We can still borrow, assures Ince
The recent economic downgrades have not negatively affected Barbados’ ability to borrow.
This assurance today from Parliamentary Secretary in the Ministry of Finance Senator Jeptor Ince, who was attempting to school critics of the Government on how the financial world actually operates.
He argued that while in theory downgrades were expected to make borrowing more expensive, it all depended on the financial institution that was doing the lending.
“[Therefore] it does not necessarily mean that because a country received downgrades that automatically you are going to get an interest rate of ten or 12 per cent on a loan,” Ince said in the Senate while supporting a Government guarantee of $17.625 million at an interest rate of 6.65 per cent for the Barbados Conference Services Limited.
Ince pointed out that the First Citizens loan was due for repayment in ten years and that from the date of disbursement, it is to be repaid in equal monthly installments “representing a blended payment of principal and interest of $201,476 that is worked out by the lending institution.
“So what I am saying is that even with the downgrades, where we are down to ‘C’, Barbados still has the capacity to borrow . . . [but] you have to know the meaning,” Ince said, while complaining that “you would hear comments from some economists and some financial analysts, as well as the Opposition, that it seems that we are in no man’s land”.
On the contrary, Ince said the First Citizens loan was reflective of the confidence that financial institutions still have in the present administration.
“It is clear, that without that confidence we could not achieve a 6.65 per cent rate for ten years, given the fact that we had previous downgrades and present downgrades and you hear the comments that the Government has nowhere to go,” Ince stressed.
Earlier this month Standard & Poor’s downgraded Barbados to ‘CCC+/C’ based on its limited financing alternatives and low international reserves. The New York based agency also issued a negative outlook for the island, while warning that the sustainability of the Barbados dollar was now under threat, amid Government’s continued reliance on the Central Bank to finance its deficit.
The action was quickly followed by a Moody’s downgrade of Government bond and issuer ratings to Caa3.
In its press release Moody’s highlighted Government’s rising debt and its very limited prospects of fiscal reform. It also said that as a consequence, rising domestic and external financing pressures were very likely to impair the Government’s ability to service its debt.