Prime Minister Freundel Stuart has made it clear his administration would not be “pushing any panic buttons” over the decline in foreign reserves, which stood at just 10.3 weeks of import, or $681 million at the end December 2016.
Furthermore, Stuart said, forget about devaluation of the Barbados dollar.
In light of the less than favourable economic report from the Central Bank of Barbados (CBB) yesterday, the Prime Minister sought to alleviate any fear in the private sector and the wider Barbados community as he addressed the year’s first Barbados Chamber of Commerce and Industry (BCCI) luncheon today at the Hilton Barbados Resort.
Stating that a dip in the reserves was expected “from time to time”, Stuart said “the real issue is how we respond”, adding that for many years Government had worked on “a well-honed system of foreign reserves and general foreign exchange monitoring and management” and was therefore in a position to “anticipate and plan for any eventualities in a reasonable and responsible manner.
“Of course, like any other system that is transactional in nature it is to be expected that we will not always perfectly predict the outcome. But to the extent that the system allows us a degree of control over what happens – and more importantly how to respond to what is happening – we have a degree of confidence that has not been misplaced so far,” he said.
Pointing to past steep declines, Stuart said his administration had been able to respond quickly and decisively, stressing Government was not running out of reserves or options.
“It is also for this reason that on this occasion, while we have recorded a decline in our reserves reported for 2016 over 2015, my Government is not pushing any panic buttons as some seem to believe that we should,” he said, adding that the 10.3 weeks of import, which was below the ideal 12 weeks, was still sufficient to meet current daily requirements and defend the currency peg to the US dollar.
“Suggestions to the contrary are unnecessary speculation which quite frankly ignores the economic history of Barbados.”
He said while Government had continued to meet all of its foreign debt liabilities on time, a shortfall in anticipated public inflows was the main reason for the decline in reserves.
However, the Prime Minister said, this would soon change with a number of projects expected to come on stream.
“As fortune would have it, we know, and can say with a high degree of confidence, that over the coming days and weeks those reserve levels will almost certainly be boosted by at least $250 million,” Stuart said, echoing CBB Governor Dr DeLisle Worrell, who yesterday 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, Worrell had said.
Stuart told the BCCI the expected funds, along with other private sector developments and public sector capital works “will prove more than adequate along with what we earn through the private sector to run the economy and meet all demands, while guaranteeing our fixed exchange rate which, as I said before, has not been under threat.
“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.”
Charging that devaluation of the currencies of other Caribbean Community states had not produced any “spectacular results”, Stuart said, “put very simply, devaluation of the Barbados dollar is not an agenda item” for his administration.
“There will be no devaluation of the Barbados dollar,” he stressed.
The country’s leader said he was confident a growth rate of above two per cent was achievable this year, but said it should be led by the private sector with a focus on investment and exports.
He also sought to respond to the Opposition Barbados Labour Party which has been suggesting the country was on the road to the International Monetary Fund (IMF).
He said the island’s relationship with the lending agency was distinct from devaluation, contending the IMF was formed as a potential partner and not as a potential predator of its member countries.
“Nonetheless, I do not judge that there is a need at this time to seek balance of payments support from the International Monetary Fund. Our present circumstances in the Government’s view, while requiring close attention, do not warrant a panicky resort to the IMF,” Stuart emphasized.