Barbados’s poor credit rating means it will struggle to attract funding from foreign direct investors.
That is the view of former Governor of the Central Bank Dr Delisle Worrell, who says the island’s current Standard and Poors rating could prove to be a “major bottleneck” in accessing much-needed investment.
He made the point in his Economic Letter for November entitled Foreign Finance for Future Development.
“Investment in social and economic infrastructure is needed to improve Barbados’ international competitiveness. The Barbados Government’s poor credit rating makes it difficult to secure foreign finance from private sources for infrastructure on affordable terms.
“Government foreign borrowing is rated by Standard and Poors at a level that is seven steps below investment grade. At this level private foreign direct investors are unlikely to lend to Government, or to accept Government guarantees for lending to contractors working on Government projects,” Worrell pointed out.
He said much-needed improvements to the country’s infrastructure were necessary at this time.
Worrell pointed to the island’s main healthcare facility, the Queen Elizabeth Hospital (QEH) and the sewage system as areas that needed to be improved.
“The Queen Elizabeth Hospital lacks the electronic infrastructure required by a modern hospital; it should be replaced. The South Coast Sewerage System and the Bridgetown Sewerage Plant need to be modernised. The water distribution system is in need of upgrade and expansion. The quality of road surfaces needs to be improved. Schools, the university, other educational institutions, healthcare facilities and public security systems are all in need of new or upgraded facilities and equipment,” the former Governor said.
He said for other infrastructural needs Barbados would have to be reliant on borrowing from the Inter-American Development Bank, the Caribbean Development Bank, the Andean Development Corporation and other official and international financial institutions.
Dr Worrell said Government’s current aim was to restore the nation’s gross domestic product to US$ 5.2 billion, the figure for 2019.
For that to happen though, he explained, it required a focus on reviving long-stay tourism to fill all available accommodation and to provide business for restaurants, entertainment, shopping and spas and other service industries.
However, he maintained that public administration efficiency continued to plague the tourism industry.
“The problems that have arisen and that continue to plague the tourism industry, have to do with public administrative inefficiency. This will continue to be a drag on investment until there is a makeover of the public sector to lift performance to an acceptable international standard,” Worrell contended.
He said there was also the need to stimulate growth and to put the economy on a new path of increasing prosperity.
“To do that requires new investment, in hotels and tourist facilities, in renewable energy, in new technology and in social and economic infrastructure. New investment creates a need for foreign finance, to import the necessary materials, fuel, machinery and equipment,” he pointed out. (RB)