CDB still worried about Barbados’ debt situation
The President of the Caribbean Development Bank (CDB), Warren Smith, today expressed fresh concern about Barbados’ high level of debt, while stating that the CDB stood ready to assist wherever possible.
Speaking to Barbados TODAY this morning on the sidelines of the 36th CARICOM Heads of Government Summit at the Hilton Barbados, Smith said while he was encouraged that progress was being made in tackling the country’s fiscal deficit, its debt level was still too high.
“We are concerned about rising indebtedness in Barbados,” said Smith.
“However, indebtedness is very much a function of the recurrent fiscal deficits. And the most recent information we have suggests that good progress has been made in addressing the fiscal deficit, and . . . even though the debt remains unsustainable at this time, it does appear to us that if the present fiscal posture continues Barbados will be able to bring the debt under control,” the economist explained.
Asked if the CDB had been approached by the Barbados Government for any technical or financial assistance recently, Smith said the Bank was continuously in discussion with the Government, adding, “we are more than always anxious to be of assistance to Barbados”.
Smith said at this stage it was still possible for the Government to borrow from the international market to restructure its debt, but he advised caution.
“I don’t know precisely where the Government is going in relation to borrowings, but to the extent that it is possible to go into the international markets to borrow and raise foreign exchange, as long as the pricing of that debt is consistent with the broader objective of reducing the debt trajectory, then I will be supportive of that,” he said.
Exactly a week ago, the International Monetary Fund (IMF) expressed concern about the country’s very high deficit and public debt, which up to 2013 was above 90 per cent.
IMF Mission Chief to Barbados Nicole Laframboise said then in response to questions posed to her by told Barbados TODAY that despite “the considerable progress” achieved by the Government over the past year, “the deficit and public debt remained very high and fiscal financing needs pressing”.
This, she said, meant that overall risks were still elevated and therefore “a stronger fiscal adjustment was still needed “to reduce those vulnerabilities further and put the debt on a firm downward trajectory”.
In terms of the wider issue of regional economic growth, Smith agreed that Caribbean economies were beginning to show some positive signs, but he said faster growth was needed if regional leaders were to effectively solve a number of the current problems.
“The indebtedness problem would be assisted by faster growth [and] the governments would be in a position to be more fiscally robust, which means that they would have more resources to be able to address infrastructure deficits that many of our countries are currently experiencing,” explained Smith.
He said while governments were relying “a lot” on domestic and international private sector investment in order to stimulate economic growth, it was critical to ensure the right enabling environment if they wanted that growth to be very robust.
“Investors need to feel confident and comfortable about the future. They need to feel that if their investments are placed here or anywhere else in the Caribbean they are going to realize the kinds of returns they expect,” he said.
“They also want to be confident that there is predictability; that they don’t come into a country with an understanding of certain rules and regulation and then the ball game changes. So predictability and consistency of policy are all part and parcel for a good story on economic growth,” he added.
Smith said the CDB had been “very forthright in making the case that debt relief is a necessity if we are going to get the Caribbean countries moving from the standpoint at economic growth and development”.
However, he said while governments were turning to creditors for help, they needed to take greater responsibility for managing their economies, including implementation of “tough measures to change the structure of the economy”.
“The bottom line is, yes, we need assistance in addressing our debt, but we need to also acknowledge our role in helping us to move towards sustainable debt positions, because if we go and get debt relief today and we don’t address our side of the problem we could be coming back to have this discussion ten years down the road and we don’t want that. We want a sustainable response to the debt situation,” said Smith.