Government’s money problems have worsened, prompting it to get help via Parliament again.
The current administration’s “cash flow challenges”, caused largely by a decline in current revenue, were so bad that it is raising the limit at which it can raise money by issuing treasury bills and tax certificates from $1.75 billion to $2.75 billion, the fourth time it has done so in the last five years.
Minister of Finance Chris Sinckler outlined the need for the change this afternoon while leading off debate in the House of Assembly.
With individual and institutional investors like commercial banks not keen to buy longer term Government instruments, including debentures, treasury notes and savings bonds, the St. Michael North West MP said Government and its economic advisors, including the Central Bank, felt it prudent to focus on short term paper.
Unlike the four previous occasions when the limit was raised, however, this time the increase is one billion dollars, and the official said this was to negate the need for a return to Parliament for another increase anytime soon.
“It is necessary for us to ensure that for the proper liquidity management of the Treasury that we have access to resources to ensure that those critical functions of Government continue in a fashion that is not … abridged in too perilous a sense as to bring Government to a halt,” the minister told the Lower House.
“The appetite by individuals and institutional borrowers for longer term paper has been abridged somewhat given the conditions that exist and because of the large amount of domestic liquidity in the banking system, the containment of aggregate demand in our economic for very specific reasons, … the investments which businesses and individuals are making in longer term instruments have waned some…
“And there has been a preference for the shorter term instruments in the form of treasury bills and tax certificates, which are issued by the Government of Barbados for its financing needs.
“And to the extent that that is the case, and has been the case for some time, Government has to utilise, in conjunction with the debt committee, between the Ministry of Finance and the Central Bank and of course with the major players in the market, to find ways in which we can raise those resources that are required for the financing of our deficit, the running of the country and of course for the economy of Barbados,” he explained.
At a time when its revenues were declining, Sinckler said Government had to take the action to “ensure … the smoothness of this exercise of managing the economy, financing our deficit, and ensuring proper order in the system, that we have the space to do what we need to do”.
“Our overall goal eventually … is to bring that deficit down, to bring the debt down … but of course overall to ensure that we can make strategic investments to increase the level of economic growth,” he said.
“And therefore in the context of that we require this additional space to allow for the authorities at the Treasury to be able to manage the financing of our deficit, and the management of our cash flows appropriately to give us the space and time to be able to do what we are required to do in this economy.” (SC)