Mr. SPEAKER: The Honourable Member for St.
Lucy.

July 11, 1995
Mr. D. St. E. KELLMAN: Mr. Speaker, we will be
supporting this Resolution also but I want to make a couple
observations on these loans. Mr. Speaker, for years, since
1985 we have been seeing a particular emphasis being
placed on interest rates whenever loans are borrowed and
we do not put any emphasis on the currency the loan is
being borrowed in. I want to warn this House that if you
are going to be borrowing money, interest rates will not be
the only factor that should be taken into account. There is
something called foreign exchange gains and foreign
exchange losses that you must place some emphasis on. I
am going to give you an example, Sir. In 1990 a loan was
raised on the English market for £30 million. We in
Barbados got $120 million at that point in time. If we did
not repay one single cent of that loan and you were to pick
up the phone now and call the Central Bank and ask them
how much money is owed to the English lender they would
tell you that we probably owe $90 million or $100 million
without repaying one single cent. I am saying, Sir, that
when people come to this House…
Aside.
Mr. D. St. E. KELLMAN: No, it is not a criticism, it
is a praise. Let me explain, Mr. Speaker. Let me explain it
again, Mr. Speaker. In 1990, the pound was over $4 which
meant that the $30 million would have given us $120
million or more. Today the pound is $3.16 which means
that it would have been $94 800 000. Foreign exchange
gains to the country would have been the difference
1524
of $120 million and the $94 800 000 which would work
out to about $25 200 000. 4.05 p.m.
Sir, when you are borrowing money you have to look
at the rate and you have to ask yourself whether the
currency is going to increase, appreciate or whether it is
going to fall. We found ourselves on many occasions
borrowing money on the international market, especially
the yen market, and I want to say there is nothing wrong
with borrowing a bullet loan, but there is something wrong
in borrowing a loan when there is evidence that the
economy of the country that you are borrowing from is
growing and the strength of the currency is increasing all
the time.
What it means, Sir, is that when you come to repay
the loan, instead of having to pay a constant amount, you
have to pay an increased amount. What we had in the 80s…
Aside.
Mr. D. St. E. KELLMAN: I am very happy to hear
you use the word “hedging”. I want to congratulate the
present Governor of the Central Bank for introducing
“hedging”, because if the previous Governors of the Central
Bank had listened to me earlier they would have introduced
that.
You see, Mr. Spe.aker, we cannot talk about
borrowing money and only speak about interest rates. There
are other things that affect the loans. We have to be very
careful and this Resolution is rather interesting because if
you look at Item 4 and then you compare 9, you can
understand where the Prime Minister was coming from.
That is why he can afford to talk about keeping the rate at
10% because he is not going to get the money from the
Central Bank but he is going to borrow it overseas. Later
on, he will probably introduce something which would give
him some more revenue.
Sir, I do not know whether 17.5 is the right figure or
whether 10 but we are dealing with $40 million to help the
finances of the Government. US$40 million is $80 million
and this has something to do with 10% of the borrowing
from the Central Bank. The Honourable Member for St.
Peter would know that. So don’t let them mislead you, Sir.
You see, Sir, all I would like to say on this matter is
that when we borrow loans I want to hear whether we
made a foreign exchange gain or whether we made a
foreign exchange loss and I want to know the quantum. I
do not want to hear about interest rates. If you are
borrowing on the U.S. market, I don’t want to hear
anything about your foreign exchange gains or losses
because the dollar is tied to the U.S. dollar, so there will be
no foreign exchange gains or losses.
When you are borrowing on the English market, the
European market or the Japanese market, I want to hear
about the foreign exchange gains and losses and when you
tell me about the foreign exchange gains or losses then I
can tell you whether it is a good loan or not. Thank you.