By FAY SIMMONS

Tribune Business Reporter

jsimmons@tribunemedia.net

The Central Bank will launch its drive to boost Bahamian savings and investments by making a total $5m in government savings bonds available to the public this November.

John Rolle, its governor, yesterday explained that the $5m is an initial tranche of up to $17m in savings bonds that will be made available to retail, individual investors during the 2024-2025 fiscal year that closes at end-June next year.

“We’re announcing the launch of The Bahamas government savings bond initiative,” said Mr Rolle. “So public education starts today, and the first sale of bonds will take place in November. We’re starting with a very modest $5m at the start of the sale process, and over the rest of the Government’s fiscal year we have set an overall target of between $10m to $17m which will be dependent upon public interest.”

He explained that the initiative is being launched to encourage Bahamians to take advantage of saving opportunities, not for the Government to obtain a new funding source. “With these levels of activity, it must be emphasised that the objectives of this programme are more about encouraging savings rather than providing the Government with any substantial new source of funding,” said Mr Rolle.

“This programme is designed to facilitate easier access to savings opportunities and to encourage increased savings by making it possible for individuals to build up their holdings in affordable increments.” Mr Rolle said the interest rates attached to the bonds will be better than those on fixed deposits offered by commercial banks. Bonds will be available for purchase in increments of $100, capped at $50,000.

“Individuals will also have the flexibility to withdraw savings early if they encounter any urgent need of funds,” said Mr Rolle. “This is different than the Bahamas Government Registered Stock [bonds,], which also pay a guaranteed interest rate, but for which the face value can increase or decrease if the holder decides to redeem them early.

“The savings bonds will be available for purchase in any quantity, in increments of $100. The bonds will pay interest at rates fairly close to those earned on Bahamas Government Registered Stocks of similar maturities.” Mr Rolle said only Bahamian citizens and permanent residents will be allowed to purchase the savings bonds, and institutions and institutional investors will not be allowed to invest.

While there is a $50,000 cap, or ceiling limit, on investing in any single issue, there is no limit on how many bond issues an individual can participate in. The bonds will be issued in four maturities - one year, two years, four years and six years - and the fixed rate of interest will be calculated at half a percentage point lower than comparable interest returns on a registered stock of the same maturity.

“The savings bonds’ fixed rate of interest will be calculated at just one half of a percentage point lower than the comparable interest return on a registered stock of the same maturity, and the interest will be paid semi-annually, transferred into the bank account that the individuals identified when they began to make the purchases,” said Mr Rolle.

“If there is an emergency need, participants can cash out of the bonds early if they so require. If they hold the bond for what we determine to be a minimum of between six months to 24 months, depending on the maturity of the bonds, they’ll be able to make that withdrawal without any penalties.

“If they hold it, hold the bonds shorter than that period, then there would be a penalty equivalent to about three months’ interest at the time of the withdrawal. These early withdrawals would be timed at the same half-yearly dates at which interest would be paid on the instrument.”

Mr Rolle said once the first offering is launched in November 2024, individuals will be able to purchase them over-the-counter or on the secondary market for the duration of the fiscal year.

“It’s very regimented, and it’s predictable as to purchases of savings bonds,” the Governor added. “You’ll be able to make those purchases whenever there’s an initial public offering or an advertised sale of the bonds and, subsequently, individuals will be able to purchase them over-the-counter or in the secondary market by making direct inquiries with the Central Bank.

“This entire process is electronic, meaning that individuals are able to go online, access the Central Bank system if they do not already have an account for other types of government instruments, investments. To be able to create an account, follow very simple identification processes, and they’ll be able to begin the process of buying and adding savings bonds to their investment holdings.”

Mr Rolle said although the Government will be able to make use of the funds to supplement its financing resources, a $10m to $17m savings bond campaign will not put “any major debt” in how government raises funds.

“Whatever funds are raised, government has the opportunity to make use of those funds, similar as it is borrowed through other channels,” said Mr Rolle. “But given that, in any year, the Government’s needs in terms of either borrowings or reissuance of existing debt is in the hundreds of millions of dollars, in some years, over a billion dollars, what we’re saying is that a $10m to $17m programme of savings bond is not intended to put any major debt in terms of how the Government raises funds, but whatever funds are raised to this means they’re also available to the Government to supplement its financing resources. But it is not significant in the overall needs of the Government.”