Put aside the election talk and let’s come together for the sake of our country’s economy.
This was the strident appeal made Wednesday by former Prime Minister Owen Arthur, who is now warning that urgent action needs to be taken within the next three months to stave off the threat of a currency devaluation.
With the country fast running out of foreign reserves and the Central Bank recently forced to put the immediate brakes on the printing of money, Arthur cautioned that now was not the time for political leaders to be engaging in rabid electioneering.
In fact, he suggested that the only thing that Prime Minister Freundel Stuart needs to urgently announce is a “national consensus” on the ailing economy.
“The time has come for a national consensus, that the Prime Minister tries to generate, as to how we are going to address the expenditure adjustments that are required,” Arthur said.
“The reality is that the exchange rate is the price that you pay for foreign exchange – two Barbados dollars to one US – and that you can maintain that price if you can guarantee or assure that there will be enough foreign exchange to meet the demand for foreign exchange as it falls due.
“Now in Barbados’ case the Central Bank, as recently as in 2008, had $1.5 billion in foreign exchange reserves. They have been plunging, and plunging precipitously, down to the point where we now have about $600 million and Barbados now has less foreign reserves than [US president Donald] Trump has,” Arthur lamented.
He further cautioned that if the current slide continued unchecked, by June the island’s foreign reserves could be fully depleted, putting the Barbados dollar in greater peril.
“In these matters, you have to talk the country through it and it isn’t so much when the election is called, but our leaders need to start talking to the people about what the country faces, get them to understand what is before us, and build a consensus as to how to deal with it,” Arthur told Barbados TODAY, while insisting that the matter was more pressing than elections.
He also warned both the ruling Democratic Labour Party and the Opposition Barbados Labour Party that even as the constitutional deadline for elections approaches, it was not enough for them to simply assure members of the electorate that “we will not devalue the currency” as they try to “keep the spirits of the troops high”.
In fact, he cautioned that though the required change was neither wanted nor desired, “it was about what is going to be forced upon you.
“What matters is if you run out of foreign exchange and you don’t have anybody else to borrow from. That is the objective reality,” he said.
“So in my view it is not so much whether you can have elections or not, because unless we stop the process that is causing our foreign exchange to drain away, no matter when the elections are called that is still going to be before you.”
Arthur, made it clear devaluation should be avoided at all costs, as he drew a comparison between the current economic reality facing Barbados and that which faced Jamaica in 1976 on the eve of Jamaica turning to the International Monetary Fund.
He said back then the Jamaican currency was almost on par with the US dollar, but the Jamaican authorities had refused to accept the economic advice given for them to stop printing money.
Since then, the value of that country’s dollar has deteriorated to the point that it now takes 128 Jamaican dollars to purchase one US dollar.
Arthur also pointed out that at one point only three Guyanese dollars were required to purchase one US dollar. However, he said the country went on a similar “printing binge” which simply ‘catspraddled’ the Guyanese currency.
“An exchange rate adjustment has shown to be very disruptive; so if you can maintain a stable rate, try to do so,” the former minister of finance advised, while pointing out that Barbadians were already facing difficulties in accessing US currency.
He cautioned that while Barbados’ situation may not yet be as desperate as that which faced either Jamaica or Guyana, “we are going there because [in addition to the pressure on reserves] the things you are depending upon to stop the slide are not happening, namely, bumper tourism and a lot of capital inflows.”
He also pointed out that “the Government of Barbados cannot borrow a lot of money from the local banking system because they have reached their prudential limit . . . you have used as much national insurance as you can. The Government, because of the downgrades, can’t borrow money from lending institutions and investors in pension funds because they have a duty of care not to put their funds in things that are not investment grade.”
In such a situation, Arthur said local trade unions have to be made to understand that their workers become worse off if we have to go down the devaluation route.
“So everybody has to understand what the situation is and what is expected of all of us to get out of it,” he said.
Asked about his own role in achieving national consensus, Arthur said though he was prepared to be part of a serious process, he would not allow himself to be “treated like a mock stick”.
He recalled that in 2014 he was approached by Minister of Finance Chris Sinckler to be chairman of the National Economic Council and then nothing happened.
Similarly, he said, “Mia Mottley once committed me against my will to be head of an eminent persons group that nobody ever said they wanted . . . . So I am prepared to be part of a serious process, but I am not prepared at my age, at this stage in life, to be made a mock stick of by either of the two political parties,” Arthur stressed.