The newly elected Barbados government took the unprecedented decision on 1 June 2018 to suspend domestic and eternal payments on debt. Credit rating agencies were predictably swift to respond by adjusting Barbados’ credit rating to selective default (SD).
Even the most ardent of Democratic Labour Party (DLP) supporters would have admitted the economy was in a free fall and the 28 May 2018 general election confirmed the prevailing sentiment. Never in the history of Barbados has a political party fail to win a seat in parliament, the BLP won all but 2 ‘boxes’.
The decision by the government to default resulted in the holders of government treasury notes and debentures taking a LOW haircut with maturities on the investments extended by 15 years. The good news story is that the local debt restructuring – if we accept the official report – has resulted in the national debt shrinking from 170% to 125% of GDP__ government has announced that by 2033 the debt should be 60%.
This blogmaster freely admits the BLP was dealt a bad hand on the 28 May 2018 and some hard decisions had to be taken to stabilize the economy. We can debate the how. The previous Freundel Stuart administration has justifiably earned the label as the worst government Barbados has experienced by a wide margin.
While listening to Senator Caswell Franklyn debating the Debt Holder (Approval of debt restructuring) Amendment Bill 2019 in the Senate this week doing a good job to remind that Chamber the misery government’s austerity policy is having on the poor, it reminded this blogmaster of the forgotten middle earning class. The decision by the government to restructure the domestic debt has impacted this group of persons who were encouraged to invest in government’s gilt edge securities by successive governments. You are reminded that for almost 10 Rh years under the Stuart administration the middle class – the majority with a mortgage, car and education loans – were asked to hold strain. BOOM the first thing the Mottley government did was to yank a belt that was already fitted tightly around the waist of the middleclass Barbadian.
A middleclass Barbadian should be synonymous with being an educated Bajan. Middleclass Barbadians understand decisive decisions had to be taken by the Mottley government to meet head on the economic challenges facing the country. Here is what this blogmaster does not understand. We have the largest Cabinet in the history of the country and given the current state of affairs in the country several will be elected for a second term. We have a BU commenter who is quick to advise he doesn’t have to read and spell for the BU family.
The following blog retrieved from the BU archives should explain the grouse of this blogmaster.
Unfunded Government Pension a Worry
Fiscal Problem In Barbados ! eb2d17288e33d24ec34a90fd04dca0d0 Dr. Justin Robinson recently shared some interesting information on Facebook, he attempted to breakout government expenditure and revenues – see the presentation, ‘facts on the Fiscal Situation in Barbados last 20 years. A focus on Transfers and Subsidies‘.
Successive governments have been challenged by the size of the transfers and subsidies allocation and it has become more so in the last decade given the fiscal challenges being experienced. Although out of the scope the blogmaster used the opportunity to question the chairman of the NIS about government’s non NIS pension liability. Private registered pension plans AND the NIS receive input from actuaries to inform the level of funding required to ensure they are able to meet future obligations.
It is an open secret the pension plan which covers statutory agencies, members of parliament and other public sector agencies continue to be a significant pension expense for government. From arms distance the fund appears to be ‘under-funded’. This is the interesting point of the exchange on Facebook with the Chairman.
If the blogmaster overestimated the ability of some to understand the thrust of the blog, Hants may be able to read and spell fuh wunnah.