Aspects of the newly struck “agreement in principle” between Government and the Barbados External Creditor Committee, are not sitting well with one local economist.
Director of the Sir Arthur Lewis Institute of Social and Economic Studies (SALISES) at the Cave Hill campus of the University of the West Indies, Dr Don Marshall, told Barbados TODAY that while he was still awaiting the finer details of the deal to released, some of the conditionalities made public so far were “invasive”.
Marshall was referring to the clause providing for the reinstatement of forgiven principal and past due and accrued interest if Government defaults on payment before the successful completion of the ongoing International Monetary Fund (IMF) programme. He contends that this essentially removes Government’s ability to renegotiate terms with the IMF, should for example, the determination be made that the social ramifications were too onerous.
“I find this to be highly invasive and I think that it is part of the deal that requires public discussion and debate. The deal, like the IMF’s, demonstrates how out of touch the policy community is in relation to credit development, global finance and lending to sovereign nations. I am always disappointed that alternatives never appear to be part of any discussion,” contended Marshall.
He further argued, “This deal is harpooning us, saying that if we should, for any reason renegotiate default or exit from the current IMF arrangement, all of the favourable terms offered by way of repayment will be removed and you have to face the harsh conditions as originally stated. It complicates Barbados’ capacity to exercise an exit option should conditionalities in relation to performing under an IMF programme prove to be socially and politically burdensome.”
In a joint statement released on Friday, the conditions for breaking the year-long stalemate includes “a reduction of 26.3 per cent in aggregate sum of the original principal amount of the debt obligations and the past due and accrued interest as of October 1, 2019”. The external creditors would also exchange certain of Government’s US dollar denominated debt for new bonds issued by Barbados.
Marshall told Barbados TODAY that there were still some critical questions which need to be answered before any determination could be made on whether Barbados came out with a good deal.
“We need greater details on what the deal really is. We also need to know who does the creditor body represent. There is an amalgam that speaks to representing a group of creditors engaging in the negotiation process, but we do not know exactly if this includes entities such as Credit Suisse or the payments around the Dodds Prison facility. We simply do not know who this committee comprises of. We know it comprises bond holders and so on, but we need a little more transparency because these things are critical,” Marshall stressed.
The UWI lecturer however praised Government for securing a natural disaster clause that would, subject to certain conditions and input from the bondholders, enable Government to “capitalize interest and defer principal maturities due on the new bonds for two years” in the event that Barbados is adversely affected by natural disasters.
“It is useful to recognize that these islands face special disaster vulnerabilities now and by necessity this would have to be taken into account in any future arrangement,” he noted.