The Barbados Government has put a temporary freeze on borrowing, even as it reported an improvement in the island’s economic position.
“Over the next four years the Barbados Government will not borrow any new funds. To put the impact of that into context, over the past four years the Government of Barbados has borrowed almost two billion dollars (One Barbados dollar=US$0.50 cents),” said minister in the Ministry of Economic Affairs, Marsha Caddle, adding, “that’s two billion dollars of new Barbadian savings that were drawn into and trapped by Government debt”.
Caddle, speaking at the 2019 planning conference for the Barbados Association of Insurance and Financial Advisors, said the island’s debt had already declined from near 170 per cent of gross domestic product, in May last year, to 124 per cent this year.
She said last May reserves stood at BDS$400 million, but the Government’s US$290 -million External Fund Facility agreement with the International Monetary Fund and other international financial agencies, including the Inter-American Development Bank, have helped to improve the economic situation here.
She said in bringing the economy to this new place, the Mia Mottley Administration has also settled one of the largest domestic debt restructuring exercises in the island’s history.
But she said that unless the Government provides new, safe avenues for individuals to invest, those excess funds run the risk of sitting idly in banks, as the current rate of interest being offered is close to zero.
“Where will the two billion dollars of new savings go over the next four years? If we do nothing these savings will only compete for existing assets, while the banks will be awash with more deposits than they know what to do with. The bank interest rates are going to remain near zero. Government bonds that seem plentiful today will be in short supply, while equity markets will see prices skyrocketing.”