Minister of Finance Chris Sinckler today sought to dismiss anxieties that Barbados would be forced to devalue its currency and enroll in an International Monetary Fund (IMF) programme to address the country’s fiscal challenges.
Responding to concerns by President of the Barbados Chamber of Commerce and Industry (BCCI) Eddie Abed about the impact on the economy of recent downgrades, Sinckler said the ratings agencies wanted to push the country towards the IMF.
However, he told the association’s business luncheon at the Lloyd Erskine Sandiford Centre, while the country was at crossroads, it would not fall into the arms of the IMF, nor would it devalue the dollar.
“They would prefer Barbados do an IMF programme. They don’t say that openly but we know that is what they really want. The problem with that is that an IMF programme may get through the staff of the IMF without a currency adjustment or what we call a devaluation, but it is not going to get through the head office or the front office without one. At least I don’t see how that is going to be possible,” Sinckler said.
“We have all agreed that the currency adjustment and devaluation is not, and will not, be in the best interest of Barbados. We simply cannot afford the luxury of having an exchange rate adjustment. So we are at a stalemate. So their position is, ‘you have to get your deficit down’ to what they call management levels . . . at least at the rate of growth, preferably below the rate of growth, so that it adds no more to the growing levels of debt. The issue is, as we have said in several Budgets, documents and speeches I have made, that our target is to get to that stage. The issue is how quickly do you get there.”
The Minister of Finance put the business community on notice that the Central Bank’s third quarter review would be presented in less than two weeks, and in addressing the matter it would present “a comprehensive review of the direction of our economy relative to growth”.
“I say this point with all degree of seriousness because I think it must be said loudly and clearly, our dollar remains stable even in a world of currency volatility and it shall and remain so for several generations to come. Our foreign reserves levels are adequate to defend our currency and will continue to improve going forward. We are confident about that,” he stressed.
The minister made it clear he was not burying his head in the sand, acknowledging that the island was going through “a very rough period” and the economy was struggling due to an unmanageable deficit, “unprecedentedly” high debt levels, infrastructure that was under “significant” stress, “uncomfortably high” unemployment, especially among young people, and a “severely challenged” social development services platform.
However, Sinckler urged Barbadians not to become dismayed, stating that with a booming tourism industry, strong and well-regulated international business and financial services sector and growing investment in green energy, the economy was still “fundamentally good”.
“There are challenges but we have the basic systems in place well ahead of many other jurisdictions in the world,” he concluded.