The Governor of the Central Bank has described a problem of our declining foreign reserves. Perhaps the following solution can be considered.
Significant amounts of foreign exchange are received by Barbadian service providers who interact with tourists at the point of sale. Much of this foreign exchange is distributed to those who are travelling overseas.
We travel overseas for diverse reasons, including: business, educational, visiting relatives and friends, holiday, and shopping. This solution addresses the foreign exchange leaked during overseas shopping trips.
Persons choose to shop overseas for various reasons, the principal one being the perceived wider selection and lower costs of goods. A visit to several duty free retail establishments in Barbados shows that the selection of goods is increasingly diverse. However, the significantly higher local prices compared to the duty free prices appear to justify
travelling overseas to shop. When travelling overseas for shopping purposes,
foreign exchange is spent on: travel, accommodation, food, the purchased goods and the shipping of bulk items to Barbados. Time is also spent away from more productive pursuits.
The current duty free policy outside of the ports of entry,
that limits purchasers to visitors, is ineffective. For example, local purchasers can easily get visiting friends or family members to make the purchases with local currency. A more effective policy would be to allow both locals and tourists to make duty free purchases, provided that those purchases are in a foreign currency approved by the Central Bank.
This solution should allow most of the foreign currency that is received at points of sale, that is normally spent on overseas shopping trips, to find its way to the Central Bank.
While this solution should provide more money to the Government, it is not likely to benefit
Barbados until the Government is able to better manage its addiction to spending more than it receives, otherwise, this solution will only enable the Government’s addiction.
— Grenville Phillips II