CAF to the rescue
Govt signs multi- million dollar loan agreement
The Government of Barbados and the Development Bank of Latin America, better known by the Spanish acronym CAF, today signed two agreements covering, in one instance, a US$50 million policy-based loan and, in the other, technical cooperation between the two parties.
Prime Minister Freundel Stuart signed on behalf of Barbados while Executive President Enrique Garcia did so on behalf of the Caracas, Venezuela-headquartered CAF. It is the first loan Barbados is receiving since becoming a full CAF member last September.
In remarks at the signing ceremony this morning, Stuart said the loan was “in support of the Barbados Growth and Development Strategy 2013-2010 (and also) . . . . enables Barbados to fund the shares in CAF to the level of 3,522 Series ‘C’ shares and to create an additional financing option in order to assist Barbados in its development process”.
Policy-based loans (PBLs) are fast-disbursing instruments which generally provide budgetary support. According to an explanation provided in a document by the Caribbean Development Bank which offers similar financing, “the size of the PBL is related to the financing gap that needs to be closed to achieve the objectives of the medium term fiscal and/or debt sustainability and sector reforms . . . . ”
Garcia said the signing of the agreements with Barbados reflected “a sense of commitment by the bank to the country”. Saying Barbados could count on CAF’s support for many years to come, he added the bank was ready and willing to support the island’s “many initiatives”.
“On the other side, we also will support the country through our knowledge-based capacity,” he added. “And, of course, in the purpose of strengthening the regional integration efforts, we look forward to this relationship.”
Speaking after signing ceremony, Minister of Finance and Economic Affairs Chris Sinckler said the relationship with CAF provided an opportunity for Barbados to source financing at “very highly concessionary rates”.
“ . . . . Given our debt profile which is at a place where we don’t want it to be and we want to bring it down, we need to, wherever possible when necessary to contract debt, that it be done at a cost that makes sense,” Sinckler added.
He went on: “The open private capital markets are very harsh for countries such as Barbados and many across the world. You borrow at very high risk premiums based on what your credit rating is and based on what is happening in your economy, and this provides an opportunity for us to access substantial resources at very highly concessionary interest rates that benefit Barbados.
“It also allows us to access resources that are predominantly geared towards infrastructural development and that is what we want to do in Barbados.”