Barbados: Central Bank Governor Announces Debt Restructure

Barbados' Central Bank Governor Cleviston Haynes, says the country's government has no other option but to undergo debt restructuring to deal with its current debt burden. Haynes along Avinash Persaud, a member of the government's economic policy team, made the statements following a move by the state to restructure its domestic debt.

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“We have structured the programme in such a way that there will be no further build-up of arrears in the system, and that is going to be very important,” Haynes stated.

“The debt restructuring is a critical component in helping us to restore our overall macroeconomic balances to engender confidence to potential investors, and that is how you regain your access to capital markets. ... We want to bring the debt ratio down to approximately 60 percent by 2033. It is a tough act, but one that is achievable if one is able to consistently have the primary surpluses, strengthen growth, reduce interest costs and then spread the maturities out.”

Meanwhile, professor Persaud said he believes people “see the default as saying, finally, you are going to get your act together and that default is the route to credibility. The default is the platform that puts us back to a sustainable position. I think bondholders ultimately will view this as the credible path because where we were before was just not credible."

He pointed out that “everyone in Barbados is suffering pain; taxes are going up; government expenditure is going down, because that is how you get from 175 percent of GDP to a sustainable point of 60 percent and the kind of surpluses that we have to run to repay all. There is no easy option and we managed to make this as fair as possible. So, the bondholders will feel pain. They are taking about half the pain, and the other half is being taken by taxpayers ... and government expenditure.”

Earlier this month, the International Monetary Fund (IMF) and the government of Barbados, led by Prime Minister Mia Mottley, have agreed on a staff-level USD$290 million economic assistance program as part of the Extended Fund Facility. 

With international reserves having dwindled to USD$220 million and unsustainable central government debt, Bert van Selm, the IMF Chief of Mission to Barbados, stated, “Barbadian authorities, in close consultation with their social partners, are rapidly developing a plan to address current economic vulnerabilities.

Barbados currently has the fourth-highest debt-to-GDP ratio in the world after Japan, Greece, and Sudan with the country’s figure standing at 175 percent. Based on this fact the IMF delegation also discussed the possibility of providing financial support for the government's economic plan.