Time will tell who is wrong and who is right!
This was the terse response issued by outspoken Minister of Agriculture Dr David Estwick today in response to the latest economic action plan, which is currently under active consideration by the Freundel Stuart Government.
The new plan, which includes proposals for dealing with the island’s ballooning debt, does not take into account Estwick’s controversial US$5 billion United Arab Emirates-funded plan, but a much more conservative debt restructuring programme — one which seeks to yield $112 million annually in interest savings, which Estwick is neither convinced is based on the best economic advice nor can yield the desired fiscal turnaround.
However, saying he has been burned enough by his own Government, he has now resigned himself to the position that he must allow his political colleagues to learn the hard way.
“They [Government] are free to choose whatever they want to do. Time is the best evaluator of reason. They have to find a way to attempt to discredit me, but I know that we cannot get out of these economic challenges without restructuring and the financing of the national debt,” he told Barbados TODAY.
“Let them proceed. Time is the best revealer of who was right and wrong. I proposed domestic debt restructuring, foreign debt restructuring, a combination of the two as well as the entire debt via the sinking fund strategy . . . . They are on their own,” he stressed, adding, “I have nothing more to say on the matter.”
The latest debt restructuring proposal is outlined in a 30-page report submitted to the Prime Minister last month by the Fiscal Deficit Committee of the Social Partnership, which was mandated by Stuart on March 3 to make recommendations on the way forward for the economy of the country, whose foreign amortization and debt service is estimated at between $300 million to $400 million annually.
The report specifically suggests that as a means of tackling the bothersome debt issue, Government should cut the coupon rate and extend the maturities on Treasury Notes and Debentures by 200 basis points to yield the $112 million in savings.
This approach runs counter to Estwick’s sinking fund proposal for wiping out the country’s entire debt and restoring economic growth and sustainability. However, the committee’s proposal, which comes amid concerns about the island’s dwindling foreign exchange reserves which fell to 10.3 weeks of import cover or below $700 million last December, is more in line with recent suggestions by former Prime Minister Owen Arthur and Opposition Barbados Labour Party economic advisor Clyde Mascoll for there to be a debt exchange, which allows the island to surrender its existing debt and bond instruments and replace them with a different maturity.
The report also acknowledges that the cross default clause on the Credit Suisse Loan would require immediate repayment of $317 million.
“Government should view the cross default clause as an obstacle to be overcome, rather than an absolute barrier,” the report says while warning that the necessary restructuring should be done concurrently with financing from multilateral agencies, which it said typically takes six to nine months to negotiate.
The move is expected to reduce the annual income of the National Insurance Scheme, which currently holds Government debt instruments, by $60 million, but is not expected to have an immediate material impact on the NIS’ cash flow, since the NIS currently reinvests interest in Government paper. However, the committee acknowledged that it could lead to medium term adjustments to its contribution rates, or a reduction in benefits.
Commenting on the proposal today, Estwick was still not satisfied that Government was heeding the best economic advice.