Barbados may face significant hurdles in its bid to return to international financial markets, despite recent improvements in its credit ratings, independent Senator Lindell Nurse said on Tuesday.
He sounded a warning that the country’s financial standing remains precarious, with a substantial budget shortfall and a reliance on costly borrowing.
Speaking on Tuesday during the Senate’s debate on the budget, he raised concerns about the country’s ability to secure funding at competitive rates given its current financial standing.
Senator Nurse noted that while the government has projected revenue of $3.5 billion, planned expenditures stand at $5.1 billion, leaving a $1.2 billion shortfall that must be financed.
He noted that without significant tax increases in the budget, it appears that the government is set to rely heavily on foreign and domestic borrowing.
“I don’t think we are really in a position yet to go back out to market, although we have had a number of upgrades within recent times. But still, our credit rating is not yet back up to investment grade,” he said.
“If we try to go to market, it will likely be very costly because obviously, you are going to have to pay risk premiums to be able to borrow on the market due to higher interest rates.”
The independent lawmaker further noted that the bulk of foreign borrowing for the coming year appears to be sourced from the Inter-American Development Bank (IDB), the Latin American Development Bank, EXIM Bank, and the World Bank, rather than the International Monetary Fund (IMF), which has played a key role in recent financial recovery efforts under the Barbados Economic Recovery and Transformation (BERT) programme.
With BERT 2.0 nearing its end, Senator Nurse questioned whether the government might need to pursue a third phase to maintain fiscal stability.
Senator Nurse also noted a lack of public confidence in government securities, pointing to the underwhelming performance of the BOSS and BOSS+ bonds, which he said had been projected to raise $58 million and $16 million, respectively.
“If you look at what is projected from those sources, it has not been a very successful venture for raising financing. So you have to wonder if the public has not yet regained the level of confidence needed to start investing in government securities at the levels they once did,” he said.
Senator Nurse stressed the importance of carefully weighing borrowing options, particularly in light of the cost and possible investor scepticism surrounding the country’s financial position.
(SM)
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