Government repaid nearly $1 billion in debt in the first three months of its new fiscal year, but the authorities say the country’s debt portfolio “remains relatively low risk”.
As detailed in the Barbados Fiscal Framework 2026/2027 to 2028/2029, “amortisation payments for the first quarter of 2025/2026 totalled $917.7 million, an increase of $786.7 million compared to the same period in the previous financial year”.
“This was due primarily to a liability management operation on the Government’s existing US$530.6 million 6.5 per cent 2029 bond,” the document prepared by the Ministry of Finance noted.
Other factors for the higher debt payment included “a reverse auction regarding Series B and D bonds along with the buyback of Series E bonds as part of the debt for climate swap, as well as a prepayment of Series B and D bonds that occurred at the end of fiscal year 2024/25”.
Interest payments also increased, expanding in the first quarter of the last fiscal year and the current one.
“Interest payments for fiscal year 2024/25 were $37.4 million higher than the previous year due mainly to additional disbursements of foreign funds and domestic securities,” the stated the Fiscal Framework.
“Sinking Fund contributions increased from $31.5 million in fiscal year 2023/24 to $32.8 million in fiscal year 2024/25. Expenses related to loans increased by $6.3 million to $18.1 million at March 2025. This increase was due primarily to expenses paid regarding the recently concluded debt for climate swap.”
It added: “By the end of June, interest payments totalled $169.3 million, approximately $4 million more than the corresponding period for the previous financial year.
“There was an increase of $1.25 million for the Sinking Fund contributions for the quarter ending June 30, when compared to the previous period in the corresponding year. Similarly, there was an increase of $2.70 million in the period for expenses related to loans.
This increase was due primarily to expenses paid regarding guaranteed loans from the Inter-American Development Bank (IDB) and the European Investment Bank with reference to the recently concluded debt for climate swap.”
Government has been using a mixture of foreign and domestic financing to fund its operations.
“During fiscal year 2024/2025, foreign financing of approximately $536.7 million was led by support from the IDB with $225.4 million followed disbursements from the IMF’s External Fund Facility and Resilience and Sustainability Facitility with $225.2 million. Other project related loans made up the remainder of the foreign financing,” said the Fiscal Framework.
“The Government raised domestic financing in fiscal year 2024/2025 by issuing debt securities and drawing on Central Bank deposits. The net issuance of treasury bills during the fiscal year yielded approximately $118.1 million.
“Purchases of BOSS + bonds totaled approximately $72.2 million followed by Government’s 7.75 per cent debenture 2044 totalling approximately $245.2 million.”
This meant that Government’s domestic financing was boosted by approximately $317.4 million.
Additionally, Government “withdrew approximately $660.9 million from its deposits at the Central Bank. As at June, financing totalling approximately $1.15 billion has been met predominately from the issuance of the US$500 million eight per cent domestic note”.
The Fiscal Framework included a look at Government’s debt management strategy for the 2025/2026 period. The strategy this fiscal year “was predicated on capitalising on greater liquidity in the domestic securities market, increased the domestic securities issuances by utilising innovative financing mechanisms such as debt for climate and other swaps which assisted with building out Barbados’ critical infrastructure while mitigating the impact on debt sustainability”.
The report also said that Barbados “continues to proactively adopt strategies for building climate resilience into its debt portfolio with the recently concluded debt for climate swap in November 2024”.
The following risks to Government’s debt portfolio were highlighted.
Interest rate risk – the vulnerability of the debt portfolio, and the cost of Government debt, to higher interest rates at the point at which the interest rate on variable rate debt and fixed rate debt is maturing is being re-priced.
Refinancing (roll-over) risk – captures the exposure of the debt porfolio to unusually higher interest rates at the point at which debt is being refinanced; in the extreme, when this risk is too high it may not be possible to roll over maturing obligations.”
Foreign exchange rate risk – relates to the vulnerability of the debt portfolio, and the Government’s debt cost, to the depreciation/devaluation in the external value of the domestic currency.
The Fiscal Framework explained that Government’s debt portfolio “currently has low refinancing risk, with the majority of domestic debt held in stepped rate bonds which amortise over an extended period and the external debt portfolio consisting mainly of multilateral loans along with two sovereign bonds that amortises over five years and US dollar domestic treasury note which will be paid as a bullet payment in November 2026”.
“This risk is expected to remain largely unchanged over the medium term. Debt service costs increased due to prepayments, reverse auctions and disbursements primarily from IMF and IDB facilities,” it stated.
“However, global interest rates declined for the fiscal year 2024/2025 and in the medium term is expected to decline even further.”
“Foreign debt accounts for approximately 40.6 per cent of the overall portfolio. However, as the majority of this is in US dollars, the foreign exchange rate risk is largely mitigated due to the fixed Barbadian dollar/US dollar peg,” the report added.
The post $918m in debt paid by June appeared first on nationnews.com.
