GOVERNMENT & NPF SIGNS DOMESTIC DEVELOPMENT BOND AGREEMENT
The
Solomon Islands Government (SIG) and Solomon Islands National Provident Fund
Board (SINPFB) signed on Monday 20th March 2017, a Domestic Development Bond
Agreement in the presence of senior officials from the Ministry of Finance and
Treasury, Solomon Islands National Provident Fund (SINPF) and the Governor of
the Central Bank of Solomon Islands.
Under
this arrangement SIG issues Domestic Development Bonds worth of $150 million to
SINPF. The Domestic Development Bonds are in two series; the first series is a
15 year bullet $120 million face value bond with an interest rate of 6.5% per
annum.
The
second series is a 10 year amortizing $30 million face value bond with a grace
period of 5 years with interest only to be paid during the grace period. At the signing the SINPF Board Chairman
issued a cheque of $120 million to the Minister of Finance for the 1st series
bond. The remaining $30 million will
be paid on 30 March 2017.
The
principal repayments and interest payments of the bonds will be paid bi-
annually in the months of September and March during the bond term.
At the signing ceremony, the Finance Minister, Hon. Snyder Rini thanked the SINPF Board for taking the initiative to participate on the Domestic Development Bond issuance by the Government. Hon Rini further highlighted that the proceeds from the Domestic Development Bonds will be used by SIG to fund its priority projects and investments.
SIG will use the money to co-finance the Undersea Cable Project and shares on Solomon Telekom Company Ltd and South Pacific Oil Ltd.
Minister Rini added that the signing of the Development Bond Agreement marks a new milestone for the Government in terms of the government domestic bond market development.
The Minister announced that SIG had plans in place to issue a further $150 million in Domestic Development bonds this year 2017. This will be a public issue and the Minister encourages the SINPF and other interested stakeholders to participate.
Mr.
Peter Boyers, Chairman of the SINPF Board in responding advises that his Board
is pleased to participate at this first bilateral bond issue and the SINPF has
been looking forward for such an opportunity after the government paid in full
its previous development bonds in late 2015.
The
interest rates are above our annual mandatory crediting rate of 2.5% with these
bonds annually earning $9,807,000 in interest for our members in the first 5
years and reducing as principal amounts of the amortized bonds are paid down.
The
Chairman further advises that as part of the Fund’s investment strategy under
our strategic asset allocation (SAA) guidelines, to achieve our investment
objective to provide real returns to our members during their membership term
with the Fund, the Board will allocate part of its investment portfolio to
government securities.
The
SINPF is well placed within our country to invest in long term national
strategic infrastructure projects that will earn good long term returns for our
members whilst also importantly, supporting the development and growth of our
national economy.
One
of the conditions set out in the agreement is that the proceeds from the
Domestic Development Bonds issued under this agreement will not be used to
finance any SIG recurrent expenditures.
In
the past, SIG also issue Domestic Development Bonds to commercial banks and
SINPF. All those bonds were fully repaid in 2015.
Pursuant
to section 3 of the Government Loans and Security Act 1979, the Minister of
Finance has the authority to raise loans by way of issue of securities in the
form of bonds.
The
Domestic Development Bonds issued under the agreement have been issued in
accordance with the Annual Appropriation Act 2017 and compliance with section
(66) of the Public Finance Management Act 2013.
Therefore,
Domestic Development Bond issued are in accordance with the Government Loans
and Security Act 1979 and the Public Financial Management Act 2013.
The
Governor of the Central Bank of Solomon Islands Mr. Denton Rarawa as the
registrar of the bonds was present at the signing ceremony to issue the bond
certificates in favour of the SINPFB based on the terms and conditions
contained in the bond agreement.
Senior
officials from the SINPF and the Debt Management Unit of the Ministry of
Finance and Treasury has been negotiating the terms and condition of the bond
since September 2016 with approvals obtained from the SINPF Board in December
2016 and Minister of Finance in February 2017.
ENDS///
Source: Government Communication Unit
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