Sunday, April 21, 2024

Governor: ‘debt ratio normal’


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CENTRAL BANK GOVERNOR DR DELISLE WORRELL has again sought to allay fears about the island’s rising debt levels but has admitted that the country was spending about a quarter of its revenue each year on interest payments.
Worrell said this level of spending on interest payments was “a very high ratio by international standards”.
Reporting yesterday on the performance of the Barbados economy during the first three months of 2013, the Governor said “Barbados’ ratios of debt to GDP are within international norms: on a net basis, the ratio for the public sector as a whole is 53 per cent, which is below the 60 per cent threshold”.
He contended that if Government deposits at banks and other liquid assets of Government were excluded, the gross Government debt-to-GDP ratio for debt issued to the private sector was 83 per cent, “which is not much different from the ratios for Canada and Germany, and below the ratios for Japan (the world’s most indebted nation), the United States and the United Kingdom”.
Worrell revealed that Government’s fiscal deficit was financed mainly through purchases of Treasury bills, Treasury notes, savings bonds and debentures.
According to the Governor,“The National Insurance Scheme (NIS) purchased a net amount of bonds and Treasury Bills equivalent to 52 per cent of the deficit, while banks contributed 36 per cent of the gross financing and insurance companies and private individuals provided the remainder.”
The NIS continued to invest the majority of its operating surplus in holdings of Government securities, equities, commercial paper and real estate.
And Worrell said “the average earnings on the Government securities ranged from 3.5 per cent on Treasury Bills to about 7.0 per cent on securities of longer maturity”.
The Governor insisted that “Barbados’ external debt service ratio is relatively low by international standards, at 7.3 per cent of foreign exchange earnings. This is well below the comparable ratios recorded in St Kitts-Nevis and Grenada just prior to their debt restructuring programmes which have adversely affected confidence in Caribbean capital markets”.


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