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March target

Government is hoping to wind up negotiations and have a mutually-beneficial arrangement with external creditors before the end of March next year.

This is the clearest indication yet of a timeline for the completion of the external debt restructuring negotiations.

Making the disclosure on Wednesday night during the Society of Trust and Estate Practitioners (STEP) annual Christmas Cheer event at the Champers restaurant, Government Economic Advisor Dr Kevin Greenidge said only about 20 per cent of Government debt was external.

“Negotiations continue. We expect that to conclude, hopefully, before the end of the fiscal year,” he said.

The local debt restructuring plan was reached in September with holders of Government paper taking a cut in interest and accepting a longer repayment period. However, external creditors have been involved in a standoff with Government, refusing to accept a similar plan.

“It is tricky because we already have 80 per cent of our debt restructured, now we are dealing with the external creditors. You really can’t put a timeline on negotiations [but] we would like it concluded before the end of the fiscal year so we can get on with business, but again that is negotiations. Both teams are negotiating and we expect we would get some sort of agreement,” he said.

Within weeks of reaching a deal for local holders of Government debt, international rating agency Standard & Poor’s raised Barbados’ long- and short-term local currency sovereign credit ratings to ‘B-/B’ from SD/SD (selective default).

S&P also affirmed its ‘SD/SD’ long- and short-term foreign currency credit ratings on the island, and its “D’ (default) ratings on Barbados’ foreign currency issues.

Greenidge said he was hoping that Government could continue with its economic recovery plan and conclude negotiations with external creditors so that the island could reclaim investment grade.

“We are not quite in investment grade yet but if we continue on the path we are going we will be in investment grade very shortly, which means the cost of borrowing on the international market if we so choose, would be cheaper,” said Greenidge.

In his analysis of the stalemate between Government and external creditors, President of the Barbados Economic Society (BES) Shane Lowe told Barbados TODAY “Failure of both parties to come to a consensus will keep the Government’s outstanding external debt in default for a longer period and further delay any upgrades to the credit rating on its foreign currency debt.”

“This will delay the Government of Barbados’ ability to regain access to international capital markets should the need arise after funding from the International Monetary Fund and other multilateral lending agencies slows down,” Lowe warned.

Government has given all indication so far that it would not be returning to the international market for financing, especially given the ambitious Barbados Economic Recovery and Transformation (BERT) programme that it is currently in place to drive down the island’s debt to gross domestic product to around 60 per cent, build the reserves and erase the fiscal deficit.

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