Repayable Welsh Government bonds will help fund projects
THE Welsh Government has taken up new powers to issue bonds to fund capital projects.
As part of its new borrowing facility agreed with the UK Government, and which from next year will rise to £1bn, bonds issued will have a long-term repayment structure to fund capital projects such as new schools, roads and public transport.
At this stage, the Welsh Government couldn’t say what interest the bonds would carry or over what time period the capital would have to be paid back to bond-holders, which would include financial institutions and pension funds.
It also said it has yet to determine if there will be different terms for the bonds – for example, those repayable over 10 years or those over 25 years – as well as what the cost of placing bonds in bond markets could be.
The new powers were part of the 2015 St David’s Day Agreement between the UK and Welsh governments.
Finance Secretary Mark Drakeford said: “At a time when our capital budgets are continuing to fall, these additional powers provide us with the full suite of borrowing levers so we can continue to invest in our ambitious infrastructure plans for the whole of Wales.
“We will always use least expensive forms of capital first when investing in infrastructure before using other sources of repayable capital, such as bonds.”
“The bonds – in common with other forms of borrowing – must be repaid with interest and will have an impact on the revenue available to the Welsh Government to fund dayto-day public services.
“Specific details of the bonds are yet to be determined, but the Welsh Government will only use these powers once all cheaper forms of capital are exhausted.”
The Welsh Government’s capital spending plans, set out in the draft Budget 2019-20, are based on using £250m of capital borrowing over the two-year period 2019-20 and 2020-21.