Creditor standoff

Governor of the Central Bank Cleviston Haynes is hoping that the deadlock between Government and external creditors on a debt restructuring plan will be resolved before year-end.

While reluctant to give an estimated timeline on the matter, which has been ongoing for the past year, Haynes said he was optimistic that an agreement would be forged that would satisfy both parties.

He made the comments on Friday while responding to questions from journalists during the half-year economic review from the island’s premier financial institution.

“I am hopeful that we can get it done before year-end but I don’t want to give you a specific timeline. We are working as hard as possible to be able to bring closure to the matter,” said Haynes.

“We have not yet got to a position where the counter proposals from the creditor committee match the 60 per cent target that we would want to be able to reach. Therefore, you look at different ways to see if you can get to your final position and that is what we are looking at. I can tell you that discussions are ongoing and we are hoping and optimistic that in the not-too-distant future we will be able to arrive at a final position on this matter,” he said.

Haynes explained that a critical part of that final position should be that government would still be able to achieve its targeted 60 per cent of debt to gross domestic product (GDP) by 2033, which is agreed with the International Monetary Fund (IMF) under the External Fund Facility-supported programme.

“So right now we are not quite at that 60 per cent which means we have to tweak the terms and that is what the discussions with the external creditors are about – tweaking the terms to ensure that we are able to achieve the 60 per cent target.

Government’s overall debt currently stands at about 124 per cent of GDP, down from the more burdensome 157 per cent of a year ago.

Immediately after coming to office at the end of May last year, the Mia Mottley administration suspended all debt payments and managed to reach a debt restructuring plan with local creditors by October, which consisted of longer payment terms and a cut in interest.

However, the creditor committee representing holders of US dollar-denominated debt, unanimously rejected the offer two months ago following a June 11 creditor update from Government.

The committee holds over 55 per cent of the aggregate total of the instruments it represents and is comprised of long-term investors, including regional and international financial institutions, pension funds, regional central banks and individual bondholders.

Haynes remained optimistic of a resolution soon, but maintained that the outcome should not put undue strain on the fiscal or on the balance of payment in the future.

“We are optimistic that we will find a solution that is acceptable to ourselves and one that the creditors also find acceptable,” he said, adding that it was not unusual or surprising for external debt restructuring negotiations to take “a little longer” than domestic debt restructuring.

“Having said that, it is important for us to be able to complete the external debt restructuring because it removes uncertainty,” he said.

“We have put certain proposals on the table. They have put counter proposals and we are trying to get to a point where both sides are ad idem (agreement on the same items) as to how we achieve. What the Government of Barbados is very clear on is that it has committed itself to achieving a 60 per cent debt ratio target by 2033. Therefore, whatever proposals we end up with, that is sort of the line in the sand that we have to meet,” said Haynes.