Economist Jeremy Stephen has warned that Government could land itself in court if it continues to force its will on external creditors without properly engaging them in dialogue.
And just like Argentina in the early 21st century, failure to broker a deal could indirectly result in increased taxes and even food shortages for Barbadians if the standoff is allowed to drag on.
The UWI Cave Hill Banking and Finance lecturer was responding to the release of yet another international media report, which indicated that the committee of creditors plans to reject Government’s most recent debt exchange proposal.
A Bloomberg report published on Thursday morning quoted a spokesperson for the creditors as predicting that Government’s decision to force its offer on them, would be “highly detrimental” to the country. At issue, the article reported is a disagreement over how much of the burden should be carried by external creditors.
Government currently owes approximately U.S $700 million in bonds, bank loans and other foreign debts to long-term investors, regional central banks, individual bondholders and financial institutions.
According to the report, the creditors’ latest offer would have allowed Government to reach its debt target a year later than it wanted. Creditors accused the Mia Mottley-led administration of trying to force severe restructuring terms on them to meet its debt targets.
Government has offered foreign creditors a similar deal accepted by local debt holders, which is lower interest rates and repayment over a longer period.
In an interview with Barbados TODAY, Stephen compared Government’s stubborn stance to that of the previous administration, which downplayed the serious implications of numerous downgrades by international debt rating agencies.
“The story is being spun in a way that the credit committee is being un-faired and Government is using irrational means to hold its position…
“The attitude that is being portrayed on the part of Government as carried by these news outlets is very reminiscent of the previous Government and people like Donville Inniss, who never took seriously the debt downgrades. This Government’s attitude is the same…and it will be more difficult in the long run to convince global investors to take Barbados seriously.
“A resolution has to be passed somehow, but it seems that both parties will not agree and in a case that Government forces the restructuring on them, I could see a court case coming out of it just like Argentina; and that country has never been able to recover in terms of being able to attract international foreign investment after how things fell apart in the early 2000’s,” said Stephen.
Even more troubling, he explained, was that if Government could not attract private lenders in the future, development could be stifled and the critical foreign currency needed to access basic items could be severely reduced.
“Something as simple as oil to power our homes, buying vehicles, cleaning agents for the environment, materials to build homes and even something as simple as buying our shoes and our clothes. Everything is affected via imports, so in terms of the average person, if we don’t earn enough foreign exchange, it has to come from somewhere and it usually comes in via loans,” he explained.
“In the long term, we could have a lack of access to foreign investment which could top up the reserves but further the tax burden of Government. If we have to continue borrowing from the IMF (International Monetary Fund), it could result in higher taxes, but if it drags out really badly, we could also expect shortages of food and other imported materials.”
Barbados TODAY has since reached out to Roy Morris, Press Secretary to Prime Minister, Mia Mottley for comment on the recent developments. However, no response was immediately available.