Debt deal ‘will save billions’ - by David Hinkson November 14, 2019

Barbados is expected to save over $2 billion a year over the next four years with its new debt restructuring programme for external creditors, the Senate was told today.

Acting Leader of Government Business in the Senate Senator Kay McConney revealed this morning that the savings would amount to $2.4 billion (US$1.2 billion),  as she introduced the Debt Holder (Approval of Debt Restructuring)(Amendment) Bill.

In spelling out the details, she said: “Our Government, having come to the agreement in principle that we have with our external debtors, now see it fit to exchange debt for visible securities up to US$580 million.

“This new borrowing, in the form of a new series of securities, will be to support the principal agreement to restructure our government’s external debt.

“This resolution also proposes the establishment of a sinking fund, that is, money set aside or saved up over time to pay off debt, which will soften the burden of having to make a big outlay one time.

“This all means for Barbados that once we sort out the legal and administrative framework, the perceived country risk for Barbados will be reduced, and Barbados will become more attractive to foreign investors, which will contribute to our much-needed growth.”

She declared that Government had made considerable progress in the debt restructuring exercise following the crisis the country had found itself in when the Mia Mottley administration assumed office in May 2018.

Senator McConney said: “When we took over and we compared what this country was producing with what we owed in public debt, we found the debt to GDP ratio was 157 per cent or more, depending on the source used at the time, so we were the third most indebted country in the world.

“That ratio was high and it meant in plain language that Barbados was not producing enough to pay its debt or bills, and with so much money having to go out in debt payments, Barbados was not in a good position to take care of a number of things the people needed like roads, garbage collection, school repairs and many other bills this country had to pay.

“We settled with our domestic creditors in four months with a significant uptake in the 90th percentile.

“This bill now seeks to validate instruments that were received and issued by the Central Bank to local debt holders after we had made that settlement in four months that were not a part of the second schedule of the 2018 Act.”

Deputy President of the Senate, Rudolph Greenidge, explained that the debt restructuring was not a forgiveness or write-off of debt, but “a temporary relief from our financial anxiety and our financial worries, that gives us elbow room to do a few more things, such as purchasing garbage trucks, Transport Board buses, making improvements to our schools, and fixing our roads. We will now have an extra $4.5 billion dollars so we can pay attention to our social agenda”.

He commended the UK-based consultancy firm White Oak, as well as Government economic advisors Dr. Clyde Mascoll, Dr. Avinash Persaud, Kevin Greenidge and Minister of Finance Ryan Straughn for their work on the overall economic restructuring efforts.

He said former Governor of the Central Bank Winston Cox had also commended the debt restructuring agreement as a “solid one that will get the country back on track”.

Senator Greenidge said that while people had criticised the $27 million fee paid to White Oak, “paying out $27 million to save $4.5 billion is a no-brainer.”