Barbados PM reiterates no devaluation of local currency

Barbados PM reiterates no devaluation of local currency
27 Jan
2017

Prime Minister Freundel Stuart Wednesday reiterated there will be no devaluation of the Barbados dollar, less than a week after his Finance Minister Chris Sinckler delivered a similar message in the Parliament.

Addressing the luncheon of the Barbados Chamber of Commerce and Industry, Stuart told the business community that there was no persuasive evidence that devaluation exercises in other Caribbean Community (CARICOM) countries had produced any spectacular results or facilitated the outcomes they desired.

“Put very simply, devaluation of the Barbados dollar is not an agenda item for the present government,” he emphasised.

The Prime Minister said that in the face of real growth in the traded and non-traded sectors; noticeable improvements in the balance of payments; falling inflation and declining unemployment; “pundits, publicists and prophets” had been steadfastly predicting a devaluation of the Barbados dollar or had been calling stridently for a programme with the International Monetary Fund (IMF) or for privatisation of some of government’s assets.

He pointed out, however, that as long as the island continued to depend on its relationship with the world for economic sustenance, there would be fluctuations in its fortunes, depending on what was going on in the economies of its trading partners.

“So, it cannot be that every time there is an adverse movement in our foreign exchange or foreign reserves situation, whatever the reason, the only solution to put forward is that we should devalue the currency of Barbados,” he said.

During his wide-ranging address, Stuart said he did not judge that there was a need, at this time, to seek balance of payments support from the IMF.

“Our present circumstances in the government’s view, while requiring close attention, do not warrant a panicky resort to the IMF,” he said, noting that Barbados had recorded a decline in its reserves reported for 2016 over 2015.

But he said his administration was not pushing any “panic buttons”, as some people seemed to believe they should.

“The most recent Central Bank report showed that foreign exchange reserves ended 2016 at 10.2 weeks of cover. We have all accepted that ideally at least we should maintain a minimum of 12 weeks of import cover. It does not mean that what we have in reserve is insufficient to meet our current daily requirements or in fact to defend our existing currency peg to the US dollar.

“Suggestions to the contrary are unnecessary speculation which quite frankly ignores the economic history of Barbados of which I have just spoken. In the early 1990s when Barbados last faced a challenge of a similar nature, we practically ran out of reserves, as we almost ran out of options. On this occasion we are not nearly close to running out of either reserves or options,” he told the luncheon.

Stuart said that over the coming days and weeks those reserve levels would almost certainly be boosted by at least BDS$250 million (One Barbados dollar =US$0.50 cents) as the delayed inflows associated with several projects including the Sam Lord’s reconstruction project and the completion of the arrangements for the sale of the Barbados National Terminal Company Limited, are received.

Last week, Sinckler dismissed possibilities of a devaluation of the local currency saying he was prepared to resign if this should occur.

“I assure the people of Barbados, I will speak on the economy very shortly, but nobody is going to force, ring, or bully me into making statements,” he told Parliamwnt, asking “what is the purpose of panic in an economy that is growing”.

He also brushed aside suggestions that the government and more specifically the Ministry of Finance and the Central Bank of Barbados had approached the Washington-based financial institution for assistance.

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