JNBS outlines debt-swap losses
Published:Friday | March 15, 2013 | 12:00 AM
Jamaica National Building Society (JNBS) says it stands to lose J$1.2 billion from its participation in the National Debt Exchange (NDX).
The projected loss is close to J$1.3 billion that the society said it lost under the first debt swap three years ago, the JDX, according to information conveyed to JNBS members at a meeting in Kingston on Tuesday.
JNBS General Manager Earl Jarrett also advised the meeting that the Government has not paid over J$2.3 billion of withholding tax that is owed to the building society from the first debt swap.
"As a holder of substantial amounts of government bonds, financial institutions such as Jamaica National will receive significantly less interest than contracted on our investments," Jarrett said.
"Because interest payments represent a significant portion of expenses for financial institutions, this will translate into a lowering of interest rates on savings," he said.
According to Bank of Jamaica data, JNBS has at least J$20 billion invested in Government of Jamaica securities.
Jarrett also said pension funds generally will be negatively impacted by NDX and beneficiaries can expect to receive smaller pensions because of the lower returns on GOJ securities.
Specifically, the pension funds managed by Jamaica National is projected to see interest income decline by US$15,000 on the US dollar portfolio, J$33 million on the Jamaican fixed-rate portfolio and J$3.3 million on the variable-rate Jamaican dollar portfolio, he said.
Jarrett said Jamaica National was one of the last entities to agree to participate in the debt swap.
"And because we are conscious of the fact that we are the trustees of your funds and that of more than 700,000 other persons, it was only at the very last moment that we committed ourselves to this process. And, in doing so, we said now as we did then, (at the first debt swap) that it is important that we understand what the plan is for Jamaica for the sake of our members," he said.
The NDX swapped out approxi-mately J$660 billion of GOJ securities for bonds with reduced coupon rates. The Government aims to save J$17 billion annually from the exchange. It says those savings should lead to a reduction in the debt-to-GDP ratio from 140 per cent now to 95 per cent in 2020.
Jarrett said the Government needs to be held accountable by the public to ensure that it delivers on its promises.
A watchdog committee has already been set up to ensure that the current commitments are honoured, he told JNBS members.