Government is in a position to satisfy its debt obligation, promises a senior finance minister.
This assurance has come from Minister in the Ministry of Finance Ryan Straughn, who dismissed critics who are questioning the Government’s ability to repay its debt as it heads back to the International Monetary Fund (IMF) for a second round of funding.
Minister Straughn on Tuesday brushed aside those concerns, recalling that Government was still able to lower the ballooning debt from a whopping 175 per cent of gross domestic product (GDP) at the time it started the BERT programme in 2018.
Speaking in the House of Assembly, the minister said: “I believe our track record speaks for itself, but I don’t want anybody in the public to fear our ability to repay the debt that we have now. What we must focus on is how we are all going to put the best efforts to ensure that we can grow this economy from top to bottom and that people are included all the way through this specific process,” said Straughn.
In addition to the US$130 million (BDS$260 million) in financing that the country would receive under a new IMF programme, it would also unlock another US$210 million (BDS$420 million) under the Resilience and Sustainability Trust (RST) set up by the IMF in May, to help countries access financing to invest in resilience building.
Since the announcement by Prime Minister Mia Mottley last Friday that the country would be approaching the IMF for a new three-year Extended Fund Facility arrangement when the current Barbados Economic Recovery and Transformation (BERT) programme comes to an end on September 30, there have been concerns raised about the island taking on more debt.
“For those who are commenting . . . when the debt was $17 million and climbing, there were those who said ‘do not restructure your debt, send home 7,000 public servants. That will cure the problem’. This government determined that we will take a different path and that as a critical part of our BERT programme we will focus on people,” he said.
Straughn expressed surprise that some people were now expressing concern about government taking on more debt, but those concerns were not raised when the island’s debt level was a lot higher.
“The people who are commenting now about our ability to repay $13.68 billion, did not, in my memory, were not concerned about the state of the economy in May 2018 when we took office. We know we still have work to do so this is not a case of us patting ourselves on the back,” said Straughn.
“If you would do basic mathematics one would come to the conclusion that $13 billion is less than $17 billion . . . I don’t recall any of the people asking about how we are going to repay [$13.68] billion, being so vociferous when it was $17 billion and climbing. Yet the range of public services being provided in this country had deteriorated to a point where Barbadinas were fed up with the government of the day,” he said.
When the Mia Mottley administration came to office at the end of May 2018, the island’s debt to GDP ratio was a whopping 175 per cent, making Barbados the fourth most indebted nation behind Japan, Greece, and Sudan.
By the end of 2020 – two-and-a-half-years into the first BERT programme – the debt to GDP ratio was around 142 per cent. The economy had declined by a whopping 19.8 per cent that year.
At the end of June this year, the island’s debt stock was recorded at about 129.4 per cent of GDP or $13.68 billion.
During the course of the IMF’s $580 million (US$290) extended arrangement for the four-year BERT programme, Government borrowed some $870 million.
Recalling that the plan when the first BERT programme started was to lower the island’s debt stock to around 60 per cent of gross domestic product (GDP) by 2033, Straughn said this target had to be readjusted due to various extreme events that caused government to carry out unplanned but necessary borrowing.
“The economy lost $2 billion in 2020 in activity. Almost all tourism workers did not go to work for the most part of 2020, all of the taxi people were impacted, all the people that move goods and services supplying tourism facilities were impacted in 2020. As a result of that, the Government’s revenue declined by $600 million in 2020,” said Straughn.
He was speaking in Parliament during a debate on a resolution to supplement the Debt Conversion (Counter- Guarantee) Act and the Special Loans Act Cap 105 (Marine Conservation), which were passed last year.