The Central Bank of Barbados urged the government to move swiftly to secure financing on favourable terms from international markets before borrowing costs rise further and conditions tighten.
The recommendation came from Governor Dr Kevin Greenidge on Thursday during a press conference reviewing the country’s economic performance for the first six months of this year.
Dr Greenidge said waiting until financing is urgently needed would not be prudent, given the steady rise in borrowing costs:
“Where international capital markets offer more favourable terms than the direction in which interest rates are heading, we should be ready to use that window rather than wait.“Use that window to access financing earlier rather than later.”
Without identifying specific projects or programmes the government should pursue at this time, he said it is normal for administrations to prioritise areas such as social development and public spending.
“We can wait and go as those [needs] occur, but one strategy, one school of thought is that if you look where the economy…where the world is going now, where prices are increasing, interest rates increasing now and into the medium term, the increased volatility, you have to consider that it may not be an optimal strategy to go when you need or when y6u think about a project.”
Dr Greenidge urged the Mottley administration to secure what he described as a “large envelope” of financing while market conditions remain stable and interest rates are favourable.
“You got to do the analysis; and half of that put aside and dip out of that as you need to do your projects. So you have an envelope, a bucket, a good rate and favourable terms, and then you use it to meet your project demands as time goes ahead.
“What that will do, if carefully executed and planned, [is] it doesn’t shift your debt trajectory from your target; it just brings forward the financing and lays it out in such a way, so you continue on your downward trajectory, and you get the financing upfront and at more favourable rates.”
He continued: “An analysis has to be done, because you need to look and see where rates are, where they are going, what’s the cost, because right now, everything is increasing. The cost of borrowing is going up.
“I am not saying which projects [to finance]. You are going to need an envelope. We can sit down and analyse what the cheap projects are, and [what] the financing will be and how to get them. Do you wait? You have to look and see where the market is.”
Barbados’ standby loan agreement with the International Monetary Fund (IMF) would be factored into this financing approach, the governor said.
(EJ)
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