Straughn says 20-year loan from local banks has favourable terms

Barbados will be paying back almost $10 million every three months for 20 years under the terms of a special $600 million loan it has secured from a trio of Canadian-owned locally operated commercial banks, as part of a debt-for-climate swap.

However, Minister in the Ministry of Finance Ryan Straughn says the massive loan will not increase the country’s debt burden but will provide significant savings of approximately $300 million.

He told the Lower House of Parliament on Tuesday that several favourable terms were attached to the loan – the government’s largest undertaking through local finance – which has a fixed interest rate of 3.25 per cent and will mature in October 2044, and allows Barbados to pay down on its debt.

CIBC is lending $360 million, Royal Bank will provide $140 million, and Scotiabank will lend $100 million. The loan will be used to repay higher-interest loans from the Inter-American Development Bank (IDB) and the Green Climate Fund (GCF) and use the savings in interest and fees to build a new tertiary-level sewage treatment plant at Graeme Hall, Christ Church for US$120 million (BDS$240 million) and undertake associated works through the Barbados Water Authority (BWA).

Among the terms of the loan is a grace period of five years and three months before payments become due.

“The repayment 1.67 per cent of the disbursed amount each quarter and you have approximately 60 quarterly payments of $9 990 000 commencing in January 2030 . . . . With this grace period, it means we have some space before we have to start repaying these creditors the loan,” Straughn said.

“One can interpret this one of two ways. I prefer to look at it as the fact that we’ve been able to demonstrate the responsibility of government. We’ve been able to meet our targets under the [IMF] programme and others supported by the IDB and . . . others in relation to what we’ve been doing. Therefore, people see the confidence being demonstrated now with the upgrades, as being able to say, ‘look, we are confident in the fiscal management of the government, and therefore, we can on-lend and be able to have a grace period, which is a little outside of what was the norm’.”

Among the requirements of the BWA will be to fix water leakage in the system, institutional strengthening, and training for disaster risk mitigation. The water agency will also have to establish a resilience steering committee and create a water sanitation master plan for a 30-year horizon that examines the physical development plan, projections for drinking water supplies, sewage, socioeconomic and environmental assessments, and a sludge management strategy, among other things.

(IMC1)