The island’s foreign reserves have fallen to the lowest level in 14 years, according to Governor of the Central Bank of Barbados Dr DeLisle Worrell.
However, Worrell has sought to calm nerves by revealing that Government was anticipating over $250 million, including $68 million on the Sam Lord’s project, $100 million from the sale of the Barbados National Terminal Company Ltd and $40 million from the sale of Government’s interest in the Four Seasons property.
In addition, $30 million was expected for the pre-funding of scheduled projects and a further $12 million for an education loan. He did not say how much of this cash would come before the end of the current fiscal year, which ends March 31.
In delivering his latest report Tuesday, the Governor said the reserves had fallen below the benchmark 12 weeks of import, standing at about 10.3 weeks.
The $681 million in reserve at the end of December 2016 was $246 million less than the $927 million – or 14 weeks of imports – recorded at the end of 2015.
The extent of the problem was further manifested in the amount collected through foreign finance last year, which was approximately one-third of the total collected the previous year.
And while the private sector performed a lot better, its intake was also lower than in 2015.
“There was an estimated net inflow of foreign finance of $132 million, 256 million lower than in 2015. Inflows by private sector entities were $379 million, $90 million lower than in 2015, Worrell said.
“Foreign financing for the public sector was also lower because select project inflows did not materialize due to administrative delays. Government’s repayments were higher than in the previous year, exceeding the amount of inflows by $170 million,” he added.
Even in the face of an economy which was estimated to have grown by1.6 per cent, along with a fall in unemployment to ten per cent for the four quarters ending in September 2016 and a rise in receipts from Value Added Tax (VAT), Government continued to struggle to earn revenue, Worrell disclosed.
The current account deficit for April to December fell by $31 million to an estimated $510 million, while revenue declined by $6 million, mainly due to a $17 million decrease in earnings from personal income.
“VAT receipts were up $48 million and the new National Social Responsibility Levy has yielded $8.3 million so far,” he reported.
Current expenditure increased by $25 million, while transfers to state-owned enterprises fell by $17 million, although interest payments rose by $53 million. Capital expenditure fell by $36 million and the overall fiscal deficit, estimated at $665 million, was $5 million smaller, he said.
Still, the Freundel Stuart administration continued to rely on Central Bank funding to drive down the debt owed to private individuals and companies, with Worrell blaming the fact that Government had spent more on the current account than it had received in taxes and other current receipts.
“Government’s dependence on the Central Bank to finance its deficit limits the Bank’s ability to influence interest rates appropriate for Barbados’ circumstances, as is the standard practice used by central banks everywhere,” Worrell said.
The Governor’s report revealed that the country’s debt to private individuals, companies and public entities stood at $4.9 billion, or 53 per cent of gross domestic product as at the end of December last year.
“The gross government debt, including borrowings from Central Bank was 108 per cent of GDP. The proportion of foreign currency debt was 31 per cent of GDP, and the cost of servicing that debt was $391 million or eight per cent of earnings from goods and services,” Worrell disclosed.
He said receipts from services other than tourism averaged about $1.1 billion since 2013, but the assets of international banks offering global services declined by nine per cent to
The number of international business companies also declined by five per cent as at October 2016.
The island’s chief economist said exports increased by five per cent to $511 million, driven mainly by rum and other beverages, construction materials and printed labels.
Fuel imports, he said, fell by 21 per cent to $366 million, while imports of consumer and capital goods both rose by over six per cent.
The economist did not give an estimated growth rate for this year, but said the prognosis “for the next five years continues to be about two per cent”, driven by $2.6 billion in tourism, infrastructure, energy and housing projects.
Worrell said an increase in productivity in the delivery of public services was urgently needed to help accelerate the forecast rate of growth by at least one per cent, by improving business facilitation, advancing the implementation of investments, and improving the island’s attractiveness as a place to do business.
“The productivity gain would permit a reduction in the wages bill and transfers to public entities, without any reduction of the level and quantity of services offered. This reduction in wages and transfers would assist in eliminating the Government’s deficit on its current account,” Worrell said.