Barbadians can appreciate the financial constraints under which the Mia Mottley administration is operating. Government is in a race against time to reduce its monthly salaries bill as well as lower the fiscal deficit and simultaneously finance capital projects aimed at stimulating the economy. Like the previous government, the Mottley administration is also faced with recessionary times, to which has now been added the COVID-19 pandemic. The Government’s handling of this latter situation has been commendable for the most part.
Prime Minister Mottley’s public relations acumen and the endearment she enjoys from sections of the media have translated into a more sympathetic populace even though domestic hardship has increased since mid-2018 by most economic gauges. Miss Mottley’s charm has also spread to the trade union movement to such a degree that not since the days of late trade unionist Sir Frank Walcott and prime minister Errol Barrow have the lines of demarcation between labour and the state seemed more blurred. Workers have expressed their concerns about this relationship that appears at times more akin to shacking up than marriage.
Government has signalled its intention to introduce the Barbados Optional Savings Scheme (BOSS) in the public service. But as much as Barbadians want the best economic scenario for their country, there are residual trust issues with this current Government that cannot be swept under the carpet and which might create a fear of déjà vu for many.
There are hundreds, perhaps thousands of Barbadians, who were bitten by the Mottley administration when it came into power and might now be twice shy of any government paper barring the almighty dollar. For example, there are some Barbadians who in 2014 bought into government debenture certificates that were issued for a period of 15 years at an interest rate of 7.25 per cent annually. Interest was paid by way of half-yearly installments (June 30 and December 31). The principal sum was subjected to a withholding tax of 25 per cent annually that was deducted from the half-yearly interest payments of 12.5 per cent at June 30 and 12.5 per cent at December 31. The full value of the debenture certificate was redeemable upon maturity on December 31, 2029.
The Government changed in 2018 and the new administration decided that the existing agreement was unsustainable. Then came the BERT (Barbados Economic Recovery Transformation) programme. As part of the economic restructuring the existing agreement was revoked and a new programme came into effect in an autocratic and draconian manner. Certificate holders were made aware that they either “jump on board” with what was being offered or face the uncertainty as to how they would recover their investment. Those certificate holders who accepted and signed off on the “offer” had the old government debenture certificate(s) recalled and the new certificate was issued with an adjusted period from October 1, 2018 to September 30, 2033, with the addendum that should there be any natural disasters during that period, Government had the right to settle in 2035 – an additional two years on top of the 15 years. The interest was significantly reduced from 7.25 per cent per annum on the principal to an amortized table of 1 per cent for the first three years, 2.5 per cent for year four and 3.75 per cent from year five to maturity in quarterly payments, (End of Oct – Dec; Jan – March; April – June; July – September).
In an effort to “rescue” some of the certificate holders, the Government offered a lifeline in 2019 of $20,000 to persons who were at pensionable age (60 and older) and a few months later a further $30,000. The sad thing is that there were several individuals only a few months away from 60 who were unemployed and depending heavily on that interest payment to service their mortgages and other commitments and no consideration was given to this category of investor. The Mottley administration also threw investors a curve ball by raising the withholding tax deduction from 25 per cent to 30 per cent last year. Barbadians who had bought government paper and were under the belief they had entered into a binding arrangement with the state had no say in the changes.
Then there is the example of an 82-year-old pensioner who invested in a short term Treasury Bill in April, 2018, but had the terms of the arrangement changed in late September of that year by the new Government. Not only were his investment instruments exchanged for new ones, but there was a reduction in interest and expansion of the period his monies were to be disbursed. Hopefully, if he is still alive he will get his final payment in 2033 at the sprightly age of 97.
There are retirees who have had to un-retire and find new employment since their mortgage payments and other commitments were tied to the arrangements they had initially entered into with the government of the day. To survive, some had to opt for an early pension which meant losing a percentage each year before reaching age 67.
The question must therefore be asked, why should Barbadians now trust this BOSS? Will the conditions under which they accept government paper be changed sometime down the road if the economic situation in Barbados worsens? Some might suggest Government knelt on the financial necks of some investors in 2018 and they and their families are not only finding it difficult to breathe but their preferred BOSS is now to Beware Of State Savings.