With prices in Barbados predicted to increase in the coming months, Barbadians are being cautioned about investing in Government’s Barbados Optional Savings Scheme (BOSS) programme.
Spokesperson on Tourism and the Economy for the People’s Party for Democracy and Development (PdP) Scott Weatherhead today revealed that with the International Monetary Fund (IMF) predicting a 4.5 per cent increase in prices on the island in the coming months, the bonds which Government are offering at an interest rate of five per cent would be less flattering.
Weatherhead said with the IMF also predicting a reduction in Barbados’ gross domestic product (GDP), public servants would find themselves facing other taxes as a means for Government to recoup the money needed to repay the debt in four years when the bonds have matured.
“The IMF is projecting a 7.6 per cent reduction in GDP for Barbados in this year 2020. That is significant.
“But of greater significance is that on the same page, the IMF is projecting that prices will increase in Barbados this year by 4.5 per cent. So they are predicting a 4.5 per cent inflation rate for Barbados in this year 2020. So with a five per cent interest rate offered on these bonds and a 4.5 per cent inflation rate predicted, you can see that the return on investment on these bonds in real terms is really only about 0.5 per cent and not five per cent like Government is trying to make you believe,” he warned during a Zoom meeting this morning.
With substantial debt payments looming, Weatherhead questioned how Government would find the money to cover those debts.
He contended that if Government found itself in financial difficulties, the monies owed to public servants who invested in the bonds would be put on the backburner.
Weatherhead described the BOSS programme as a “ponzi scheme or pyramid scheme”, where Government was adding to its debt to pay its bills.
“How is Government going to meet payments of bonds to public workers worth over $100 million beginning in July 2024 for 18 months, and payments of over $145 million a year to creditors starting in April 2025? These two sets of payments will overlap in the first quarter of 2025. If Government’s finances are not sufficient to cover payments to both the creditors and the workers, which one do you think will get paid? And which one will get restructured or deferred?
“Of course Government cannot again restructure agreements with foreign creditors, so that means workers will have to suck salt on the repayment of their bonds. They will beg and plead to you and say that they cannot default on the foreign debts again, and so you must understand and accept their defaulting or rolling over of your debts instead,” Weatherhead predicted.
“We question whether this BOSS scheme is really a ponzi scheme or pyramid scheme? In banking they call this kiting. Government knows it has to meet debt payments of almost $85.5 million dollars to creditors this year on bonds it just issued to them, so now they are issuing another set of bonds to public workers in order to finance the first set of bonds that they have to start making payments on this year.”
In an effort to avoid this, Weatherhead called on Government to shorten the repayment date for its latest bonds.
He said instead of having the bonds in the BOSS programme mature in 2024 after the next general elections, Government should start repaying those bonds before 2023, when the next elections are constitutionally due.
“We challenge Government to reduce the repayment time for these bonds to ensure that repayment begins within this current term of Government as a sign of trust to the public workers in this country. If there is no insidious or political motive behind this four-year date, then make it happen within this term of Government.
“That will show trust, because Government will not risk defaulting on repayment to public workers right before an election, but they could do it right after one as they have done recently. That will also give them some breathing room before the repayment of the foreign creditors bonds begins in April 2025,” Weatherhead said.
