UWI economist says govt’s billion-dollar loan ‘signals economic jitters’

An economist at the University of the West Indies has raised alarm over the government’s decision to borrow US$500 million (BDS$1 billion) at what he describes as an “exorbitant” eight per cent interest rate, warning that the move could signal deep-seated concerns within the administration about Barbados’ economic trajectory.

Speaking to Barbados TODAY following Wednesday’s Senate debate on the External Loans Act resolution to okay the bond issue, Dr Antonio Alleyne said the interest rate being accepted was unusually high outside of a crisis.

“The last time that any sort of loan at this rate was accepted was when we had the financial crisis, and I don’t think we are in that position right now,” he said.

Calling the interest rate “exorbitant”, he added: “In terms of the return, the repayments, the interest rates – that’s extremely high. I’m still shocked at it, to be honest.”

Dr Alleyne also highlighted what he described as a contradiction in the administration’s approach.

He said: “The reality is they themselves, or the previous government, criticised one government for doing it at similar or slightly higher rates. Now they are about to undertake the same task. It’s a little hypocritical.”

He noted that the move could suggest unease within the government about the economy’s direction: “I’m not saying we’re in a bad place, but it gives indication that there is some fear existing in the government about Barbados’ performance in the future.”

Referring to earlier announcements of international investment efforts, Alleyne said: “Only recently they were talking about garnering loans from investors abroad and outside of loans investment… so that has not borne any fruit. If you have the IMF in your back pocket…that doesn’t really sit well with investors.”

“I think they should wait a little before taking on such expensive loans. The eight per cent rate is significant, and the Barbados economy doesn’t even grow anywhere close to that.” (LG)