Minister in the Ministry of Finance, Ryan Straughn.
MINISTER in the Ministry of Finance, Ryan Straughn, yesterday sought to clear the air on what he says is some level of misunderstanding in the wider public as it relates to Government’s debt suspension request.
His comments came during the debate on the Appropriation (Amendment) Bill 2020, where he stated: “You would recall that under the BERT programme, we committed ourselves to a 60 per cent debt-to-GDP ratio by 2033 and successfully restructured both our domestic and external commercial debt to ensure that we move from 171 per cent when we came into office to just about 118 per cent just prior to COVID.
“Since the onset of COVID, Barbados like the rest of the world we have had to borrow, to finance in a sense what the shortfall in revenue would be given the commitments we have made.”
He revealed that this week and in the course of earlier weeks, Prime Minister Mia Amor Mottley has been engaged in a number of multilateral discussions with the IMF, World Bank, the various institutional lenders about how to treat to the debt incurred as it relates to COVID and with respect to how debt sustainability is managed and assessed going forward.
“Because we have been advocating quite strongly, and there is consensus with respect to that that is building, it is now to ensure we have the political will of those who are richer financially, to get them to agree to the principle of it.
“In the same way the Great Britain would have benefited from the War bonds which they only just finished repaying for the rebuilding after World War II, we have been advocating very strongly that the debt that is incurred with respect to COVID, that ... the payback of that debt should be done over a much longer period than the existing debt that persons would have already had on their books.”
He said this would have been done, recognising that the pandemic has evolved. “You have a situation where households and many businesses are under stress and therefore if the economy was to recover within two years, the debt burden that we now hold as a country ... that you would find yourself where the economy is back at the same level that it was at the beginning of this year.
“But your debt level and potential debt service would be over and above that which the potential carrying capacity could be, which then triggers potentially some level of financial implosion not just in Barbados, but there are a number of countries who are not as fiscally strong a position as Barbados and certainly we have to be concerned equally with respect to that.”
He said it is against this backdrop that the Government has been advocating for the redefining of debt sustainability. “Or find a way to ring-fence or treat very differently the debt that has been incurred with respect to COVID-19, such that over the course of the longest possible period that that debt could be serviced without necessarily creating a debt overhang for economies such as Barbados.”
Minister Straughn said that it was misinterpreted somehow that the Government was contemplating a new debt restructuring, but reiterated that this is not the case.
“...Because if there was no COVID this year, we would not have needed to borrow any of the monies that we borrowed already and equally a number of the countries – small, medium and large globally – have had to respond in ways that nobody anticipated they needed this year and therefore this is a global issue.
“Barbados is leading in these very important discussions because that will make a difference to the quality of life that Barbadians can expect because as you can appreciate, if after this recovery we have to expend more resources than anticipated servicing that additional debt that means we cannot allocate those resources to dealing with some of the more structural issues which we were committed to when we entered the BERT programme.
“And therefore, we will continue those discussions within that space and therefore I want to give the public the confidence that ... the Government is not contemplating a debt restructuring in the nature that would have taken place with respect to the domestic and external debt, but more importantly, understanding that we were not going to borrow these monies this year, but we had to given the shortfall of revenue and the response the Government has had to respond to and that this is a global issue and therefore we are leading within that context to be able to bring about or avoid very uncomfortable discussions and potentially a significantly global debt problem, which we have the ability to respond to.
“These are some of the complicated things that confronts Barbados because while we are responding to the public health crisis and responding to stimulate as much domestic activity as possible, we equally have to ensure that down the road we are putting the things in place today to ensure we can maintain sustainable debt trajectory and fiscal situation going forward,” he said.
