Thu | Dec 7, 2023

CIBC FirstCaribbean makes significant purchase of Barbados gov’t bonds

Published:Thursday | April 6, 2023 | 1:38 AM

CIBC FirstCaribbean’s branch in New Kingston, Jamaica
CIBC FirstCaribbean’s branch in New Kingston, Jamaica


CIBC FirstCaribbean said yesterday it is acquiring BDS$100 million (1 Barbados dollar=US$0.50 cents) in the Barbados Optional Savings Schem, BOSS, Plus investment instrument that officials say represents the return of confidence in government debt.

Governor of the Central Bank of Barbados, CBB, Dr Kevin Greenidge, said with the IBC First Caribbean purchase, there is an estimated BDS$11 million of the bonds remaining, and that the central bank is expected to issue a new round of BOSS Plus bonds “shortly” for the 2023-2024 financial year.

The move by the bank comes nearly five years after commercial banks suffered major losses as a result of the government’s debt-restructuring programme.

The BOSS investment instrument became available in August last year, and the move by CIBC FirstCaribbean is its first investment in government bonds since the debt restructuring began in 2018.

Industry officials said another commercial bank has taken up an estimated BDS$55 million of the five-year bonds, which pays an annual interest of 4.5 per cent.

CIBC’s Managing Director for Barbados and the OECS, Donna Wellington, said the $100-million investment in the BOSS Plus bonds was an indication of the financial institution’s “strong commitment” to Barbados.

“We firmly believe, from all the signs we are seeing, that the Barbados economy is on a trajectory to recovery, following the challenges of the past few years,” Wellington told a news conference.

“Re-entering the local capital market is our strong vote of confidence in Barbados and its prospects for the future. CIBC FirstCaribbean has a vested interest in ensuring that this country flourishes. It is our host country,” she said.

But she acknowledged that with limited investment options on the local capital market and excess liquidity in the banking system, it was almost a natural step for the bank at this stage.

“The money is always going to be here. The money supply is large, but in terms of excess liquidity for FirstCaribbean, yes, this does help with some of our excess liquidity. However, there are other things that bring it right back into the system.

“We have looked at what is happening with the Barbados economy. We have looked at what the government of Barbados has done to strengthen the economy and we are confident, based on what we have seen, that we can dip our toe, as it would be, back into the market because we are confident in what we are seeing,” Wellington said.

The CBB governor said the purchase of the government bonds “signifies the increased level of confidence that is now within the financial sector as it relates to the government of Barbados’ fiscal and economic position”.

He said he regarded the decision by CIBC FirstCaribbean as an effort “to restart the capital market”.

“As you would know, with the debt restructuring that occurred in 2018-2019, financial institutions and investors became a bit skittish, and the capital market basically came to a stall.

“Since then, it has been quite anaemic, nothing going on. We believe now has come the time . . . that we will have a renewed effort to get the capital market going,” said Greenidge, noting that the significant purchases of government paper was “not a push because the government needs finance or anything like that”.

“The financing position of the government, from our perspective, is quite manageable and comfortable. The emphasis here is really to get the capital market going,” said Greenidge.

He said that increasingly, more people were becoming confident in taking up government paper again, and he expected that trend to continue in the coming months, especially as the economy starts to fire on all cylinders.

Greenidge told reporters that the Barbados economy was expected to grow by about five per cent this year, with continued growth over the medium term, and that the local economy was no longer in the position it was in 2018.

He said the debt, which stood at around 124 per cent at the end of last year, was “manageable and sustainable”, with government’s fiscal position also sustainable.

“The economy is now starting to rebound, we now need to plateau and keep it going. So now is the time that we are bringing a renewed effort. There are a lot of savings, a lot of liquidity in the banking system, and restarting the capital market is an opportunity, in a way, to help move those funds from savings into investment opportunities, where they are needed,” he said.