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Investors uneasy about Barbados’ growing debt

Barbados’ worsening debt situation, which has been the primary cause of several recent downgrades, has local investors uneasy, says Fund Manager Roger Cave.

Cave, who is the investment manager for Fortress, warned that the situation was not only unsustainable, but that it puts the entire country at risk.

“We are now the fourth highest most indebted country in the world behind Japan, Lebanon, and Greece,” he told a gathering of investors and other players in the island’s financial sector at Fortress’ annual forum at the Frank Collymore Hall last night.

“This means it [Barbados] is non-investment grade, and substantial risk. For us as institutional investors for many places in the world, many mandates do not permit you to invest in non-investment grade securities. So it’s a real challenge for us here as Barbadians, this is a significant concern,” said Cave.

The wealth manager reported that the Caribbean Growth Fund, a premier Fortress investment vehicle, produced a 9.8 per cent growth for the financial year ending September, 2016, but all of this increase was owed to international financial investments.

“Our debt continues to grow, and that’s a problem that is going to be unsustainable,” he said, while pointing out that on account of recent downgrades, the island’s has dropped ten notches in terms of its ranking by Moody’s from an ‘A’ rating in 2009 to Caa1 in 2016, which takes it below the recommended financial investment level.

Cave also highlighted recent inconsistencies in Government reporting, pointing out that in his 2016 Budget, Minister of Finance Chris Sinckler had said, “our debt was now $12.1 billion, or 138.4 per cent of GDP at market prices”.

The figure “differs with the statistics you see in the Central Bank” which stated in its third quarter report ending September 2016 that “the gross public sector debt at the end of September stood at 108 per cent of GDP.”

However, Cave said regardless of what the true debt to GDP figure is, “This is a serious problem, and it is of great concern to all of us”.

He also said the printing of money by the Central Bank was cause for concern, while highlighting the section of Central Bank Governor Dr Delisle Worrell’s latest report which said “…there was an $84 million switch from foreign to domestic financing because of amortization of foreign loans. The resulting money creation by the Central Bank financing Government was $114 million”.

Cave warned that this was not the way for Government to raise the finance it needs to fund its deficit.

His comments came on the heels of yesterday’s disclosure by the Minister of Finance that the deficit for 2015/2016 was actually 5.8 per cent of GDP which is below the seven per cent that was projected.

7 Responses to Investors uneasy about Barbados’ growing debt

  1. Veroniva Boyce
    Veroniva Boyce November 4, 2016 at 3:54 am

    Barbados is in great need of a NEW Government. #VoteOfNoConfidence

    Reply
  2. Tony Webster November 4, 2016 at 5:34 am

    Statistics, statistics……and damned truths!

    Lord, cumfa, Please? When you arrive, we gine ask a Big-Brain guy to explain to you how ‘e find a new way to calculate an’ produce “correct” fiscal deficit figures.

    This, after we done invent “accrual accounting”, whichin’ did always give me a li’l pause for concern, as it’s OK to accrue such things, but ONLY if one is simultaneoulsy made aware of hummuch people owes government , and hummuch peoples owes government!! Just accruing does not relieve our fiscal masters of actually collecting what is owed The Crown, and also of actually settling the Crown’s own debts!!

    Cumfa..cumfa quickly please, Lord.

    Reply
  3. Rochelle November 4, 2016 at 8:22 am

    I have a question that myself and a colleague would like answered as we are not ‘knowledgeable’ in Economics etc…
    In terms of the Central Bank printing monies to finance this Government……is that wrong? And if so why?
    An honest question…..Thanks.

    Reply
  4. BoboTheClown November 4, 2016 at 8:37 am

    I always saw the current Finance Minister as somewhat of a coy showman, who would always told Barbadian s things that he thought would appease them. Things like all the growth that is happening in the economy, l the hundreds of new investments in the Island by foreign entities that will bring millions in cash to the economy and create thousands of jobs. What has happened sir? We are now hearing that we owe the third highest amounts next to Japan ,Greece ,Lebanon.Guess what will be coming next.It surely will be the on again ,off again of devaluing our Dollar. Of course this now seems inevitable . All i can say now is .
    “Lord dis ship is sinking”;Water gushing in in from Bow to Stern. The pumps can’t stop the water ,so all left fa we to do is jump ship and try swimming.
    This ship known by many drunken Sailors as the DLP. Look like we all gine perish ,no life boats on the horizon and it is too far to swim.

    Reply
  5. Tony Webster November 4, 2016 at 9:14 am

    @Rochelle: you could do no worse than checking Wikipedia, regarding the Third Reich in Germany, and their disaster with Wheel-barrow-fulls of reichmarks to buy a loaf of bread; or you could try the same site, to see if they might have ip-dated this with Uncle Bob’s recent similar experiment ( and same outcome) with Zimbabwe dollars, the last of which was printed in a 100-billion ( yes, billion) note. Zimbabwe has since “discontinued” it’s own currency, and now uses as US dollars; S.African Rands; and Euros.

    Our Central Bank of Barbados does not actually “print” our paper currency: this is usually undertaken by specialist note-printers such as DeLa Rue of London, or similar. Additionally it should be borne in mind that a Central bank guilty of ” printing money” need not be culpable only if they actually flood the market with rashly-printed currency. They can accomplish the same result, by allowing government to run high overdrafts on their account(s) within the Central Bank’s books.

    Reply
  6. Hal Austin November 4, 2016 at 2:27 pm

    Tony it is done electronically, but the principle is the same.

    Reply
  7. Phil November 4, 2016 at 8:49 pm

    Wait a minute. Nobody mentioned Haiti, nor Venezuela. I guess African countries are better than Barbados too. I can suggest a way out. Try me and prove me.

    Reply

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