Minister in the Ministry of Finance Ryan Straughn has defended the timing of Government’s borrowing of $256.6 million for the Scotland District Road Rehabilitation Project, insisting that the loan has been secured at attractive terms amid rising interest rates globally.
The concessional loan, which Acting Prime Minister Santia Bradshaw told the House of Assembly is scheduled to be signed on July 1, represents “perhaps the single largest investment that any government has undertaken to embark on any part of Barbados”, Straughn said.
He was speaking on Tuesday as he presented a resolution seeking the approval of Parliament for Government to borrow the money from the Export-Import Bank of China.
The 20-year loan has an annual interest rate of two per cent, and repayment through 31 equal semi-annual instalments has a grace period of 60 months, which means the Government will not have to start the repayment until five years from the effective date of the loan agreement. Under the terms of the loan, funds will be disbursed over a period of 48 months.
“Interest rates for the first time in a long time are rising globally…. and the consensus generally is that they will continue to rise in the short to medium term as the authorities in North America, as well as Europe, seek to try to respond to the latest set of shocks, through the use of monetary policy – interest rates – in order to help curb inflation….,” Minister Straughn said, adding that it was therefore important for the Barbados Government to finance critical works in a sustainable way.
“The extent to which we are doing this now allows us some very critical space to be able to execute these works relatively cheaply, with respect to the quantum of works that are expected to be done, given what is happening and available globally from a financing perspective, in order to keep our debt trajectory in line and that the debt service with respect to that, that we are capable of being able to deliver in the medium to long term,” he explained.
Noting that the last loans undertaken by the previous administration saw the government paying around 12 per cent in annual interest, Straughn said the current administration sought to secure “the most reasonable, long-term financing under quite favourable terms”.
He noted that after completing debt restructuring when it first came to office, the Mia Mottley administration had determined that any debt incurred had to be related to the country’s priorities, and the government had to be able to meet the costs associated with servicing that debt.
Insisting on the importance of the loan, he stressed that people in the Scotland District were just as deserving of proper infrastructure as the rest of the country.
“We cannot allow any part of Barbados to be either cut off or do not have access to services – whether it is ambulance services, fire, police…. All of these things matter for the Scotland District just as to do for St Michael or Christ Church or St Philip or the rest of Barbados,” Straughn said.
“This resolution is one element of how we are going to finance the rehabilitation of the Scotland District whilst we are going through this short-term shock with respect to the war [in Ukraine] and the commodity prices and all of that. The revenues we’re collecting we will continue to provide the public services in the way that we have.
“We’re conscious that we have five years of a grace period… such that we are in a position in five years’ time to be able to not just service this debt but to be able to see the movement in economic activity within that time frame in order for us to be able to keep this country afloat,” Straughn added. [email protected]