Banks, pensioners and other domestic bondholders are being asked to show some understanding and make a sacrifice for the nation’s future during the Government’s ongoing debt restructuring exercise, a Minister said in the Senate today.
Piloting the debate on the debt restructuring policy in the Upper Chamber, Foreign Minister Senator Jerome Walcott said the decision to suspend debt payments was not easy but necessary given the current state of the economy.
“It was not an easy decision. It was one Cabinet was involved and there was much discussion and debate to come to that decision but it was recognized we had to do something in terms of stopping the slide on our foreign reserves,” said Senator Walcott.
“Out of that, it was also decided that we needed to come to develop a plan which came to be known now as the BERT Plan – the Barbados Economic Recovery and Transformation plan,” he said, acknowledging that despite a number of meetings and explanations, some people remained critical of the restructuring plan.
Under a debt exchange offer, which expired on October 5, individuals and companies holding domestic treasury notes, treasury bills and debentures will get new instruments but receive significantly lower interest and longer repayment terms.
There have been widespread criticisms and concerns that should domestic creditors, especially pensioners, accept the offer, their standard of living could be affected.
But just two days ago, Government reported that although the Central Bank continued to reconcile tenders in its role as exchange agent for the transaction, preliminary estimates indicated that holders of more than 90 per cent of eligible claims had accepted the offer.
The Prime Minister also indicated that further consideration will be given to providing relief to pensioners, some of whom have expressed fear of lower investment returns and not living long enough to cash in on Government paper.
Insisting that the plan was “absolutely necessary” in order to help lower the debt, bring about fiscal consolidation, rebuild the foreign reserves and restore economic growth, Walcott urged all affected by the suspension of debt payment to make the sacrifice.
“We are asking all Barbadians to play their role in terms of those who have invested interest – the pensioners and the others and indeed the financial institutions. We are saying we understand what was originally due to you. We are saying understand the situation. It is a situation where we give you a bit less in an effort to prevent the entire collapse of the economy where you might get nothing, and that this was quite possible,” explained Walcott.
“For the pensioners, we are trying to make it as . . . easy for them to bear in terms of the period in which they will have no return on their investment. Again it means calling on all of us to make some sacrifice in terms of the development of the survival of Barbados’ economy and indeed to take us through this process of restructuring and getting the economy going again,” he said.
Adding that the move was also necessary to preserve the fixed $2 to US$1 currency peg, Walcott insisted that the decision was unavoidable.
Using the phrase “you have to break eggs to make omelet”, Walcott said, “in this case it is not being callous but is saying that we have to make sacrifices at this point in time to build better and stronger Barbados, a more viable Barbados for all Barbadians – not only us but for those to come.
“The necessary stress tests have been done in terms of some financial institutions looking at their capital base, their revenues, their liabilities and solvencies. And I want to reassure the Honourable Chamber that as part of the process it is understood, where necessary, safeguard measures will have to be put in place,” he said, without giving details of those measures.