Mascoll enters Credit Suisse loan row
Economic advisor to the opposition Barbados Labour Party, Dr Clyde Mascoll, has added his voice to the ongoing row between Finance Minister Chris Sinckler and Opposition Leader Mia Mottley, over government’s servicing of an approximately $88 million loan from Swiss bank, Credit Suisse.
Mottley claimed that government did not repay the amount on the due date of June 18 – a charge that Sinckler denied.
At a news conference yesterday, Mascoll questioned the level of installments being paid on the loan, and pointed out that under the terms and conditions of the loan presented to parliament, the principal repayment was to be done in eight semi-annual amortizations, commencing 18 months after the financial close, which was December 2013.
“According to the terms and conditions of the loan the first principal payment was to be $56.25 million,” Mascoll said.
“The question is why did the Government only pay $20.63 million as opposed to $56.25 million on June 18, 2015 for principal alone. Barbados was supposed to pay 8 semi-annual amortizations payments of equal amounts and the amount was $56.25 million.”
Mascoll, who is one of Barbados leading economists, charged that a commitment of $56.25 million would have weakened the country’s foreign reserves even more at the end of June 2015.
He noted that one of the reasons for the Credit Suisse loan was to build the country’s foreign reserves which had declined by $175.9 million since the loan was acquired.
Mascoll also called for more transparency on the issue, noting that “The interest rate on the loan was supposed to range from 7.5 to 8.5 per cent. By the time of the Estimates the interest rate quoted was 8.84 per cent.
“The interest rate could have been increased as a result of a downgrading of the country’s credit rating that has occurred subsequent to the loan. Was the interest rate on the loan pushed up? If so what is it? Is the increase because of the re-financing or the downgrading of the country’s credit rating in the latter part of December 2014?” he said.
Meanwhile Mottley has reiterated calls for the finance minister to “come clean” and tell the country if he has entered into a debt-restructuring programme with Credit Suisse International Bank, over the repayment of the loan.
Mottley told a press conference yesterday that government was now paying $42.12 million instead of what should have been closer to $78 million, and also charged that government was engaging in the restructuring of the loan under the cover of darkness.
The St Michael North East MP quoted from Sinckler’s 2015/2016 Financial Statement and Budgetary Proposals that “This administration has no plans to engage in a frolic on the type of debt restructuring which has now seemingly crept into the discourse of the proponents of the economics of the easy way out.”
Arguing that the minister has now taken a different course of action from what was spelt out on June 15 in his Budget, Mottley asked: “Is he now accepting as has been put by former Prime Minister Owen Arthur and by his own Cabinet colleague Dr David Estwick that Barbados needs to address the issue of debt-refinancing in a sensible way?
“You cannot tell Barbadians that you are going to change how you pay, pay less than what you were required to pay, pay longer and that is not a form of refinancing.
“Barbadians want to know why you paid less. Is the loan longer than December 2018 and if it is longer than December 2018 will Barbadians incur millions of dollars in additional interest for that extension?” Mottley added.
She referred to the terms and conditions of hire purchase agreements, which stipulate that a fee will be incurred if the individual cannot meet the agreed payments.
“What is the fee that the Democratic Labour Party has had to pay in order to allow Credit Suisse and the others holding the debt to accept $42 .12 million instead of the full amount that was expected. Is that fee near to US $200 000. The Minister of Finance must tell us.”
Mottley also raised questions last week over whether the terms and conditions of the loan had been secretly altered. But a statement from the Ministry of Finance on Friday dismissed the possibility, saying the opposition leader should have known better.
“Miss Mottley further knows – or perhaps doesn’t – that any material alterations to the official and original terms of any loan contract between a sovereign country and its creditors to the extent that introduces new payment terms and conditions, constitutes a direct default or technical default as so classified by international capital markets and the international ratings agencies.
“It is therefore absolutely impossible for any Government of Barbados to surreptitiously alter the original terms and conditions of any loan, so as to permit it to break the original terms and pay less on previously agreed terms, and worse yet, to inveigle a major international bank to accompany it in such mischief, as the arranger of a major syndicated loan involving varied investors,” Sinckler said.