Hobson’s Choice | Debt Default or …
The following was posted as a comment by Northern Observer to the Congratulations to Ambassador David Comissiong blog. It is a comment that resonates with the blogmaster for the commonsense perspective it shares about the huge challenge facing the country given the diminishing forex reserves and inadequate foreign inflows – David, blogmaster
“Mia unilateral decision to default on debt”
This is a horse you need to dismount. When a doctor tells you somebody has stage 4 cancer, and their life expectancy is 4 weeks, do you expect them to live for a year? Or you display anger towards the doctor, because you felt he didn’t consult with others? You haven’t heard it from 5 doctors, and they told you some weeks before the ‘patient was doing better’. So wha happen?
The continued decline in the Barbadian Sovereign Credit rating, told all of us in the financial world that a death was imminent. Junk status, is a polite term for saying, default is not official but imminent. The lower the junk rating, the more imminent the default. If you hold debt instruments, do not expect a full and timely settlement.
While I am all for transparency, I am unsure what you wanted the GoB to ‘discuss with the people’? Skinning local bond holders (which may still happen), does not solve the Fx problem of repaying monies in Fx, when your Fx reserves are perilously low. Rather than an official default you can try negotiating with each party, it takes time and can create animosity (and legal recourse) if one debtor feels treatment has been unequal. Default places all of them into the same basket. And buys time, and lowers expectations.
Default is a result of 13 consecutive years of accumulating Debt, and when the servicing costs exceed your ability to meet them.
So what would you like the GoB to discuss? That they will sell the Hilton and BNTCL for rock bottom prices and use the funds to pay down foreign loans. That the GoB will actively seek buyers for the BWA and any other asset of value, which can be used to bolster the Fx account. For what? Foreign lenders are not lending us money, whether we meet current loan terms or not. Foreign lenders have no collateral claims.
Defaulting was not a choice. The only choice was whether it happened now or at a later date. This way we get to keep (at least for now) the few meaningful public assets we have left. I can never ‘support a default’, but for the people of Barbados this was the “best” decision.
The challenge is, you choose not to accept, the Barbados public financial condition was as bad as it is, because you felt all the less-than-positive comments were coming from people you labelled as ‘the enemy’. They were B supporters. Many were, not B as in BLP, but B as in Barbados. They saw the bandages, they heard the prescriptions, and each time the bandage got changed, the wound was worse than before.