Tough sell

The proposed Barbados Optional Savings Scheme (BOSS) Plus bonds investment will be a tough sell for Government given the bitter taste still left in the mouths of investors who had to take a haircut during the 2018 debt restructuring.

This assessment has come from noted economist Carlos Forte, who described the move by Government to extend the BOSS bonds investment scheme to the wider population, in an effort to reportedly raise $200 million, as marketing.

“BOSS Plus or extending the BOSS programme to the general public is really a marketing frame and I have no quarrels with that. The issue here is that since the restructuring of the debt, the Government has been experiencing some challenges securing local debt – bonds, debentures, treasury bills,” said Forte.

He explained that while the BOSS programme seemed to have had some measure of success, “in the sense that when public servants weren’t willing to hold, private persons bought those bonds”, the overall appetite for Government debt was still “quite low”.

He recalled that people who purchased government paper prior to 2018 had the confidence of getting the principal and interest they signed up for when they became due, but when that did not happen they lost confidence.

Forte further noted that given the impact of the COVID-19 pandemic on the economy and Government’s high debt levels after the debt restructuring, “some people are skittish about the spectre of another debt restructuring in the future”.

However, noting that the proposed BOSS Plus may be Government’s way of trying to rebuild confidence, Forte said he was hopeful that it would work out.

“I don’t think any economist – and certainly I am not – [would be] troubled by the fact that the Government is seeking to raise money domestically,” he said, adding that it was unfortunate that the administration was forced to rely more on foreign debt over the past three years.

Last weekend, Prime Minister Mia Mottley revealed at a press conference that the BOSS scheme, which started in June last year, would soon be extended to the wider public under what is known as the BOSS Plus.

When it was introduced, the BOSS gave public sector workers the option to be paid a portion of their salary in four-year bonds at a five per cent interest rate. It was designed to shift a portion of Government’s wage bill to capital expenditure.

While it was targeted mainly at public servants, other Barbadians were allowed to purchase those bonds from a public servant, a broker, or the Central Bank, once the public servants opted out.

The proposed BOSS Plus bonds scheme would follow on the heels of Government’s first major bond offer in November last year since the debt restructuring three years ago.

Last year, the Central Bank announced a $125 million Treasury Notes offer which was aimed at raising funds to assist with the financing of recovery from the COVID-19 pandemic.

However, by the end of January this year, Governor of the Central Bank Cleviston Haynes reported that the take-up of those government papers had been less than ideal.

Stating that nothing much had changed between then and now, Forte said: “I think the Government is rightly trying to ‘activate’ the local debt market by… proposing to issue the BOSS Plus. But the fact they are called BOSS is just marketing.”

“Nothing much will change. These instruments could very well have a slow take-up too,” added Forte, who stressed that he did not take any glee in Government having difficulty to source debt locally.

“I would like the Government to be successful in this endeavour . . . . It is important for Barbados that faith is restored in its domestic debt over time.”

Explaining that the relative success of the BOSS investment plan over the past two years was due to its structure, Forte stressed: “It is kind of built in the take-up because take-up was default and you have to opt out. That is why I characterised it as marketing”.

Nonetheless, the economist said that despite the perceived low levels of confidence in government paper, it would be best for the country if borrowing was tilted more towards the domestic market rather than the international market.

marlonmadden@barbadostoday.bb