Eustace to ask follow-up question on bond issue in Parliament on May 31

Leader of the Opposition Arnhim Eustace says a lack of confidence in this country’s financial situation was reflected by the response of investors to the recent sale of EC$40 million worth of government bonds on the Regional Government Securities Market.{{more}}

Speaking on the New Times program yesterday, Eustace said when Parliament meets on May 31, he will enquire as to how many financial institutions subscribed for bonds, because the prime minister confirmed that the financial institution charged with underwriting the bonds, took 50 per cent of the bonds.

This, Eustace said, confirmed that the bonds were not oversubscribed, but that something was done to push the subscription over the edge.

Eustace also contended that the oversubscription of $285,000 was a signal that things are declining, not improving, and was not something for the government to brag about.

“I won’t describe that as oversubscribed, because that is less than one per cent over the amount of money you are looking for,” Eustace said.

“The prime minister could talk all the talk he wants; it shows a lack of confidence in the country’s finances,” he continued.

At a press conference last week; Prime Minister and Minister of Finance Dr Ralph Gonsalves said he would not disclose those private persons who had invested in the $40 million bond issue that was recently auctioned off on the Regional Government Securities Market.

“The Opposition Leader said he wants to know who bought. We will know who bought because we will have to pay the interest,” Gonsalves said last Tuesday, adding that there was a more appropriate question for Eustance to ask.

“You can ask me if any entity owned or controlled by the government has purchased and I will say to you that the National Insurance Services (NIS) bought, but I can’t talk people business,” the prime minister continued.

Gonsalves further contended that by law, he was required to pay the buyers of the bonds their interest and that should they decide not to collect it, that money must be placed in a separate account known as a sinking fund.

“So, when your 10 years comes, your money is safe because it is in the sinking fund,” he said.

And if I did not put money into the fund on an ongoing basis, Gonsalves said that he must be held accountable and will have to explain.

“But otherwise it’s the private sector, that’s all you need to know,” the prime minister said.

This, he said, was part of the financing arrangements for the capital programme for the 2012 budget and the proposal which was also included in the 2012 estimates were approved in Parliament.

Gonsalves further explained that since the international financial meltdown, the government had not gone to the market for long-term or medium-term money, except for the normal rolling treasury bills, which, he said, they do every month.

The Trinidadian firm First Citizens Financial Services, which has a local branch, partnered with the government to work on the process and to contact entities and individuals who would be interested in purchasing the bonds.

“That’s how it’s done; so we did it professionally,” Gonsalves said.

Not only did the financial institution partner with the government, but the prime minister said that it agreed to take $20 million of the bonds for themselves and to on-sell to their clients.

“Because they will strip the bonds down and they will make money on it,” the prime minister explained.

The NIS bought a further $5 million in bonds, Gonsalves said. (DD)