Barbados braced for tough measures to clear debt burden

Barbados must prepare for a long and painful journey back to financial and economic health, after announcing a radical plan to tackle the fourth-biggest debt burden in the world, according to the country’s new premier.

The Caribbean island is still reeling from Prime Minister Mia Mottley’s revelation on Friday that it had discovered previously undisclosed financial liabilities, which lifted the country’s overall debt from 137 percent of gross domestic product to more than 175 percent. This is the fourth-highest debt-to-GDP ratio in the world after Japan, Greece and Sudan.

Given the precarious fiscal situation — the central bank’s reserves are down to just $220m, or seven weeks worth of imports — looming debt payments due this month and the upcoming hurricane season, Ms. Mottley said she had no choice but to act quickly by calling in the International Monetary Fund and putting in place a debt restructuring.

“We needed to stabilise the country and stop the bleeding,” the new prime minister said in her first interview with international media.

Ms. Mottley, a former lawyer, became the country’s first female premier last month when her Barbados Labour Party won a thumping victory to claim all 30 seats in the lower house of parliament.

Barbados is the latest Caribbean statelet to stumble into financial distress. Since 2010 St Kitts and Nevis, Antigua and Barbuda, Belize, Grenada and Jamaica — twice — have had to default on and restructure their debts, in what Moody’s in 2016 called a “silent debt crisis” for the region.

Its slide into sovereign insolvency has been a long time coming. Barbados was long one of the better-run countries in the region, helping its GDP per capita grow to about $17,000 in 2016. But fiscal discipline started eroding after the global financial crisis when the economy was hit hard by the resulting tourism drought. (Financial Times)