014

      thanks for educating me on this

  17. FORKIT
    June 24, 2014

    is it true that a high level meeting convened to discuss austerity measures for civil servants including police?//

    time will tell

    • cream
      June 24, 2014

      Like stopping duty free for civil servant..

  18. AA
    June 24, 2014

    But all you have jokes boy. Go behind the numbers and you will see what is actually happening. There was only six bidders for this security and if you look at the bidders you will see that its banks with excess liquidity who have no other investment to place their funds in that are settling for these rates instead of zero. These TBills are guaranteed by the ECCB making them risk free. So this notion that foreign investors have confidence in the economy is a joke. A true test of whether there is confidence in the economy can be seen from medium to longterm securities as attain by the US treasuries on the medium to long. What rates are they getting on medium to longterm debts are there appetite for those paper?

    • Voicemail
      June 24, 2014

      Your comment does not make sense

      • Papa Dom
        June 24, 2014

        Instead of saying that tell us what makes sense

      • June 26, 2014

        Probably u do not understand the things that make sense, ever thought of that?

  19. real possie
    June 24, 2014

    HMMMMM cant wait for the spins.

    • Malgraysa
      June 24, 2014

      No spin Possie, except the one that has already been applied by the Prime Minister’s Office. Makes me wonder if the good man even understands what a Treasure Bill is. I’m sure he would not have bragged like that if someone had told him the real truth about our parlous financial situation. Still, the brokers will get their fees.

      • real possie
        June 24, 2014

        @ Mal the question is did you understand what you read? and I see some kind of spin eh but hey little insight if Bados had that rating they would not be losing their rating with the world credit rating hope that helps you but Q is in the morning so you don’t know how to understand what you read LOL.

      • Cerberus
        June 25, 2014

        – discount rates for treasury bills should not be confused with a country’s credit rating, although there is an obvious link – the lower a country’s credit rating the bigger the discount it must offer on its treasure bills in order to find any takers.
        – the world’s major credit rating agencies, such as Standard & Poor, Moody’s & Fitch do not even list Dominica and you can interpret that as you may.
        In our region S&P rates Barbados as BB-, Jamaica B- (same as Venezuela), Suriname BB-, Belize B+, Dom. Rep. B+, meaning that credit risk in these countries is “highly speculative”. Only Trinidad & Tobago with A rating scores higher, putting it in the”upper/medium”! group.
        One must compare that with the creditworthiness of developed economies of countries such as the U.K-. AAA, Norway – AAA, and the U.S.A.- AA+, which puts them into the uppermost “Prime” division.
        Dominica, as far as I know, is only rated by the much smaller regional agency CariCRIS and the last evaluation of our creditworthiness of our country by them I recall categorises us as “adequate”.

        .

  20. Educator
    June 24, 2014

    Any time you can borrow at a lower interest rate to pay off higher interest debt, that is a good think.

    But I am not a huge fan of the mountain of debt the government is amassing, particularly to finance recurring expenditure.

    A bond issue to finance an infrastructure project is one thing. Borrowing to pay salaries is not a good thing. No matter how low the interest rate, eventually you will need to pay it back. That situation is made worse of interest rates start to climb.

    We live in an ultra low interest rate environment. That will not last forever.

    • Roz
      June 25, 2014

      You are correct.
      Actually, the US is expected to raise its benchmark 90-day t-bill rate in early 2015. It is likely that other benchmark rates – LIBOR, EURIBOR – will follow suit. We must not take information in isolation. The government has financed its short term debt at its lowest rate ever. This is an environment in which benchmark rates are near zero. The change in the spread between ‘risk free’ instruments and the new rate is a better indicator of the market’s risk perception of Dominica’s debt instruments.

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