Barbados borrowing at lower interest rate has enabled it to do projects that would have otherwise been placed on the back burner.
Prime Minister Mia Amor Mottley pointed this out yesterday as she hosted president of the World Bank Group, Ajay Banga, his wife Ritu and members of the agency that provides financial resources, technical advice, and research to developing countries.
Mottley said Barbados did not take the relationship for granted and one of the major reasons why it worked was because of the technical capacity provided in areas that were lacking as a small state with a declining and ageing population. She said the tweaking of the natural disaster clause done by Banga made it acceptable.
The aim, she said was to be able to ensure that lending in the future could match the life of the asset more appropriately.
“Not exactly, but better, which is why we say, if I have to borrow at high interest rates, to put down water mains, or if I have to borrow at high interest rates to refurbish our hospital as we are doing now, for the first time in 60 years, major refurbishment, or if I have to borrow at high interest rates to build schools and repay in ten to 12 years, we then have to say, what drops off? We can’t do this, we can’t do this, we can’t do that.
“Therefore, the ability for us to make sure that the cost of borrowing can better match what we are building is really where we want to go for the global south,” Mottley said.
During the tour, Mottley said Banga got a chance to see the erosion in Six Men’s, St Peter, that Barbados was “facing frontally” as she also pointed out the area was once filled with houses.
Similarly, at the Bridgetown Fish Market, the bank president got a chance to see his agency’s money at work through the temporary rebuilding following the damage done by Hurricane Beryl.
“. . . Because we know that that can’t be a permanent rebuild, but, equally, we couldn’t leave the boats exposed for years because then there would be no fishing industry,” the Prime Minster said.
She said there was around $16 billion in bank accounts earning 0.1 per cent and no one was requesting people take their money out but through financial literacy and building instruments supplied by the World Bank some of those people could invest.
“The bank is going to help us look at other instruments that we can use in order to make it easier for Bajans to discuss how they want to invest, because I asked the question, ‘If the Government can’t invest, who next best to do it?’
“Bajans at the end of the day still will not have all of the capital that we need, hence the need to bring in some foreign capital, too. So I’m just explaining that to make the linkages so that you understand that when we talk about private sector-led investment it’s not only foreign capital but it is also domestic savings that, quite frankly, is earning at a fraction of even the lowest rate of inflation,” Mottley said.
It was in the interest of Barbadians to be able to make an educated guess determination as to how to spend their money by leaving some for liquidity in the banks but also putting some to earn at a higher interest rate so that they are not pauperising themselves, she reasoned. ( AC)