Growing debt and the implications for future generations have sparked warnings from top economists, who urged a national conversation on the terms and consequences of the nation’s borrowing.
With the government securing new funding, calls for transparency and a more cautious approach to debt management are growing louder.
The calls follow news of the government’s latest financial arrangements, including a fresh injection of US$56 million ($112 million) from the International Monetary Fund (IMF) to support the Barbados Economic Recovery and Transformation Plan (BERT) 2022 and the climate policy agenda, alongside another commitment of US$12.4 million from the CARICOM Development Fund.
Expressing concerns over the country’s borrowing practices and their long-term implications, Professor Don Marshall and Dr Antonio Alleyne have highlighted the urgent need for a clearer understanding of the terms and conditions tied to the country’s loans.
Professor Marshall, the head of the Sir Arthur Lewis Institute of Social and Economic Studies at the University of the West Indies, told Barbados TODAY that the arrangement with the IMF and other multilateral agencies has enabled critical infrastructure renewal projects.
But he cautioned against the record-high levels of external debt that have accrued as a result.
“The engagement with the fund in BERT 2022 has meant that Barbados can continue to carry out its infrastructure renewal and other related projects through foreign financing through foreign borrowing,” he said. “However, the danger is that we are facing a situation where our external debt is reaching record-high levels, and we are already asking our children, our grandchildren, to undertake the debt servicing burden going forward.”
Professor Marshall stressed the urgency of examining the nature of the nation’s creditors, particularly multilateral institutions like the IMF and the World Bank, which impose shorter repayment timelines and stricter conditionalities.
“The real urgent reason why we should be very concerned with the state of our borrowing is who we are borrowing from,” he said. “The particular class of creditors we’re relying on . . . presents shorter timeframes within which we have to start servicing those loans, but they also bring with them onerous conditionalities.”
The economist noted that the country now faces imminent debt servicing commitments under BERT 2022, with obligations beginning as early as 2024.
“So between 2024 and 2028, we have some debt servicing commitments to meet,” he added.
He further contrasted these terms with the more patient lending practices of creditors such as China or African agencies like the African Export-Import Bank: “There’s a longer-term arrangement with the patient lending that these other classes of creditors offer.”
Marshall called for a “domestic mature conversation” about the implications of these loans.
“At home, when we listen to our minister of finance, the governor of the central bank, and others who are part of that chamber, we get a sense that everything is hunky-dory,” he said. “Come on. We need a conversation, here in Barbados, about the conditionalities that also speaks to the debt servicing.”
Dr Alleyne expressed similar concerns but focused on the fundamental questions surrounding repayment, questioning the country’s continuous reliance on loans, and noting the cumulative burden regardless of low-interest rates.
“It seems to be a recurring activity in governments, whereas they seek loans regardless of their low-interest rates or high-interest rates,” he said. “There’s a continuous pattern of building up on this loan portfolio . . . . At the end of the day, it still has to be repaid.”
Dr Alleyne stressed the importance of understanding three critical factors: the interest rate, the repayment period, and any grace periods or consequences of non-repayment.
He said: “Unless we have details of how this loan will be repaid . . . the purpose of this conversation should be, in my opinion, on just how much we have to pay back and when we have to pay back. That’s the only two things.”
While acknowledging the government’s positive agenda on debt-for-climate and nature swaps, Alleyne cautioned against the pace of borrowing.
“The pace at which we want to reach these goals may not be in the best interest of those in the future,” he warned.
Both economists agreed that Barbados must carefully evaluate its borrowing practices and prioritise transparency in debt management.
