Barbados could be heading for yet another downgrade.
Economist Jeremy Stephen has described as a bombshell, Government’s mode of restructuring its debt, as revealed last Friday by new Prime Minister Mia Mottley.
And he feels it could lead to another downgrade of the Barbados economy before eventual improvements come about.
“They are essentially going to freeze payments out to external creditors from now. It wasn’t spoken to, but that may very well involve Credit Suisse,” Stephen said, making reference to a more than $100 million loan repayment which is due to be paid within the next three weeks.
“That’s going to result in an automatic downgrade somewhat. That is something we will have to face right now so we can do a rebuilding. The only issue I have with that is that it should have happened four years ago, so we could have a position from which we could rebuild,” he told the Sunday Sun.
Last Friday, Mottley revealed that Government would be suspending payments due on debts owed to external commercial creditors. Similarly, Government would endeavour to make scheduled domestic interest payments, and domestic creditors would be asked to roll over principle maturities until a restructuring agreement is reached.
Stephen said it was important to note that Mottley did not say who would be exempt, or not exempt from payments.
“What is also a bit sad, but I hope it doesn’t last too long, is that domestic investors in Government debt, mainly the NIS [National Insurance Scheme] or even some commercial banks, would have a freeze on the principle and not interest to be paid. I’m wondering how that would affect things like T-bills, which are a very short, liquid form of debt. They haven’t said if the freeze is on long-term or short-term debt,” the finance expert suggested.
He noted Government’s intervention indicated a certain level of prioritisation.
“It shows a serious intent to deal with the problem. I’m just wondering if it’s a case of too little too late. I’m looking forward to hear the details in two weeks’ time.”
Regarding the decision to invite a team from the International Monetary Fund which is scheduled to arrive in Barbados on Tuesday, the former president of the Barbados Economic Society, said he “will wait to see how that plays out”. (BA)
