Prime Minister Mia Amor Mottley will next month lead a Government delegation on an overseas trip that could result in Barbados borrowing millions of dollars on the international capital market for the first time since 2013.
This is part of her administration’s plan to continue funding its financing needs while setting aside money for a rainy day, as Barbados prepares to exit seven years of International Monetary Fund (IMF) arrangements.
Mottley said Government will also continue to offer investment opportunities on the domestic capital market, is planning to offer United States dollar bonds here and in the Caribbean, and will continue to implement debt swaps, including a regional one and a debt-for-social swap.
Debt sustainable
The Minister of Finance gave this update Thursday as she and IMF team leader for Barbados, Michael Perks, said Government’s debt was sustainable, on a downward trajectory, and lower nominally when compared to where it was in 2018.
They were speaking at Ilaro Court during a press conference to report on the IMF team’s staff level agreement with Barbados on the fifth and final reviews under the Extended Fund Facility and the Resilience and Sustainability Facility.
“We have talked about the possibility of going back to the international capital markets, and at the beginning of June I will lead a team from the Ministry of Finance and others and it actually will be a whirlwind, because we have to do Boston, New York, London and Paris in order to be able to put Barbados back out there for the first time since effectively 2013,” she said.
She recalled that “the last international loan we took before on the capital markets would have been the Credit Suisse loan in December 2013 and therefore we leave this part of our relationship with the IMF . . . much stronger”.
The Prime Minister is anticipating that the money being sought on the international capital market will be “a combination of both financing and having money for a rainy day”.
“There is a view that we should seek to go one time, because there’s a benefit to get on the Emerging Market Index and therefore that minimum is US$500 million,” she said.
“At the same time, we have dark clouds, so it may make sense for us to be able to meet immediate financing while at least covering ourselves for any eventuality in the next two or three years. I do all of this while still having IMF on speed dial.”
Mottley also said Central Bank Governor Dr Kevin Greenidge was having discussions with local banks with a view to mobilising the US$1.6 billion in accounts at deposittaking institutions but earning no interest.
“Even before we go to The Bahamas, Jamaica, Guyana, Eastern Caribbean, Trinidad, Barbados has US$1.6 billion in foreign currency accounts here earning zero per cent and therefore the banks themselves recognise that this may be fertile ground from which we can raise a bond,” she explained.
“And I suspect the number is likely to be US$300 million that we go for regionally.”
Debt swaps
Mottley also said that they determined internally to continue using debt swaps.
The Prime Minister defended Government’s borrowing, arguing that “there are very few people I know in this country who can build a house without borrowing.
“So that this conversation that has been taking place nationally by those who have no political leg to stand on, that is seeking to cause the country to believe it can continue to build out capacity, to build out institutions, to fix roads, to fix the beaches that help us earn our foreign exchange that pays our debt . . . without increasing debt at some point, is foolhardy,” she asserted.
“The debt that we have incurred has been for substantive areas and not for paying salaries, as was happening under the last administration. That’s why the Government has been calling across the entire world for lower interest rates and longer repayment periods. But that must not be mistaken and used as an excuse not to borrow at all.”
Perks said the IMF team’s assessment was that “debt is sustainable and . . . Barbados is on track, assuming that the fiscal position continues as is and the projections hold . . . to come down to the 2035/36 target of 60 per cent [of Gross Domestic Product] as planned”.
(SC)
