EDITORIAL

THE announcement that the Barbados Government has reached an agreement with external creditors is good news for the country and a boost to the efforts of the present administration as it goes about its plans to deal with the country’s debt situation, and the correction to the economic ills facing the island.

Having concluded a similar agreement with domestic creditors towards the end of last year – even though that created much anguish and fretting by individual bond holders – this latest pact will bring some breathing space and elbow room for the Government to do more while tackling the pressing issues in the economy.

It had been tough going to reach this far, since the external creditors had shown they were about negotiating an agreement that would not put them at any disadvantage, in as much as they said they wanted to work with the Barbados Government.

Last June when Government came up with proposals to inch the negotiations forward, it seemed not to have gone down well with those creditors.

Around that time, the creditors reacted by suggesting that it appeared Barbados would launch a debt exchange without their consent and that such terms were unsatisfactory.
“We hope that before they actually launch an offer, the GOB will re-approach us and try to re-engage in conversation,” they said in a statement quoted by the National Association of Securities Dealers Automated Quotations (NASDAQ). Prior to that, there were other positions carried by Bloomberg.

One thing it shows is that debt restructuring is no walk in the park. These programmes call for tough negotiations since at the end of the day it is usually the investors in financial institutions which have to assess the impact on their investments and how long they will have to put up with temporary loss of returns.

The agreement reached last week includes new rates for bonds, as well as new terms – a 26.3 per cent reduction in the aggregate sum of the original principal amount of debt obligations and past due and accrued interest as of October 1, 2019. It also includes a provision that will enable the Government to capitalise interest and defer principal maturities in the event the country is affected by natural disasters.

Barbadians, in general, see the settlement as a positive sign and that whatever the two sides agreed on should pave the way for economic improvements.

When the question about the contentious issues between the government and the external creditors was put to Cleviston Haynes, the Governor of the Central Bank of Barbados last August, he had put his faith in the discussions while telling the media an agreement would likely come before year end.

He said then that the GOB had stated from inception that it wanted restructure both domestic and external debt to bring the debt to GDP ratio to 60 per cent of GDP by 2033.

A statement said that in reaching an agreement with the Government of Barbados, the external creditor committee had considered information made public by the Government, and the first review of Barbados by the International Monetary Fund (IMF).

Currently the Barbados economy remains in recession, and there is disquiet among Barbadians concerning the high taxes, the hike in bus fare and unavailability of buses, among other matters.

It will be interesting to see what transpires in the future and how government deals with these issues.