THE Central Bank is looking to cede control of Clico “as soon as possible,” Central Bank Governor Alvin Hilaire said yesterday. Clico has been under Central Bank control since the company went bankrupt in 2009 and needed a government bailout. That bailout has cost taxpayers over $20 billion to date.
“The Clico situation has been with us for a while. The Central Bank is not in the business of running an insurance company. We have a policy and it’s been managed well... but we would like to (cede control) as quickly as feasible while maintaining financial stability,” Hilaire said at the bank’s 2017 Financial Stability Report launch in Port of Spain. "The important thing is to learn from the experience and create safeguards so such an event doesn’t happen again," he said. Hilaire added that he couldn’t give an exact day but giving up control is a priority.
The other big topic for discussion was foreign reserves. In May, the country’s foreign reserves dipped below US$8 billion for the second time this year— the first was in March, when it dipped to US$7.987 billion; after a brief rebound in April to US$8.112 billion, reserves fell again to US$7.965 billion— the lowest point in a decade.
“We lost about US$500 million this year; all things being equal we may probably lose another US$500 million by the end of the year,” Hilaire said.
The country’s reserves are still “comfortable,” he added, but pointed out that high reserves are essentially buffers for rainy days, like what the country is experiencing right now. “We are using it but we will have to rebuild these reserves and be careful not to overdo our use,” he said. The bank was not worried, he said, but it was observing the situation and hoped policy would be applied in a way that would help the country rebuild buffers to weather future storms.
Nevertheless, Hilaire did acknowledge the rebound in energy prices and exports gave the country a boost but cautioned against early celebration of a windfall. "The country was going through a cycle, as is often the case for commodity exporting countries; it has gone through this before and gotten out of it, and will do it again," he said.
“But now, we have to get through in a better, stronger way,” he noted, with both the public and private sectors stepping up their game to make things happen.
“For this to work, people can’t just sit by and let things happen. Everybody has to work together to turn things around in a more sustainable way.”