Government’s proposed extension of the Barbados Optional Savings Scheme (BOSS) bonds investment is being knocked by one economist who has described the decision as “another misread of the investment climate in Barbados”.
Kemar Stuart, Director of Business Development, Finance and Investment with Stuart and Perkins Caribbean, said given that Barbadians were still reeling from a decline in their spending power, the plan by Government to introduce BOSS Plus bonds was a mistake.
“Barbados is still severely hurting from the brutal and erroneous debt default occurring in 2018 as Barbados made world economic history by restructuring its treasury bills, completely shattering investors’ confidence in Government paper,” said Stuart.
“To date, investors have not been fully repaid from the bruising. This act only ever occurred in Russia in 1998, Ukraine in 1998 and Uruguay in 2003,” he said.
Recently, Prime Minister Mia Mottley revealed that the BOSS scheme, which started mid-year last year, would soon be extended to the wider public under what is known as the BOSS Plus.
When it was introduced, the BOSS programme gave public sector workers the option to be paid a portion of their salary in four-year bonds at a five per cent interest rate. It was designed to shift a portion of Government’s wage bill to capital expenditure.
While it was targeted mainly at public servants, other Barbadians were allowed to purchase those bonds from a public servant, a broker, or the Central Bank, once the public servants opted out.
Pointing out that Barbados now found it difficult to access financing on the international capital markets, Stuart said “The push to launch BOSS Plus is due to the inability of Government to raise enough money from the previous failed attempts to sell bonds to the Barbadian public, as confidence in Barbados’ government paper remain at an all time low.”
The proposed BOSS Plus bonds scheme would follow on last November’s Government bond offer, the first major programme since the debt restructuring three years ago.
Stuart also questioned the subscription to the BOSS, noting that the take-up of some of those bonds by the Central Bank was “a clever way around government’s self-imposed decision to amend the Central Bank of Barbados Act to limit the Bank’s financing of Government’s operations”.
“In short, it is a backdoor way of financing government’s operations,” said Stuart.
“The first BOSS programme, launched in July 2020, can be classified as hardly a benefit to public workers as it didn’t raise the intended money as planned by Government. Participation by civil servants was really low and the Central Bank of Barbados reported that $3.1 million or 45 per cent worth of bonds were left unused in the first month of the BOSS programme. No increases in performance have been reported to date,” he said.
Pointing to lockdowns during 2020 and 2021, increases in the cost of living, loss of wages and salaries, damages from the ash fall and Hurricane Elsa, Stuart said the spending power of the average resident has been on the decline and this would impact their ability to engage in the proposed BOSS Plus programme.
“The spending power of the average Barbadian employee is being eroded especially via unbearable price increases in the cost of living on top of the heavy taxation as part of the Mottley administration tax policy, which places a heavy tax burden on lower and middle-income earners,” said Stuart.
“The current economic climate does not incentivise a working-class Barbadian to buy BOSS bonds as both middle and lower class Barbadians simply cannot afford while simultaneously experiencing trust issues with this new offer of bonds from Government,” he said. (MM)
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