The Senate today debated a resolution to borrow a further US$13.9 million (BDS$27.8 million) to assist in the refinancing of a $73 million sugar debt.
Leading off debate on the measure in the Upper Chamber today, Minister in the Office of the Prime Minister Senator Darcy Boyce explained that the loan, which was made to Government a few years ago for the purpose of providing resources to the Barbados Cane Industry Corporation matured earlier this year and had been repaid.
However, he said additional funds were now needed to take forward the restructuring of the sector.
Boyce explained that of $73 million that was originally borrowed, close to US$13.9 million was arranged by a bond by Ansa Merchant Bank and Consolidated Finance.
“It is that US dollar portion of the bonds that we are here to discuss a resolution on,” he said.
The monies were previously treated as domestic borrowing under the Special Loans Act. However, the Government Senator explained that based on the advice coming from the Office of the Chief Parliamentary Counsel and the Solicitor General’s Office it should really be characterised as foreign borrowing under the External Loans Act.
The latest loan is due to mature in six years with interest payable half yearly at a rate of 7.95 per cent annum. Boyce also explained that the principle is to be repaid in 12 equal semi-annual installments, starting six months after the disbursements.
“The bond is being issued at a price . . . a little bit below par . . . which makes the effective interest rate slightly above 7.95 per cent. The rate that we are getting on this borrowing is a little less than what we were earlier on and therefore we are happy to be able to accept this and take care of the loan,” he added.
Boyce contended that the fact that the two financial institutions agreed to arrange these loans, showed the confidence they continue to place in Barbados and that all was not dark and lost.
While acknowledging that the original loan was to support the sugar cane industry here with the focus mainly on the export of raw bulk sugar to the United Kingdom, the Government Senator pointed out that the thinking had since shifted to the production of special premium-priced sugars and quality molasses.
He explained that molasses was a critical ingredient in the manufacture of rum.
However, he said with the declining production of sugar over the years, the country had been forced to import the liquid commodity and ran the risk of breaching the European Union’s Rules of Origin by importing a crucial component for its locally branded rum.
Hence, he said the construction of the multi-purpose factory to produce a greater quantity of molasses, along with electricity from biomass and special sugars, was vital.
“And so, the view in Barbados is that we need to make sure we can revive the sugar cane industry in order that we can get the molasses that we need for that rum industry which earns foreign exchange,” he said.