Barbados is “paddling [its] own canoe” and will not be dictated to by the International Monetary Fund.
While seeking to make it clear his organisation valued its relationship with the institution, Central Bank of Barbados Governor Dr. DeLisle Worrell said the IMF “is not in a position to tell us anything, that is the beauty of having adequate foreign exchange reserves”.
“We had to engage in an IMF programme in 1991 because we were out of foreign exchange, now we are paddling our own canoe so we are engaged with the IMF to try to help them better understand, but that is for their edification,” he stated today while answering questions from the media.
The governor noted that because the island was not in an IMF programme, all the United States based body could do was voice an opinion, which Barbados did not have to follow.
“The IMF actually informs your policy when you have a programme with the IMF, but under other circumstances it is just in the nature of a discussion, a different view on your economic policy,” he stated.
A candid discussion between Worrell and IMF Managing Director Christine Lagarde recently became public, with the governor strongly disagreeing with the Lagarde that devaluation was a good measure for the Barbados economy.
“What I said in Japan is that the reason why we focus on the stability of the dollar is that if you devalue you are not going to get any more foreign exchange and you are not going to use any less foreign exchange, so devaluation is not going to help the foreign exchange to balance,” Worrell said.
“That’s what happens perhaps in other countries, in bigger countries, if you devalue you sell more overseas and you get more foreign exchange.
“That does not happen in our case, therefore in order to balance the demand and supply for foreign exchange you cannot depend on the price to do it, what you have to do is you have to affect the quantity, you know how much foreign exchange is coming in and therefore you have to use your fiscal policy to adjust to the quantity of foreign exchange,” he added.
That said, the economist said there was no deterioration in the relationship with the IMF.
“We value very much our relationship with the IMF. The IMF brings a different perspective to our circumstances and … we have always had a difference of view from them and we think it is because they bring a perspective on our situation which is not reflective of our reality,” he said.
“The importance of foreign exchange, and the fact that foreign exchange is involved in everything that supports the quality and standard of living in Barbados, that is a reality which people who do not live in a small open economy do not understand and it is that results in the inappropriate advice that we get from the IMF.
“There is still value in the relationship because we need, and the IMF to its credit has set up a new body within the Fund to focus specifically on the issues relating to small states, that gives us a forum in which we can begin to explain that there are certain features of small economies and in particular this total dependence on foreign exchange, which has to be built into your analysis.” (SC)