The Tribune

By YOURI KEMP

Tribune Business Reporter

ykemp@tribunemedia.net

The government has to-date identified $300m in funding it can access should the COVID-19 pandemic force it to go outside its revised post-Dorian financing structure.

K Peter Turnquest, deputy prime minister, told Tribune Business: “We have lined up already money from the IDB (Inter-American Development Bank), as well as from the CDB (Caribbean Development Bank).

“We have the opportunity for drawing rights at the World Bank if we have to, so that’s the primary sources. We have identified $300m so far. We have no plans of going back to the IMF (International Monetary Fund) at this point.”

Mr Turnquest had previously indicated that accessing the IMF’s $200m “rapid response” credit facility was a last resort option that the government was a long way from considering. It had also rejected a similar offer over Hurricane Dorian, adding that IMF funding was “not part of the financing mix”.

The government’s pandemic response to-date has been to repurpose financing from within the revised budget framework approved after Hurricane Dorian, as it seeks to remain within the $677.5m deficit target unveiled for 2019-2020.

The funding sources referred to by Mr Turnquest may include part of the IDB’s $100m contingent credit facility, which was established to provide emergency response financing in the event of a disaster. The government was only planning to draw on $80m of that facility, and it subsequently also obtained a $50m CDB loan to help Dorian-related reconstruction. Both lenders also represent obvious sources of new funding amid the COVID-19 pandemic.

Mr Turnquest added: “Things are changing obviously every day, and nobody knows where the bottom is on this and how rapidly the needs will develop over the next couple of weeks. So the best we can do is ensure that we have available enough resources to meet the immediate demand, and we will do that by shifting whatever we need to shift and we will see what happens after that.”

Zhivargo Laing, former minister of state for finance during the last Ingraham administration, told Tribune Business: “I don’t think anybody at this point can say that $300m is enough, $500m is enough or even $600m is enough for anything.

“This is an evolving situation, but my own impression is that $300m is a modest level of borrowing for what is likely to be the country’s fiscal need moving forward, especially considering the hit the country has taken.

“But again, at this point, that might be the level of borrowing for this phase of things, and they can - as time goes on - evolve into new considerations. The prime minister said recently he is putting a team together, and maybe that team will look at the short, medium and long-term prospects for the country and what is needed and required then.”

Mr Laing, turning to suggestions by the opposition’s finance spokesman, Chester Cooper, that the government should seek to borrow up to $2bn to “shore up” the economy, said: “I thought that he certainly is recognising the size of the problem that we are faced with economically, but borrowing that kind of money can’t be frivolously considered.

“You have to take into account many things, not least of which is your local market - whether the government borrowing lots of that money in the local market means you are going to have some crowding out of some borrowing for the private sector, which is going to be important for you going forward after the crisis.

“When you take into account that level of borrowing, you have to take account of your own local capacity to supply it. If the local [banking] sector can’t supply all of that money then you have to look at the foreign market, and then you have to look at the extent to which borrowing huge sums of money leverages you for the future and puts you in a more precarious situation should another external, negative shock hit you. That is another consideration that has to be made,” Mr Laing said.

“Whatever the level of borrowing the government has to do, it has to be very carefully considered, balanced against all of the fiscal and monetary implications of doing that. So I could not flippantly say to the government you should borrow up to $2bn, but it may well be that the government may need to borrow up to that amount of money.

“There has to be a thorough analysis that brings the government up to that point along with a very careful consideration of how you proceed with that level of borrowing.”