The Barbados External Creditor Committee is urging the Mia Mottley administration to engage in good faith negotiations to resolve the external commercial debt default.
The Mottley administration chose to default on its domestic and external debts days after taking office on May 25. That decision was premised on finding only US$220 million in international reserves with an imminent US$80 million payment on the 2013 Credit Swiss loan.
In a statement today, the Committee reiterated that a financial proposal to resolve the external default was sent in good faith to the Government on 26 September with the aim of supporting the reform agenda to be implemented through the much-welcomed International Monetary Fund Extended Fund Facility.
The Committee, however, has not been engaged in any serious discussions by the Government of Barbados to fully assess the benefits of its proposal though, it said, their offer provides substantial cash flow relief, aiding in the rebuilding of foreign exchange reserves and strengthening the exchange rate peg, which together would encourage the resumption of much needed foreign currency inflows and direct investment, anchoring long-term sustainable economic activity.
“By resolving the external default in a consensual and expeditious manner, the Government would be in a position to accelerate the country’s credit rehabilitation, lower the credit risk premium and take important steps to regain external market access, a key objective of the reform programme supported by the EFF arrangement,” said the Committee’s statement.
The Committee noted that it communicated to Government that the indicative restructuring scenarios for US dollar denominated debt released on November 21 by the administration was “not based on transparent or open discussions with holders of these instruments. Rather than providing guidance, these scenarios risk delaying efforts to reach a consensual agreement to resolve the external commercial debt default to the detriment of all parties over the near-term”.
Consequently, “the Committee does not believe it is worthwhile to engage in discussions on the basis of the indicative terms included in the scenarios released, as such terms would create new debt instruments with no marketability or investor sponsorship and accordingly place the reform agenda at serious risk”.
The committee further stated that following Prime Minister Mottley’s recent comments acknowledging the need to meet contractual obligations and abide by the rule of law, it wrote her directly to urge the Government to honour its pledge to engage with all holders of external commercial debt in transparent negotiations to reach a consensual agreement that resolves the default in an expeditious manner.
The Committee stressed that external creditors remain interested in engaging in good faith discussions to resolve the external commercial default quickly and would continue to support the structural reform agenda. (SP)
