No debt restructuring plans, says Straughn

Barbados is not undergoing any new debt restructuring

That assurance was given today by Minister in the Ministry of Economic Affairs Ryan Straughn, as he sought to clear the air about the Government’s recent debt suspension request.

Speaking in Parliament this morning, during debate on the Appropriations (Amendment) Bill 2020, he said there seemed to be a misconception that Barbados was seeking to restructure its debt. However, he said, Government was lobbying for longer repayment periods for debt incurred during the COVID-19 pandemic.

Straughn said that under the Barbados Economic Recovery and Transformation (BERT) Programme, the Government had committed itself to a 60 per cent debt to GDP ratio by 2033, and as a result had successfully restructured both its domestic and external commercial debt two years ago.

That move, he said, allowed the Government to move from 171 per cent in 2018 to around 118 per cent prior to the COVID-19 pandemic.

Straughn said because of the substantial loss in revenue due to the pandemic, the Mia Mottley-led administration was forced to borrow money to finance the shortfall.

He said the Government had been engaging in a number of multilateral discussions with the International Monetary Fund (IMF), the World Bank, and other lending institutions as well as rating agencies, about how it would treat debt incurred as a result of the COVID-19 pandemic.

“There seems to be some level of misunderstanding in the public domain in relation to our debt suspension request…. We have been advocating quite strongly that the debt that is incurred with respect to COVID-19, that the payback of that debt should be done over a much longer period than the existing debt that persons would have already had on their books,” Straughn explained.

“And why is that? You would appreciate that in this pandemic, as it has evolved, you have a situation where households as well as many businesses are under stress, and therefore even if the economy was to recover within two years, the debt burden that we now hold as a country – and it’s not just Barbados – that you would find yourself where the economy is back at the same level as it was at the beginning of this year; but your debt level and potential debt service would be over and above that which the potential carrying capacity could be, which then triggers potentially some level of financial implosion.

“We have been advocating within the context of the multilaterals and even in the context of discussions that we have had with a number of the rating agencies about how to redefine what debt sustainability is or find a way to treat very differently, the debt that has been incurred with respect to COVID-19, such that over the course of the longest possible period that that debt can be serviced without necessarily creating a debt overhang or stress for economies such as Barbados,” the Minister pointed out.

Straughn maintained that had it not been for the pandemic, the Government would have had no need to borrow additional monies.

“I want to give the public the confidence that what is being contemplated is not in any way associated with debt restructuring in the nature that would have taken place with respect to the domestic and external debt,” he promised.
(RB)