Two financial institutions today reacted to Prime Minister Mia Mottley’s decision to immediately suspend payments due to domestic and external creditors.
During a teleconference called to report on the Sagicor Financial Corporation’s performance, Chief Operating Officer Ravi Rambarran said the company expected minimal fallout since Sagicor’s investment in Government paper represented only about five per cent of its total investment portfolio of approximately US$5 billion.
“These are primarily up to US$280 million. I would say US$260 million represents local dollar debt that is used to back local dollar liabilities,” he explained.
In a brief statement today on the matter, Royal Bank of Canada (RBC) said they recognized that it was an evolving issue and they were following it closely.
“We are proud of our history in Barbados and remain committed to the region and its economic prosperity,” the RBC statement added.
Saying that the island’s economy was worse off than previously thought, Mottley on Friday announced the suspension of debt payments, triggering an immediate ratings cut for the island with its credit worthiness being slashed to “poor” compared to its regional neighbours.
The devastating commentary came from regional rating agency CariCRIS, which dropped the island ‘CariC’ on the foreign currency rating and ‘CariC’ local currency rating “on our regional rating scale” — its worst rating to date — just 24 hours after Mottley announced she was going to the International Monetary Fund (IMF) and would restructure the country’s staggering debt.
However, in welcoming the IMF move, Rambarran said “it demonstrates recognition of the problem, acceptance of the problem and that you are willing to engage on a path towards fiscal sustainability”.
“The IMF playbook has changed considerably. They have quite a successful programme in Jamaica. Jamaica has become the poster child of the IMF. So the IMF is no longer the boogeyman that it used to be. So overall it is a positive development and demonstrates to us the seriousness and the intent to tackle the problem head-on. That is a positive. It brings clarity,” he said.
Reporting on the group’s performance, the Sagicor official also insisted that Sagicor Barbados continued to meet its targets despite any economic fallout here.
“Barbados actually performed in line with expectations. Our brand is so strong in Barbados that our top line continues to grow and the business stays profitable. So Barbados continues to make a contribution to the group,” he said.
Barbados operations account for almost 15 per cent of the group’s business.
Pointing out that all countries in the region experienced low economic growth last year, with the exception of Trinidad and Tobago, which experienced a decline, the Sagicor executive said the company was still able to perform at its best since 2008.
“All countries in the Caribbean have unsustainable fiscal deficits and debt stocks and they are all trying to manage through various combinations of tax increases, cuts in public expenditure and they are engaging in that fiscal austerity. On the social front, unemployment and crime continue to pose substantive challenges to the region,” he said, adding that the region’s ability to generate foreign investment had also been reduced somewhat.
“In all key financial metrics there have been marked improvement. It is our best performance since 2008, the onset of the global financial crisis. We continue to contain the solvency standards significantly above the required levels,” added Rambarran, while pointing out that the company has also been able to maintain its international ratings despite downgrades in Trinidad and Tobago and Barbados.
The Sagicor Group has operations in 22 countries with assets increasing from US$6.5 billion in 2016 to US$6.8 billion last year.
The group earned US$115.3 million in net income last year, compared to US$109.3 million the previous year.
Its debt also increased from US$395 million two years ago to US$440 million last year.