Appalling and a cacophony of rubbish!
Those were just some of the adjectives Canada-based Barbadian senior economic consultant Carlos Forte used to describe the recent suggestion by Special Envoy to Prime Minister Mia Mottley on Investment and Financial Services Professor Avinash Persaud that it would be disastrous for the Government to repay the $1.3 billion debt to the National Insurance Scheme (NIS) which it wrote off during the 2018-2019 debt restructuring programme.
Professor Persaud had warned that if the Mottley-led administration heeded the calls from the Democratic Labour Party (DLP) and others to repay the money, it would be tantamount to reversing the debt restructuring programme, taking debt back to 178 per cent of GDP, and putting the Barbados dollar at risk.
“That just doesn’t add up. I think it’s just trying to score political points without making any economic sense,” he said.
But in a scathing response, Forte, who was one of those urging the repayment, told Barbados TODAY in a prepared statement that “there was nothing that Mr Persaud said that was substantive or could stand up to the rigour of economic thought or analysis”.
“It would have been clear to anyone with a modicum of understanding of economics and public finance that the gentleman’s comments, which were intended to discredit the suggestion to commit the Government to repay the written-off $1.3 billion that it owed the NIS, were grossly misleading at best and a cacophony of rubbish at worse,” the project manager for research, valuation and advisory with the Altus Group in Canada contended.
Analysing Persaud’s claim that the debt repayment would put the Barbados dollar back into jeopardy, he noted that the last time the dollar was at risk was in the early 90s when Barbados was faced with a balance of a payment crisis, with imports far exceeding exports and exceedingly low foreign reserves.
“In 2018, Barbados had a debt crisis, precipitated by fiscal woes characterised by an onerous debt servicing burden that consumed high levels of government revenue. It did not have a balance of payments crisis, and the foreign reserves cover was 6.9 weeks.
“The IMF [International Monetary Fund] orthodoxy has changed significantly since the 1990s, and recommending a devaluation as a condition for providing assistance is no longer one of its go-to primary prescriptions. Moreover, if the Mottley administration is to be believed, when it took office in May 2018 and swiftly approached the IMF, it already had a homegrown programme (BERT) that was proposed to the IMF and ultimately approved. Surely a devaluation of the Barbados dollar was not part of the package presented to the IMF,” Forte contended.
He added that even when Barbados slipped to just two weeks of import cover in the early 1990s, there was no devaluation and no debt restructuring.
“Despite the Mottley administration claiming that they saved the dollar in 2018, the fact is, the dollar was not in any peril in 2017 or 2018. Claims to the contrary are nothing more than political propaganda. The question must be asked, ‘exactly what or who did the Mottley administration save the dollar from?’” Forte queried.
“The fact of the matter is that the Mottley administration decided to write off $1.3 billion of money the Government of Barbados owed the NIS, another almost $700 million in arrears owned in the form of rents and NIS employer and employee contributions due by public and private sector entities and, of course, it also wrote off $1.6 billion owed to the Central Bank.”
“Can the goodly, honorary professor explain to the public how repaying that money over 30 or 40 years threatens the balance of payments, the current record $3.1 billion (of borrowed) foreign reserves and 33 weeks import cover, or the value of the Barbados dollar for that matter?” Forte challenged Persaud.
DLP president Dr Ronnie Yearwood last week described the reasons Persaud gave for why the NIS debt could not be repaid as “foolishness”.