Mottley issues downgrade warning
Opposition Leader Mia Mottley is cautioning Government to put the brakes on raising the country’s credit limit, warning that it was putting the economy at risk of a further downgrade by international rating agencies.
She issued the caution in the House of Assembly today as legislators debated a resolution to approve a record $4 billion debt ceiling through the issuance of Treasury Bills (T-Bills), tax reserve certificates and tax refund certificates.
Pointing to warnings issued by Standard & Poor’s and Moody’s late last year during their most recent downgrades of the economy, Mottley said this latest move showed “recklessness at a high level” and put the country at “grave risk”.
She pointed out it had also come just a year after Government went to Parliament to raise the limit from $1.5 billion to $2.75 billion.
“This is like giving alcohol to an alcoholic; this is throwing gasoline on a fire. This is the thing that would lead to a further downgrade in our credit ratings according to Moody’s,” she cautioned, adding that the Freundel Stuart administration was sending the wrong signal.
Mottley said Government had continually ignored cautions, including from the opposition Barbados Labour Party, about the associated risks with short-term borrowing.
At the same time, she noted that while expenditure continues to be “way out of line”, revenue had collapsed, showing a more than ten per cent drop last year.
“You have a situation where targets have been set, plans have been developed, but in every instance we keep missing the targets and we keep failing to raise the revenue and to reduce the expenditure,” Mottley said.
“The consequences of that are simply this: the more you borrow, the higher your interest costs are; the more you borrow, the more you have to pay debt service; the more you have to pay debt service, the more you crowd out expenditure on things you truly need to keep Government functioning at optimal levels and to be able to finance new projects to restructure this economy to bring back growth.”
Before the resolution was passed, Mottley asked that none of the new T-Bills issued by the Government be taken up by Central Bank of Barbados (CBB) and that the National Insurance Board not be directed to take up any short-term loan in respect of the T-Bills either.
“The fear is that if they are forced or directed to pick up Treasury Bills, it in fact compromises the integrity of the National Insurance Fund and the ability for them to adequately meet the pensions of Barbadians when required in the future,” she said.
In 2008, the Opposition Leader pointed out, the CBB held no treasury bills and $75 million in debentures and that figure had mushroomed to $490 million in Government paper up to December, $415 million of which were treasury bills.