Wuhloss! Barbados now paying 6% to borrow money.

delisle worrell Barbados

With United States Treasury Bond yields averaging below 2% over the last 10 years and at record lows, the Central Bank of Barbados is forced to pay 6% on a new $65,000,000 Treasury Note issue. You get the feeling that Central Bank Governor Delisle Worrell is backed into a corner with his list of viable options evaporating in his hand. (Thanks to Barbados Today for the photo)

I really don’t know much about these things – but I do know this: When Barbados is forced to pay three times the going rate to borrow money, we have a problem somewhere…

Central Bank of Barbados : ISSUE OF $65,000,000 BARBADOS GOVERNMENT 6% TREASURY NOTE 2018

General Press Release ISSUE OF $65,000,000 BARBADOS GOVERNMENT 6% TREASURY NOTE 2018
01/29/2013

ISSUE OF $65,000,000 BARBADOS GOVERNMENT 6% TREASURY NOTE 2018

Applications are invited on January 31, 2013 for subscription to this Treasury Note opening on February 01, 2013.  The Treasury Note will be issued at par with a fixed interest rate of 6%payable on January 31and July 31 of each year.  The interest due to Pensioners 60 years and over residing in Barbados will not be subject to withholding tax.

Non-residents seeking tax exemption must satisfy the Commissioner of Inland Revenue of their status before exemption is granted.  However, for all persons resident in the island, the interest from these Treasury Notes will be taxed separately from other income at a rate not exceeding 12½%.  These Treasury Notes will be repayable at par on January 31, 2018.  The issue will remain opened until the Central Bank advises that it has been fully subscribed.

Prospectuses may be obtained from the Central Bank of Barbados, our website http://www.centralbank.org.bb, the Accountant General or any commercial bank.  Application forms should be addressed to the Director, Banking, Currency & Investments Department, Central Bank of Barbados, Tom Adams Financial Centre, P.O. Box1016, Bridgetown.

January 29, 2013

8 Comments

Filed under Barbados, Economy

8 responses to “Wuhloss! Barbados now paying 6% to borrow money.

  1. Laughing

    This article has me totally lost. A quick scan of the Barbados Stock Exchange’s Q1 2012 report shows that 6% on a Treasury Note is actually around the mean coupon rate on Tresuries issued in the last 10-15 years. On page 7 of the report (Table 13) coupon rates of 8% are noted and 7.5% on some notes issued before 2007 (maturity date 2012) . Heres the link:

    http://www.bse.com.bb/downloads/BSE%20First%20Half%20Report%202012.pdf

  2. Laughing

    Even more interesting…the coupon rate on Treasuries issued this time last year was the same 6 %. So 6% pre and post downgrade. The proof as always is in your ability to acquire them

    Go figure

  3. 6% not so bad, but not so good either

    Smaller markets like Barbados will always have to pay substantially higher rates than the USA, Canada and Britain. We always have paid higher rates, but we have always been able to fill our subscriptions. That is no longer true and therefore we are seeing smaller overall goals so as to not set ourselves up for failure. At the same time the Central Bank also issued some long term paper for over 7%.

    The story here is not so much the 6%, it is that we cannot seem to break through this 6% barrier with our current demand.

  4. What difference does it make?

    Whether its 2 per cent, six per cent or 10 per cent what difference does it make if Barbados can’t pay for it? The debt will only accumulate and have to be written off in future.

    These lenders or institutions could start by requiring a country to have all its
    accounts fully audited and in order, including its crown corporations as part of full disclosure.

  5. sith

    @what difference does it make

    It makes a difference cause a great amount of that money going to leak out of the island to cover things that are imported like most of the food, cars, televisions, medical equipment etc. One day when someone going to have to pay an import bill there aint going to be any US$ in the bank to do it then the interest rates going to get higher. Fixed currency with foreign exchange controls comes with some disadvantages when the main foreign exchange generators are in decline. At some point the question of devaluation has to be considered as well as having a free market for foreign exchange that all progessive countries have. There is a reason why the BB$ has been downgraded to almost junk status.

  6. What difference does it make?

    Sith

    Good point but is it really being paid and current or simply another notional banking transaction in the Ponzi-like financial world accumulating and waiting for the next generation to pay the price?

  7. sith

    @what difference does it make

    All things imported on the island eventually end up getting paid for in currencies that can can be traded for US$. Things produced locally and consumed locally can be paid for in local currency and thus the effect on foreign exchange on those particular transactions does not really matter. The problem is the Government needs the money to pay for things like wages and the people getting the wages then spend the money on things that to a great extent have to be paid in US$ or currencies tradeable to US$. So why the interest rate so high? Simply because the people lending the money, the market, does not have faith in the currency to hold its value against other currencies. As a result you get inflation, high interest costs, and higher operating costs. Pegging the Barbados dollar is a good thing when you making lots of money and a very bad thing when you are not. Under current deficit spending a pegged dollar at 2 to 1 cant last. Better evey one learn to be self sufficient real quick cause the bubble going to burst.

  8. yatiniteasy

    I don`t understand why our milk prices are so high. The milk is supplied by local farmers, processed and packaged in a local plant, delivered to the outlets in trucks, with no more than 11 miles distance from supplier to retailer, and yet our price to the consumer is higher per litre than the 10 most expensive cities in the world! (prices taken from a recent CNN report)
    Now we hear farmers considering dumping because PHD cant take what they produce, yet are using imported milk powder to produce what they market as “fresh cows milk”…Disgusting that our Government allows this to go on without direct intervention.