Best bet to settle external debt

The institution providing funding for the Barbados Economic Recovery and Transformation (BERT) programme is suggesting that lower interest rates and longer payment period may indeed be the best solution for external creditors.

This suggestion comes as government and holders of Barbados US-dollar debt are in a stalemate regarding what arrangement should be put in place to restructure that potion of the country’s debt.

A local debt restructuring plan was reached in September with holders of Government instruments taking a cut in interest and accepting payments over a longer period.

However, while Government was hoping to complete the external debt restructuring with a similar deal by March 31, external creditors, who account for close to 20 per cent of Government overall debt, have been refusing to accept this.

Deputy Division Chief for the Caribbean II Division at the International Monetary Fund (IMF) Bert Van Selm told Barbados TODAY that portion of the debt restructuring was critical to the contribution of the return of confidence to the local market.

“We hope for this matter of course, to be resolved at some point. Also, from a confidence point of view, that is important because only after the debt restructuring has been completed you can expect the rating agencies like Standard & Poor’s and Moody’s to start upgrading Barbados. So it is important that the process is wrapped up at some point,” he said.

While insisting that the process should not be rushed, Van Selm insisted that what was also important was for future payments to be “smooth”.

“Before it was being restructured it was quite lumpy; so there were concentrated payments that were due at certain points in time that made it difficult for the Government of Barbados to meet its targets. So one important outcome of this debt restructuring would be a much smoother payment of debt going forward, but hopefully in terms of maturity and interest rate, this is something to be discussed between the government and its creditors,” he said.

“The IMF doesn’t get involved in this, but from a debt sustainability perspective of course, lower interest and longer maturities would help. What is important for us in this is that there is an orderly process and that government of Barbados shares data and negotiates in good faith. And that is what we have been seeing so far, so that is very good,” he added.
marlonmadden@barbadostoday.bb