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A whopping $570 million per year or $48 million per month!

That’s how much chartered accountant Douglas Skeete estimates that the Freundel Stuart administration would have to repay over a 30-year period, should it take up Minister of Agriculture Dr David Estiwick’s advice and borrow US$5 billion from the United Arab Emirates (UAE).

In an interview with Barbados TODAY, Skeete explained that in keeping with the concept of a sinking fund, as raised by Estwick during his presentation to Cabinet last week, the Government would usually be given a moratorium on repayment.

However, he cautioned that in terms of the 30-year proposal from UAE, which Estwick has forcefully put on the table as an alternative means of addressing the country’s high national debt, a sinking fund would not be very helpful to Barbados in such a scenario.

“I have worked out the numbers,” said Skeete, who in addition to being a respected accountant is also a former candidate of the Opposition Barbados Labour Party.

“Even if you are repaying the loan over a 30-year period, the Government will be required to look for close to Bds $570 million per year,” he cautioned, adding: “Now you can see that it is not an insignificant amount.”

Skeete also questioned the feasibilty of Estwick’s proposal asking: “What is the purpose of a sinking fund when you are repaying over $570 million per year? There is no moratorium. What is the purpose of setting up a sinking fund when you have to look for more money to set up a sinking fund. So that is where I do not understand where he talks about a sinking fund.

“Each month Government will be writing a cheque. You are either going to pay just about $48 million a month or $570 million per year.”

Estwick has also said that a low level of interest would also be charged on the loan from the UAE, but Skeete has questioned whether any knowledgeable investor, knowing that Barbados’ sovereign currency has a rating below investment grade, would take such a risk.

“Barbados is two levels below investment grade. It will suggest that on that basis a lender will see there is some risk as opposed to someone who has investment grade. If that risk is priced in clearly four per cent, [it] seems to me to be absurd. One would have to ask, what is so special about this arrangement that the lenders would want to lend Barbados US$ 5 billion at four per cent? That is a question that one should raise.”

Asked if private equity could be financing the loan, the chartered accountant said it seemed to him to be coming from the UAE and the question had to be asked, if it has to be approved by a parliament or a ruler?

Skeete suggested that based on the system of government which exists in the seven states which make up the UAE, it could be a private arrangement.

While acknowledging that the loan would assist Government in reducing the national debt, Skeete insisted that “it will not pull the country out of the woods”.

“Estwick is saying that when you pay off the debt you do not have to borrow for another 30 years. That is not true because we are still going to run deficits. Our revenues still do not cover our expenditure. Then when you factor in capital expenditure, we are still paying out more each year than we are pulling in. So even when you pay off this debt you are still going to continue to borrow – granted the borrowing will not be at such a high level, you will still have to borrow.

“The loan will still not eliminate your fiscal deficit,” Skeete maintained.

3 Responses to ABSURD!

  1. Philip Matthews
    Philip Matthews February 18, 2014 at 10:36 pm

    Them is loan shark rates , borrow 5 pay back 8 WTF

  2. Robert Holloway
    Robert Holloway February 18, 2014 at 11:29 pm

    Good observation by the author, one has to ask what the conditions are . Regardless if you do not change the way things are today with more expense than revenue, the debt will continue. This is not a free ride

  3. lynda February 19, 2014 at 8:48 am

    they all are playing boo peep, none of them dont know a pang, as none of them are economist..they are playing trials and errors with people daily life..they should be honest, if they dont know how to run the country, then say so.all they studying is their fat pension while taxpayers continue suffer.i know they WILL NEVER GET A VOTE FROM ME< IF THEY PAY ME OR NOT


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