Straughn: Search on to find financing for key capital projects

Government is not ruling out returning to the international capital market to borrow money for major projects amid concern that global interest rates are rising.

Minister of Finance Ryan Straughn has signalled that Government is keeping its options open and given the country’s strong economic performance, he is confident the authorities can find “a good deal” to secure funding for public projects.

He is also hopeful that when the International Monetary Fund (IMF) and World Bank annual meetings take place in Bangkok, Thailand, from October 12 to 18, there will be progress on the Vulnerability To Viability (V2V) Compact.

This is an initiative that Barbados and other states are working on with countries in the Persian Gulf in an effort to unlock affordable finance for climate-vulnerable countries.

Straughn was speaking to the Sunday Sun in the context of growing concern about rising inflation and increased interest rates, and the likelihood that this would continue to push the cost of borrowing up.

“We always look in the portfolio to see where we could get the best deals for Barbados, and I think that is always part of our debt management strategy,” he said.

“We have been surveying the market in relation to how we are able to finance some key capital projects over the course of the next few years. We have been reviewing what our financing needs will be from a capital perspective to be able to help drive growth, and therefore we’re looking at multiple instances where we potentially go back to the market, and there’s a possibility that we can do that.”

The minister added: “But we are equally also working with the Gulf states in relation to the Vulnerability To Viability Pact, which we will get further progress on next month with the IMF and World Bank meetings in Bangkok.

“So we are looking at a combination of things to make sure then that we can have access to financing.”

Straughn said that in spite of the global volatility, “Barbados’ macro fundamentals still remain strong, and the market continues to be kind . . . as a reflection of Barbados’ performance. So there’s always any opportunity to be able to find a good deal where you can acquire finance and get some stuff done, such that we can ensure then that we have the financing available to continue the capital works”.

Speaking during his half-year economic review in late July, Central Bank Governor Dr The Most Honourable Kevin Greenidge said that with inflation and international interest rates trending up, Government had to make a decision if it wanted to get some money in the bag to pay for future projects.

“Of course, where international capital markets now offer more favourable terms than the direction in which interest rates are heading, we should be ready, in my view, to use that window . . . to access financing earlier rather than later,” he said.

“There is a strong school of thought . . . that Barbados should look to settle its financing needs for the next two to two-and-a-half years by going to market sooner rather than later.”

The Governor said Government “has needs for priority projects, social development, capital expansion needs [and] development needs that will need financing as normal”.

Barbados’ weighing of options for securing new funding comes as the Inter-American Development Bank’s (IDB) latest Caribbean Economics Quarterly,

produced by the economics team of the Caribbean country department, warned that “interest rates remain stubbornly high”, which meant that “the cost of financing has remained high”.

“This implies that while many Caribbean countries have maintained or in some cases improved their credibility, they still pay more for financing, given that the global risk-free rate has shifted upward,” the IDB team advised.

“For Caribbean sovereigns, this means that debt-service burdens can rise even in the absence of a classic market-stress episode.

“It also means that debt management choices, including with respect to currency composition, maturity structure and contingency planning, have become more important relative to previous periods of abundant low-cost global liquidity,” the economics team added. (SC)

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