The Eastern Caribbean Central Bank (ECCB) is keen to follow Barbados’ lead in negotiating stand-still clauses into major loan agreements that would ease loan payments if the economy was hit by a major disaster such as a hurricane or pandemic.
The position was outlined by Governor of the ECCB Timothy Antoine as he participated in the Central Bank of Barbados’ recent Caribbean Economic Forum on the topic COVID-19 and Economic Policy Protecting Jobs, Businesses and the Economy.
Antoine heads the regional central bank which governs financial services for the sub-regional grouping of the Eastern Caribbean Currency Union (ECCU) comprising Antigua and Barbuda, Dominica, Grenada, Saint Lucia, St. Vincent and the Grenadines, St. Kitts and Nevis, Montserrat and Anguilla.
According to the ECCB governor: “What we would like for longer-term debt is a debt standstill for about two years to allow our economies to recover before resuming debt servicing. We have fought for this because we believe that all small states should have what we call disaster-linked clauses such as if you have a shock of a certain magnitude, there is a standstill that is agreed up front . . . between the issuer and investor.”
Noting that the Mia Mottley-led administration in Barbados had secured such a clause in its recent debt restructuring exercise, Antoine said it was a feature that the Organisation of Eastern Caribbean States (OECS) was seeking to have included when negotiating with multilateral institutions and other major lenders.
During the discussion that also involved Barbados Central Bank Governor Cleviston Haynes, Bank of Jamaica Governor Richard Byles, and Governor of the Bank of Guyana Dr. Gobind Ganga, Antoine said the COVID-19 pandemic had highlighted the critical need for this waiver to be included in long-term debt financing.
“If a situation arises where there is a need, it triggers the standstill clause and you know for a period of time – one year or two years [you have a respite] then you resume [debt payments]. That is the work we have been doing with the International Capital Markets Association, the International Monetary Fund (IMF) and World Bank for the past several years.
“We have got them to agree to a term sheet. What we need now is the wide adoption of that term sheet. I pioneered that idea in Grenada in 2014/2015 with those debt clauses. I know Barbados did it recently in its restructuring. But we need that for all small states so that when there is an event – a hurricane, a pandemic or some kind of economic shock of a certain magnitude, we can have the facility.
“What that does is to enable our countries to recover even faster because you can invest in your recovery and then resume your debt servicing after.”
Addressing the situation that currently exists, the ECCB Governor noted: “The Caribbean Development Bank (CDB) has not given debt relief but what it has done is that it has provided a loan for member countries that need it, to remain current with the CDB. So if you have debt servicing of $20 million, the CDB will provide you with a loan of $20 million so that you can stay current. Now this adds to your debt but it provides cash flow relief.
“In the case of the IMF and the World Bank, they do not provide that sort of relief. So four of our countries have gone to the IMF, like Jamaica has done, and got rapid credit facilities to the tune of US$81 million to assist with financing.”