President of the Barbados Economic Society (BES) Jeremy Stephen has expressed concern about Government’s debt in light of the latest report by the Central Bank of Barbados which shows that interest and amortization on the country’s external debt increased to $441 million in financial year 2015/2016, representing about 9.8 per cent of foreign exchange earnings.
“Net public sector debt stood at 69.9 per cent of GDP at the end of the fiscal year, compared to 67.5 per cent as at March 2015. The gross public sector debt ratio was 107 per cent,” said Central Bank Governor Dr DeLisle Worrell, who also revealed that the Central Bank had provided $190 million of “newly created money” for financing of Government’s deficit.
Reacting to the report, Stephen said while he welcomed predictions of 1.6 per cent economic growth this year, which falls in line with the International Monetary Fund’s (IMFs) projections of about 2.1 per cent, this was dependent on oil prices remaining low, which would impact other sectors such as tourism.
“I am . . . celebrating the fact that we are looking towards a return to form, but the debt overhang, that is the amount of public debt that we have got on our Government books, along with the increase in debt servicing costs that Government is experiencing, and might be likely to experience in the near future as interest rates are projected to grow, is a cause for concern,” Stephen told Barbados TODAY.
He said while the BES agreed with both the Central Bank and the IMF that much anticipated investment projects were beginning to “get off the ground in some form or fashion”, it was generally concerned about
the fact that “the worldwide economy is beginning to slow again on the face of China’s slow down.
“World trade is slowing again and [there is] evidence that you are seeing out there of a very expensive dollar . . . So maybe . . .our tourism season and any recovery, or any improvements that we continue to see, would be done on the backs of Americans as opposed to our normally more reliable source markets, those being the UK and Canada. So once the debt can be dealt with or treated as some form of priority going forward, then I welcome this recovery,” he said, pointing out that he had originally predicted economic recovery would take place “around 2017”.
“We wanted it on the back of more diversification, but the debt overhang that Government is currently experiencing will, once they do believe their hands are tied, inhibit their ability to diversify the economy in an effective manner. But if Barbados is expected to be sustainable going forward, it must do so, not on sunset industries, but sunrise industries that allow us to have not just a greater return on investment, but allow us to compete effectively,” Stephen said.
He also warned that the days of low fuel prices would soon be over.
“With all global indications most people, especially after the fire that happened in Canada recently, do not think that $30 oil is the new norm any longer,” he said.