One of Government’s main economic minds has dismissed comments by Leader of the Democratic Labour Party (DLP) leader Verla De Peiza as nothing but “fake news”.
Though not explicitly mentioning the DLP leader, Professor Avinash Persaud, Prime Minister Mia Mottley’s Special Envoy on Investment and Financial Services, told Barbados TODAY that it was the DLP that should take the blame for the junk status that the island’s credit worthiness had to endure for several years.
“The last administration took us from having the one of the highest credit ratings in the region to one of the lowest,” said Persaud.
Following an upgrade of Barbados’ short- and long-term foreign currency ratings by Standard and Poor’s on Wednesday, De Peiza said there was very little to be jubilant about since it was under the current Barbados Labour Party administration that the country dropped five notches to default status in the first place.
“We have now moved one small step higher than where we were before the default. On the 31st of May last year, we were one step before where we are at now,” said De Peiza.
She also insisted that Barbadians have paid an unnecessarily high social cost for any perceived gains from the New York-based credit ratings agency.
“Our concern is how our people are faring through all of this,” said De Peiza.
However, Persaud rubbished those claims saying they were “two pieces of fake news on the credit upgrade from the international rating agencies that must be corrected”.
He insisted that it was the former DLP administration that shirked its responsibility to residents and was responsible for the lowering of the island’s credit rating to junk status.
“It was in March 2017, a year before the last election that after a long line of downgrades, Barbados was further downgraded from B-, where we have just returned, to CCC+. At that time in 2017, Standard & Poor’s warned that the outlook for Barbados was for a further downgrade unless something substantial changed,” Persaud recalled.
On March 3, 2017 S&P had lowered its long-term foreign and local currency severing ratings on Barbados to CCC+ from ‘B-‘, with a negative outlook.
At the time the ratings agency said the downgrade reflected its view that the Government’s willingness to take timely, proactive corrective measures to strengthen its financial profile continued to erode.
Persaud said: “Up to that point, the DLP administration was avoiding defaulting on payments to its creditors by defaulting on payments to Barbadians.”
He explained that this default was on the payment of reverse tax credit, National Insurance Scheme (NIS) contributions, tax and Value Added Tax rebates, Government contracts, medicines for the hospital and its commitment to security and the Bridgetown Port.
“It had been defaulting on Barbadians since 2012. It’s why when we came to office there were less than 50 working buses, a handful of garbage trucks, a broken water and sewage system and few audited public accounts. It was defaulting on all Barbadians in order to pay its creditors,” said Persaud.
“In June last year Barbadians drew a line on that. We said the Government has to be able to run its affairs to meet all of its commitments and that required finding as much efficiency as we could in Government expenditure, while spending what we had to on security, sewage, buses and more and asking the creditors to reduce their payments to an affordable level,” he said.
“The start to that process, the most shared economic adjustment programme in history, is now complete and ready to move to the next stage,” he added.
The economist said he was satisfied Barbados was now “climbing” back to having “the best credit in the region and beyond”, where it was before the DLP came to office back in 2008.
“It will take a few years to undo the damage. What’s worth doing takes time to do right. Almost everyone understands that and understands too that the signs that we are well on the way are there for all to see,” said Persaud.
“The rating agencies are reasonably waiting to see us hold to our course before upgrading us again. They say it will be politically challenging for us, but they should not underestimate the resolve and determination of Barbadians,” he added.