Former Central Bank Governor Dr DeLisle Worrell sees no reason to celebrate the Fair Trading Commission’s (FTC) ruling on the proposed sale of the Barbados National Terminal Company Limited (BNTCL) to the Sol Group.
Last Friday Barbados TODAY broke the news that the FTC had finally okayed the controversial deal, ten months after it was first announced that the entity was up for sale.
However, Sol and the Government now have to meet to mull over the FTC’s stipulations, which include that there could be no 15-year moratorium on construction of new terminal facilities.
The FTC has also rejected Sol’s call for a 32 per cent pre-sale increase in throughput fees, on the basis that it could impinge on the provisions of the Fair Competition Act, which prohibits merger increases in prices.
However, even if Government is able to get the US$100 million it is asking for, Worrell does not believe it will make a big difference to the country’s bottom line at this stage, given a high fiscal deficit in excess of five per cent of gross domestic product, a national debt of over 100 per cent of GDP and less than $600 million international reserves.
“It will be in one shot injecting foreign exchange, but I think that at this stage of the game, it won’t really make that much of a difference,” Worrell cautioned today, while emphasizing that $100 million would be a one off injection in an economy which still has serious problems to address.
The former Governor, who was fired by Sinckler back in February after being his economic adviser for a number of years, was addressing the annual general meeting of the Small Business Association at Savannah Hotel this afternoon.
During his presentation, Worrell warned that the Barbados dollar, which is currently pegged at two to one against the US dollar, was in danger of devaluation because of the low level of the reserves, which are currently well below the 12-week benchmark. He also warned that the Central Bank’s “war chest” was being depleted.
The respected economist also outlined his alternative fiscal strategy for Barbados that included much more than divestment of state enterprises such as the BNTCL, a subsidiary of the Barbados National Oil Company (BNOC).
In fact, Worrell is proposing that 4, 500 workers need to be sent home from the public service over the next three years. He is also contending one of the quickest ways for the island to return to investment grade was by way of a structural adjustment programme with the International Monetary Fund (IMF).
“We need to get back to investment grade . . . because if we are not investment grade, we are effectively out of the private capital market. Our last serious bond floatation was in 2012. We had US$200 million in bonds and we had applications for about US$800 million. And that was because we were investment grade,” the former Central Bank Governor said, adding that people who buy investment bonds do so to hold until maturity because they have a good coupon.
“As soon as we fall below investment grade, those people are no longer interested,” he emphasized, while suggesting that attention should also be paid to credit downgrades.