Despite a flat-out rejection of Government’s debt restructuring offer by the Barbados External Creditor Committee a month ago, a top economic advisor to the Mia Mottley administration Professor Avinash Persaud says Government has no intention of folding cheaply in the negotiation process.
In fact, Persaud insists that Government has a very strong bargaining position and it would therefore be pointless to settle for anything less than a fair deal for both parties.
In his interview with Barbados TODAY this morning Persaud argued that even though the default on the foreign debt could compromise Barbados’ ability to secure loans on the international capital markets, Government’s policy of no borrowing for the next four years negates this threat. However, the economist did not reveal whether Government plans to make adjustments to the latest known proposal, which was dismissed by the holders of Barbados’ foreign debt.
“What we have been trying to do is to get the best deal possible for Barbados, which means that it can’t be the quickest deal possible. If you play poker do you fold early? If you don’t need to borrow for four years you have a good hand. So, we are following the right strategy,” Persaud explained.
Persaud charged that the external creditors were attempting to apply pressure on Barbados by speaking publicly on the process, painting a picture that things were not going well. He also contended that the media was unwittingly helping them achieve these ends.
“The people who are really pushing us to settle early are the external creditors. What they do to push us to settle early is they feed you [the media] press releases. They announce that the Government is not speaking to them. Then you [the media] amplify their position and present it as a problem,” he stressed.
In a release dated June 14, the committee said it was disappointed that the Mia Mottley Government had released restructuring scenarios that “ignored important feedback” in respect of financial and structural terms put forward during negotiations between the committee and the authorities over the past several months.
In its June 11 creditor update, Government issued a proposal, saying it was done from “the point of view of bondholders”, while respecting the debt targets as agreed with the International Monetary Fund (IMF) under the Extended Fund Facility (EFF)-supported programme.
In recent months economic pundits have warned Government that the stalemate did not augur well for the country and urged the Mottley-led administration to find some way to settle the critical matter, which is being handled by the London-based firm White Oak.
In an interview with Barbados TODAY earlier this month, local economist Jeremy Stephen contended that Barbados is running out of time to settle the external debt negotiations, as a chunk of its foreign debt payment was due in two years.
The UWI lecturer said, “We can’t afford to stall on them much longer and it could actually become worse the nearer we get to 2021.This is when we are supposed to pay off a massive amount of foreign debt.”
He argued at the time, “My guess is that if the foreign investors just do not have any resolve on these matters, then it could actually become a bad situation.”
However, Persaud told Barbados TODAY that based on the efficiency and speed in which Government handled the much higher domestic debt, he is confident that the external debt, which represents 20 per cent of the overall debt, will be settled within the two years.
“We settled the domestic debt in record space of time. We have shown that we can do things quickly. We are taking out time to get the best deal possible for Barbados. We have Barbadians’ backs. We have designed our programme in such a way that we have as much power as possible. We have a very small debt and we do not need to borrow and therefore we have given ourselves the best opportunity to fight for Barbadians to give them the best deal,” said Persaud
“In reality, we would really like to move on, but we don’t want to move on at the expense of Barbadians. Anything that we do not get that we should get and any unfairness, will be a problem for Barbadians. I hear people saying to me don’t blink and we are not blinking,” he said while expressing confidence that Government has the backing of the people in this process.”