Home » Posts » Govt borrowing ‘at one per cent’

Govt borrowing ‘at one per cent’

by Marlon Madden
4 min read
A+A-
Reset

Government has been borrowing at a dramatically low-interest rate of just one per cent, the senior economic advisor to the Mia Mottley administration, Kevin Greenidge, has disclosed.

Greenidge, a Barbados-born International Monetary Fund (IMF) economist who has been seconded to Government in its Barbados Economic Recovery and Transformation (BERT) programme, did not say if the very low-interest rate was across the board.

But he explained that given the island’s unusually high debt in recent years, it was only able to borrow at interest rates above 10 per cent prior to the BERT programme, which was implemented in October 2018.

Greenidge made the comments during an interview with the CBC’s Lisa Lorde on the island’s ability to grow foreign exchange levels from an all-time low of just under $420 million or about six weeks of import cover in 2018 to a “healthy” $2.66 billion by the end of last year.

“People will say, ‘that is borrowing’. Of course, it is borrowed, but you borrowed at one per cent in order to do what you need to do. Every developing country must borrow,” said Greenidge, adding that as a result of the borrowing, a number of infrastructure upgrades and investments were taking place.

“So it is important, the interest rate. Prior to the BERT programme, because the debt was unsustainable, people were only willing to lend at astronomical rates like 12 and 13 and 14 per cent, but now it is one per cent,” said Greenidge.

He added: “Because of that we have been able to fix the fiscal, fix the debt and you have the adequate reserves and then you start to deal with the impediments to growth.”

Last year, Government borrowed $968 million in policy-based loans from four institutions including the IMF.

Highlighting Government’s digitalisation programme and Customs’ new ASYCUDA system, which is central to Government’s revenue collection, as examples of development from borrowed funds, he said it was necessary to continue to improve the business environment so that the private sector could lead the required economic growth.

“Government don’t get growth, Government creates a conducive environment for the private sector to invest and the economy to grow,” Greenidge declared. “Government has to use its powers to remove the things that would stop growth.”

The economic advisor also pointed to the need for diversification of the Barbados economy away from tourism.

“Whether in a crisis or not in a crisis we should always be looking to broaden the economic base,” he said, as he highlighted agriculture as a critical area on which to focus in coming years.

“The focus on agriculture is not because it is a foreign exchange earner, it is because of food security – if anything happens you got to be able to feed yourself.

“So I am not saying we should be thinking about abandoning tourism, but think about widening the base into other areas – agriculture, other manufacturing like moving the value chain from bulk sugar to direct consumption; moving into other energy sources and production like solar panels – and even within tourism, diversify the way we do things.”

Greenidge also took the opportunity to insist that the IMF was not in the business of telling countries what to do but would simply put forward the available options.

And asked if devaluation of the Barbados dollar, which is pegged to the US currency at $2 to US$1, was ever an option, Greenidge said Government took the decision “to protect the exchange rate and focus the bulk of the reform on fixing the fiscal, fixing the local economy and remaining committed to that process”.

He said: “The IMF has a duty to advise countries on all the options they have so they will say [if] devaluation is an option,” he added. He said that in some cases countries would have no choice but to devalue because of not having adequate foreign exchange reserves to protect their exchange rate.

“The key is to develop policies that help you to earn foreign exchange while people are investing and you are earning.” (marlonmadden@barbadostoday.bb)

You may also like

About Us

Barbados Today logos white-14

The (Barbados) Today Inc. is a privately owned, dynamic and innovative Media Production Company.

Useful Links

Get Our News

Newsletter

Subscribe my Newsletter for new blog posts, tips & new photos. Let's stay updated!

Barbados Today logos white-14

The (Barbados) Today Inc. is a privately owned, dynamic and innovative Media Production Company.

BT Lifestyle

Newsletter

Subscribe my Newsletter for new blog posts, tips & new photos. Let's stay updated!

We use cookies to ensure that we give you the best experience on our website. If you continue to use this site we will assume that you are happy with it. Accept Privacy Policy

-
00:00
00:00
Update Required Flash plugin
-
00:00
00:00