Sinking In The Debt Trap

The House of Assembly was in great unease last Tuesday when, inter alia, it convened in order that the Government borrows more money from commercial banks to finance its operations. According to Prime Minister Allen Chastanet, seeking Parliament’s approval for the $55 million loan is crucial so that government does not encounter any snags, including failure to pay civil servant salaries.

Expectedly, the Opposition railed against the Government’s audacity to seek permission to raise the national debt, especially since, when in opposition, it criticized the then government for doing the same. Predictably, justifications came from both sides as to the relevance of such borrowing and the purpose for which those funds were used.

However, the Opposition charged that with about six weeks to go before the Prime Minister presents his 2018/2019 Budget, the loan seems unnecessary, unless, of course, things might not be as sparkling as the Government professes them to be. On the other hand, the Government side contends that despite encouraging tourism arrivals figures, lower unemployment and future developments poised to pay off immensely, Government was still finding it difficult to pay its bills.

At last count, the national debt hovered around $3 billion, with much of it now having to be rolled over. In August 2016, Minister in the Ministry of Finance, Dr. Ubaldus Raymond, said that government was being forced to convert its short-term debt into longer-term debt instruments so as to free government from paying the huge monthly and yearly interest payments.

Describing then the nation’s debt portfolio as “alarming and shocking”, Dr. Raymond said government’s cash flow problems were very grave. The long-term goal, he said, was to reduce the cost of servicing short-term instruments and placing those savings into a sinking fund. To this day, it remains unclear whether such a fund exists.

While the contentious issue of borrowing will be around for a long time, there is no denying that things will get worse before they get better. There seems to be something special about government that makes commercial banks so eager to lend them money – whether or not real economic growth is experienced. But, unlike private entities, governments never go out of existence, so the banks will get paid, anyway, because government owns lands and other prized assets.

In the final analysis, money borrowed must be paid back – the sooner the better. That is why every citizen must be mindful that when government seeks approval to borrow money, there must be a high degree of accountability and transparency where those funds are concerned.

Secondly, such funds must not redound to pork barrel projects to gain political mileage. Such funds are being borrowed on a national level and must benefit citizens – not politicians who often see the need to spend millions of dollars on audits and witch hunts that bleed us all financially. Meanwhile, much-needed hospitals are allowed to take nearly a decade to complete or become fully operational.

Having had a deficit budget for many years now, government must be mindful that it must always exercise prudence in much the same way citizens are asked to during difficult times. Come next month, there will undoubtedly be another round of borrowing to finance capital projects and the like. Before the next cent is borrowed, however, a conscious effort must be made to justify whether all this borrowing is adding up to efficient dollars and commonsense.

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