(CARIBBEAN360) – The Barbados Government is fast running out of options and it could soon be forced to choose between going to the International Monetary Fund (IMF) for a bailout or devaluing its currency.
Economist Jeremy Stephen issued the dire warning as some of the island’s major investment firms – including Sagicor Asset Management Inc, Royal Fidelity Merchant Bank & Trust and Fortress Fund Managers – made it clear they had lost interest in Government securities because the country was at risk of defaulting on its debt.
“It is either the IMF or some other form of international funding, or devaluation,” Stephen told the Barbados Today online newspaper. “If Government cannot finance its activities it would have to devalue, or rather the Central Bank would have to print more money, which would force devaluation.”
Addressing the fourth annual Eckler investment review seminar, Senior Investment Analyst at Sagicor Asset Management Inc. Nicolette Blackett said her company would be avoiding Government papers, given the current situation.
“We are not taking any more lump sums . . . and also in terms of the challenging times, we are just not investing more in the Government of Barbados debt and we are just going to manage that situation,” she said, adding that the company would continue to seek out international investment options for higher returns.
Blackett further lamented that returns on the company’s investment in Government bonds had been low in recent times.
“Actually, as at the end of September, it is at 1.52 per cent. So, of course, it is not doing that well this year and that again is because the majority of it is in the Barbados Government debt. So, as the ratings deteriorate, this fund will also deteriorate,” she said of the company’s preferred income fund invested in Government bonds.