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What debt problem?

Dr. Delisle Worrell

Dr. Delisle Worrell

The International Monetary Fund, leading rating agencies and other notable economic pundits have gotten it wrong — Barbados does not have a debt problem. Central Bank of Barbados Governor, Dr. DeLisle Worrell, has also dismissed views that the island’s investment instruments are junk.

Responding to questions from some of the island’s familiar business faces this afternoon after addressing a Barbados Chamber of Commerce and Industry luncheon, the economist who has worked at the IMF and other agencies outside of Barbados, said contrary to views being espoused by some, the island was not one of the world’s highly indebted countries.

Worrell also said it was wrong for the experts and others to conclude a higher than realistic debt profile for Barbados based primarily on a comparison of its debt to GDP ratio.

Economists often use this method as a gauge of a “misinformation”.

country’s economic outlook since the debt to GDP ratio is the national debt measured as a percentage of overall GDP.

“We are on par with Germany, we are on par with Canada and we are below the United States. The most highly indebted country in the world in terms of debt to GDP ratio is … Japan, and Japan does not have a debt problem,” the governor pointed out. “It is not a functional measurement, it is that the debt to GDP ratio is not an informative measurement,” he stated.

Worrell said what mattered to a small open economy like Barbados was the amount of foreign debt “and more precisely, the servicing of your foreign debt”.

“That is what we were taught, we have forgotten that. The reason why we ran into trouble in 1991 was because we had to repay two large Japanese loans and we did not have the foreign exchange and the reason we can safely ignore all of these opinions about our debt at the moment is that our foreign debt service this year and next year and for the foreseeable future is less than 10 per cent of our foreign exchange earnings,” he stated.

“This year it is about six per cent, one of the lowest in the world. So I keep saying we have no debt problem.” As for Barbados’ junk status, lower than investment grade, ascription by rating agencies Standard and Poor’s and Moody’s, the Central Bank official said this was

“One of the things that we have been actively doing is that we have putting information out there to make our case that the rating that we are being given does not correspond to riskiness of our bonds. What we have said to the rating agencies, and I have said it to them directly, ‘You are misinforming potential investors, you are causing investors who are constrained to invest in investment grade instruments to pass up profitable opportunities for virtually risk-free investment that yields a good return’,” he said.

“And we will continue to do that. At least once a year we have a road show where we go directly to investors. We say to them ‘Form your own judgement!’, we tell them the same thing we say to the rating agencies…, ‘These guys are looking at debt-to-GDP ratio, it doesn’t make any sense’.

“What you are interested in as an investor is whether the country has the ability to service the investment that you have made, … and I am saying we have that capacity and preeminently so.

“And so sometime in the not-too-distant future we will again, myself, the Minister of Finance, will go to the markets … in London and New York and we will meet with investors and we will give them the facts,” he added. (SC)

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