Finance and Economic Affairs Minister, Christopher Sinckler, remains adamant that the Freundel Stuart Administration will not be going the route of debt restructuring.
“We said it to S&P [Standard and Poor’s] very clearly, Barbados is not doing a debt restructuring. That’s not what we are doing and we don’t contemplate doing it, certainly not in the traditional way that people understand it to mean,” he affirmed during an interview with the media yesterday morning as he reflected on S&P’s most recent downgrade, which saw Barbados’ long-term local currency sovereign credit rating being reduced a notch to ‘CCC’.
Minister Sinckler revealed that rather than going that route, Government intends to look at putting a voluntary liabilities management exercise in place to deal with its current debt situation. That, he said, would include not only the debt held by the Central Bank and the National Insurance Scheme (NIS), but the private financial entities as well.
“We said in the Budget that since Central Bank and NIS are two major holders of government paper, and they are internal to Government because they are government institutions, we will have a conversation with them about the possibility of looking at putting a liabilities management exercise in place that will be voluntary. When we say liabilities management, you have your liabilities, you know when they come due, you know how much money you have to spend and you look at how such can be managed and handled in a way to ease the pressure off of Government’s fiscal budget and the country generally,” he said.
The Minister reiterated that such an exercise would not be mandatory, as they do not intend to command anyone to participate.
“This is not for you to say you have accept this and the Government is going to, as has happened in other countries, we are going to cut your interest rates and cause you to lose money on the debt that you hold for Government regardless of whether you want it or not. It has to be a voluntary exercise where all the parties sit down and agree that going forward this is what we are going to do; this is how we are going to handle the market when we come up with future issues,” he stated.
However, Sinckler admitted that pursuing such initiatives can cause credit rating agencies to “get a little anxious”, thinking that a government might do a debt restructuring exercise which would see the lenders’ profit margin being cut as a result of reducing the interest rates. In turn, he explained, they adjust the credit rating downward to alert people in the market of that possibility. But, he made it clear that while they respect the rating agencies’ role, the reports they produce are not used by governments to determine economic policy.
“When we do programmes we look IMF, we look CDB, we look IDB, we look at other agencies, we do not look at rating agencies; rating agencies do not determine economic policy. They may comment on it, they may have an opinion on it, and they may issue that opinion based on what they perceive to be the threats or potential threats to people who have lent money or are about to lend money,” he said.
Sinckler went on to acknowledge, however, that their opinions do have an impact.
“…They are important in the process and clearly can create hysteria as you have seen among people domestically and otherwise, and we have to manage that. But we have to stay focused with what we have to do and proceed with it and that is what we are basically doing.” (JRT)