With very little investment options currently available on the local market, at least two prominent economists are predicting that there could be a handsome take up of Government’s criticised Barbados Optional Savings Scheme (BOSS) bonds.
Giving an assessment of the proposed scheme, which opposition political pundits have advised public servants to resist, regional economist Marla Dukharan described the offering as an innovation.
She told Barbados TODAY that Government was faced with an unprecedented crisis in the COVID-19 pandemic, which was made even worse since it hit when Government was coming up for air after it completed a debt restructuring and was working towards targets set under its four-year International Monetary Fund (IMF) programme, which began in October 2018.
“I must say that the Government is handling this exceptionally well and has been very innovative in its policy response to the pandemic and the socio-economic fallout. The BOSS plan is no exception,” said Dukharan.
“It satisfies the IMF parameters, it gives the Government some creating space, and it gives potential investors an attractive opportunity. The public sector workers have the option to hold or to sell, and this means that there is no real negative impact on them, which is very important, especially now,” she said.
In fact, Dukharan said she believed immunity of the bonds from restructuring, the five per cent return, the ability to trade, and the liquidity it would create, all combined to make the BOSS “probably the most attractive investment option on the market at this point in time”.
“It also presents an opportunity to support the Government in its efforts to revive the economy, in the face of tremendous and probably yet unknown challenges,” she said.
The four-year bonds, which will attract semi-annual interest with no withholding tax on the interest, are intended to raise about $100 million to create space for Government to carry out capital spending.
Government said the BOSS plan would also help to protect public sector jobs and provide an opportunity for individuals to have higher spending power due to the returns in interest which are higher that those offered by financial institutions.
Dukharan said in addition to creating the space needed to carry out infrastructure projects, Government should focus on driving “deep, meaningful and lasting” ease of doing business reforms to allow existing businesses to operate more efficiently and to encourage new businesses, especially entrepreneurs to launch new businesses.
Dukharan, who sits on the Jobs and Investment Council, said unless the ease of doing business was urgently addressed then the 5.5 per cent maximum corporation tax rate would not have the powerful effect it ought to have in driving massive socio-economic transformation via private sector-led growth.
She also pointed out that due to the COVID-19 pandemic the world of work would be changed forever, with more people adjusting to a new normal of working remotely.
This, she said, should lead to a better appreciation of the need for, and the value in, having flexible work arrangements and greater autonomy.
“But unless we approach this new way or working with a reasonable and responsible mindset on both sides – employer and employee – we may see productivity and job satisfaction decline,” she warned.
Barbados-born economic consultant Carlos Forte told Barbados TODAY people should take the time to look at the objective behind the BOSS plan instead of rushing to criticise it.
Adding that there were not many investment options in Barbados at this time, Forte said: “It is important to stress that notwithstanding the restructuring that recently took place, with the exception of the insurance scheme, no one lost their principal.”
“I think it is important that we first understand that the Government’s objective here is to reduce its wage bill and if for no other reason, that is why this programme is targeted to public servants,” the Canada-based Forte pointed out.
He said he did not see any need for alarm over the new BOSS plan.
“There is certainly no need for the general public to be alarmed at the prospect of the Government issuing bonds, be it bonds under this BOSS programme or bonds in general. I do believe investors can feel pretty satisfied that Government would honour its obligations going forward,” said Forte.
Having said that however, Forte acknowledged that there was always some measure of risk, pointing to the current global health pandemic impacting negatively on a wide cross section of industries with no sure timeline for it to end.
“That context is important because notwithstanding the government said these bonds will be insulated from restructuring, the truth is that no administration can really give any such absolute assurance. If a government decides to restructure, that administration would decide and determine that,” he said.
Forte said in the absence of the BOSS programme, other options for Government to generate much-needed revenue to carry out infrastructural projects and adequately pay wages could include borrowing, issuing of treasury bills and debentures, increasing taxes and using Central Bank financing as a last resort. [email protected]
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