The Barbados government has told holders of treasury notes, treasury bills and debentures that they have until Friday to accept its debt restructuring proposal.
The senior technical advisor to the Barbados government, Dr. Kevin Greenidge, said that the Mia Amor Mottley administration has recognized that the terms were difficult ones, as individuals and pensioners were being asked to stretch out the repayment of their debt to 15 years, and accept reduced interest rates.
“But these changes have become necessary because the debt burden is otherwise unsustainable, and continued repayments would only further undermine the Barbados dollar,” he noted.
Dr. Greenidge said that the Central Bank would tally the responses to the offer letters and an announcement should be made by Friday, October 12.
“After that, the Central Bank will place the new bonds in accounts for each person and input the bank payment information it receives. As part of the modernizing process, the Central Bank will no longer send out physical certificates for the new bonds, and will need to collect previously issued certificates for notes and debentures. Interest payments will be made on December 31, 2019, for the new bonds,” he explained.
Last month, the government’s special advisor on the economy, Professor Avinash Persaud, said a Barbados’ debt restructuring is the way back to the path of stability.
“I think people see the default as saying, finally, you are going to get your act together and that default is the route to credibility. The default is the platform that puts us back to a sustainable position. I think bondholders ultimately will view this as the credible path because where we were before was just not credible.
“Everyone in Barbados is suffering pain; taxes are going up; Government expenditure is going down, because that is how you get from 175 per cent of GDP (gross domestic product) to a sustainable point of 60 per cent and the kind of surpluses that we have to run to repay all.
“There is no easy option and we managed to make this as fair as possible. So, the bond holders will feel pain. They are taking about half the pain; and the other half is being taken by taxpayers…and government expenditure,” he said.
Government recently announced that it had launched an offer to exchange the vast majority of Barbados dollar-denominated debt it owed and certain public sector obligors for new debt instruments.
Treasury Bills, treasury notes, debentures, loans and bonds owed by the Government, loans and bonds owed by state-owned enterprises and other entities that receive transfers from the state budget and certain arrears owed by the Government and its public sector are included in the exchange offer or affected debt.
Barbados recently entered into a US$290 Extended Fund Facility (EFF) with the International Monetary Fund (IMF) as the island seeks to revitalise an ailing economy.