Barbados News Business

Progress reported in negotiations to settle debt to external creditors

The former governor of the Central Bank of Barbados, Dr Delisle Worrell, says progress is being made in the negotiations with the government regarding the millions of dollars (One Barbados dollar=US$0.50 cents) it owes to foreign institutions and investors.

Worrell, who serves as an advisers to those institutions and investors, said however he would not give a date when an agreement could be reached after the Mia Mottley government missed a March 31 deadline to agree to a plan.
On June 1, 2018, the government announced the suspension of interest and amortisation payments due on its debts owed to external commercial creditors.

The Central Bank said then that it is envisaged that in addition to foreign currency denominated external debt, domestic obligations of the central government and guaranteed debt, inclusive of treasury bills, treasury notes, debentures, bank loans and commercial bonds, which are serviced directly out of the public purse, will also be subject to the restructuring exercise.

The bank said that the announcement by the government immediately impacted the trading price of Government of Barbados’ international bonds, which fell from an average of US$87 to US$47 and from US$91.8 to US$46.8 on its medium-term and long-term instruments, respectively.

Government had planned to give external creditors, who account for 20 per cent of its overall debt, a cut in interest and payments over a longer period, similar to the plan that was reached with local debt holders in September last year.

Worrell said that “discussions are continuing” when asked to give an update on the state of the negotiations.

Worrell, who last December said the creditors had put forward their own proposal to government, said the principle they were committed to “a restructuring proposal which works for Barbados, is in the best interest of Barbados, but also works for the creditors”.

He said that the external creditors were managing other people’s funds including pensions and that they were depending on the increments they were getting from their investments in government paper.

“They have a responsibility to take care of the people who have put their money with them. So what we are working towards is a win-win situation, a situation which gives the Government space that it doesn’t have to repay the major funds that are becoming due particularly in 2021 and 2022 but which also gives the pension funds a return so that they can pay the people who have contributed to these pensions over the years.

“I think there has been progress in the discussions and we are hopeful that based on this principle of achieving a win-win situation,” the former central bank governor said, adding that while there were “many ways to skin a cat”, he insisted that creditors were not comfortable with the proposal that was initially put forward by the government.

He said the external creditors are seeking a solution that everyone was comfortable with, adding that the issue is not about the amount of external debt that the government had, but attention being paid to settling favourably so that it could attract future investments.

“If foreign investors do not end up with securities that they are comfortable with, marketable securities that other people will want to buy, then new investment becomes that much more difficult to attract new investment to Barbados.

“So the focus should not be on repaying old debt, the focus should be on creating conditions which allow you to borrow more in the future.

“If you have a choice between using your future foreign exchange resources to repay old debt and if the investors are saying we are quite happy to roll over that debt if you pay us some acceptable market interest, we don’t need to be repaid so you can use your new foreign exchange resources to actually do new investments rather than to pay old debt. That is the proposition that is before the government,” he added.

CMC

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