New markets being sought due to geo-political instability
Barbados is seeking alternative source markets for goods coming into island in light of the current geo-political instability.
Leader of Public Business in the Senate, Senator Lisa Cummins, said it was important that Government looks at “risk mitigation”.
She announced Wednesday that ‘a team’ was currently overseas on this mission. This was during debate on a Resolution to borrow US$500 million on the international capital market.
The money is intended for the refinancing of Government’s 6.5 per cent 2029 Euro bond and the prepayment of a portion of Government’s debt to the International Monetary Fund for the External Fund Facility and also for the repayment of a portion of its debt to the International Monetary Fund for the External Fund Facility.
Fiscal space
Cummins explained Government was looking to pay off some of its debt early to create fiscal space in an uncertain geo-political period in which the island’s economic future could be threatened, and noted threats to the economy posed by global events such as the current wars in the Middle East.
Cummins said the liability management exercise of the resolution bore two components, one, the payment of $340 million “to retire 84 per cent of the Government’s Eurobond of 2018” which is being retired ahead of schedule and the other, repayment of “approximately $142 million of the principle maturities due to the IMF (International Monetary Fund).”
She added the operation intended to free up about $372 million over the next two years, which would give the Government some fiscal space.
In addition, by prepaying the IMF loan, Government was hoping to be able to eliminate the need to repay the principle to the IMF between July
2025 to the end of June 2027, Cummins added.
“It is meant to reduce the Government’s borrowing from the IMF from its current level at 505 per cent of its quota, down to just above 300 per cent, providing room if need be, for new emergency facilities in the event of natural disaster; it is also meant to reduce the interest to be paid to the IMF, including on the prepaid maturities and to eliminate the time-based interest surcharges, thereby cutting the surcharges roughly in half.”
Opposition Senator Ryan Walters chided Government for the high level of borrowing, expressing concern that the country’s debt was liable to compromise the future of later generations of Barbadians, and cause the imposition of heavy taxation.
“The country’s debt obligations do not go away. They are just pushed further down the road. Is the Government saying that they will find an excuse every time there is a principal payment to be paid, to refinance it ‘or push it down the road and in this case it is at an extra cost to the taxpayers’ of this country.”
Pointing out that the loan under consideration was at a higher interest rate, Walters contended it “extends our debt obligation”.
“I am deeply concerned that this Government does not know how to manage the debt of this country. All they do is find fancy ways to push the liability further down the road,” Walters said. (GC)
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