The Senior Economic Advisor to the Government is reassuring Barbadians that the country does not have a debt problem.
“Even with modest growth production, we will be able to pay back all of our debt. We have no debt problem,” Dr Kevin Greenidge told Barbados TODAY this morning.
In fact, in dismissing the concerns about the ability to meet repayment obligations, Dr Greenidge noted: “Unless Government stops taking revenues…even right now, we have enough reserves at the Central Bank to cover, not just the IMF repayment, but all external debt about 10 times over.”
Dr Greenidge said that while the $870 million that was borrowed from the International Monetary Fund (IMF) may seem like massive debt, it literally breaks down to less than one cent in every revenue dollar this year and four cents at the height of the payback period in 2026.
He was responding to assertions of retired Head of the Department of Economics at the University of the West Indies (UWI), Cave Hill Campus, Professor Emeritus Michael Howard who told Barbados TODAY on Tuesday that the Mia Mottley Administration had placed the country in a debt trap that will be difficult to get out of in the foreseeable future.
Professor Howard suggested that Government needed to come clean about the real level of its spending and debt, arguing that its forecast for settling the $815 million debt to the fund by 2027 was unrealistic.
But today, Dr Greenidge said he wants to make sure Barbadians are not given the wrong impression and cause panic and fear over the issue.
“Debt is not an issue for Barbados right now. As long as we continue to manage our debt and borrow responsibly and put it into productive things, it is not a problem,” said the economist. He is contending that Barbadians need to have the issue put in context, instead of persons simply focusing on the debt figure.
He said that based on the average interest rate of one per cent, “the IMF money is the cheapest money in town” and the loan is well within the country’s ability to settle.
“Howard said paying back [over] $800 million [by 2027] is unrealistic. First, put it in the context of our overall debt…It’s actually $870 million right…is 6.4 per cent of our total debt, which is a small portion of the total debt. Our total debt is now $13.4 billion,” Dr Greenidge explained. According to him $870 million of that is going to the IMF.
“The number looks big, but it is small in the grand scheme of things. And by the way, that $13.4 billion used to be $17.5 billion prior to the BERT [Barbados Economic Recovery and Transformation] programme,” added the senior economist who was seconded from the IMF to advise the Government.
“Now it has to be repaid by 2029 and the interest rate is averaging one per cent. This year in 2022, we will pay back $92 million from the Government revenues. That is, 0.3 per cent of Government revenue will go to pay the IMF debt. In other words, less than a cent out of every revenue dollar will go to pay the IMF this year,” he disclosed.
“Next year, it’s going to go to two per cent of revenues. In other words, less than two cents out of every revenue dollar will go to service the IMF debt. Two cents. By the time we reach 2026…that is the height of when we are repaying the debt, it is going to be 4.3 per cent of projected revenue debt. Do you know what is 4.3 per cent of projected revenue? Four cents out of every revenue dollar,” the top economist asserted.
“You could not say that, by any stretch of the imagination, is unrealistic when you are taking less than a cent this year. Next year you are taking less than two cents, then it goes to three cents and by the end of the height of your repayment period, it is going to be four cents out of every revenue dollar. That is manageable under any circumstance,” Government’s senior economic advisor stressed.
Dr Greenidge assured Barbadians that by the time the loan is repaid in 2029, it would only have cost taxpayers an additional $52 million in interest for borrowing $870 million.
“That is the cheapest money you could get anywhere in the world. The borrowing is very small relative to our total borrowing. It is easy to repay because we can handle it because we borrowed at a low-interest rate; and that money that we borrowed, you can see it in the economy,” he declared.
Dr Greenidge listed new garbage trucks, electric buses, a new quarantine centre, medication, support to protect those Barbadians on welfare, $150 million paid out by the National Insurance Scheme (NIS) and assistance to “a whole host” of people impacted by the COVID-19 pandemic, as ways in which the financing can be seen at work.
“We didn’t borrow and threw the money in the garbage. It was used to support and help us respond to the shock because of that (pandemic),” he added.
“Because we moved the debt to 176 per cent of GDP prior to the BERT programme to 170 per cent prior to COVID, that allowed us the space to make the additional borrowing to do what we need to do,” he stated. The economist noted that the debt rose again to 140 and now it’s on the way back down…As at the end of May this year it is 127 per cent of GDP.
“And that includes the IMF borrowing, and we project that it will continue that downward trend particularly when the economy starts to grow,” the senior economic advisor told Barbados TODAY.
emmanueljoseph@barbadostoday.bb
The post Greenidge says no issues repaying IMF appeared first on Barbados Today.