A former Prime Minister has applauded Government for trying to resolve the near decade-old CLICO collapse, but has warned the Freundel Stuart administration that it might be creating an explosive debt problem for the country in the process.
Owen Arthur, who served as the country’s leader and Minister of Finance for 14 years, issued the caution this evening as the House of Assembly debated the CLICO International Life Insurance Company Limited resolution.
The former Barbados Labour Party leader, who currently sits as an independent in the House, cautioned that Barbados exposed itself to monumental risks by taking on the debt of private companies when it already faced significant challenges as one of the most highly indebted nations in the region.
He pointed to two fellow Caribbean Community countries, explaining that the debt situation had exploded in St Kitts after the government assumed responsibility for the collapsed sugar industry and in Jamaica after the state took over the liabilities of the financial sector.
“CLICO Holdings Limited was not a regulated company, the insurance company was regulated, and we are in this problem from which we ought to learn,” Arthur cautioned, while acknowledging that “there were things that were done in this country and elsewhere . . . that have put us in a situation of difficulty”.
“We need to solve the CLICO problem, but are you doing the right thing in the right way? Was there a recent valuation of the assets and are the assets you are putting into the statutory fund of the nature that will give the Minister the assurance that what caused the statutory fund deficit in the first instance will not come back to haunt you?” he asked.
Moreover, the economist stressed the already precarious debt situation facing the island, as Government sought approval to create and finance new companies to manage the assets of the former CL Financial insurance subsidiary.
“We are this evening helping to create a guaranteed debt for a Government that already has debt that is too large.
“Some of the assets of the company that is being created have been non-performing in recent times. . . .[And] as we seek to grapple with a debt problem that will overwhelm the future of our children and grandchildren, we are now adding to it by creating a company that has assets that are so badly impaired that the very problem you are seeking to solve – mainly a deficit in the statutory funds – could come back to haunt us,” Arthur warned.
In his contribution, the St Peter MP stoutly defended his actions as Minister of Finance, insisting that he could not be blamed for what had happened leading to the collapse of CLICO International Life Insurance Company.
He rejected as a “myth” that he could have done something to prevent CLICO’s demise.
“The Minister of Finance cannot get involved in the operational affairs of a supervised and regulated company like CLICO and it is time that [we end] this nonsense[talk] that the Labour Party could have intervened and stopped it.
“It could only have done that at the expense of breaking the law,” he argued.