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.