The contentious printing of money by the Freundel Stuart Administration will continue for the foreseeable future, Minister of Finance Chris Sinckler today revealed.
However, Sinckler told a news conference at Government Headquarters this afternoon that immediate steps were being taken to steadily reduce the practice over the next year.
“We have set ourselves the target of ensuring we could at least bring that down consistent with a reduction in the deficit by at least one third over the next year or so, and then we move it down from there to a more sustainable position,” Sinckler said, adding that if the deficit could be reduced at a much faster rate it would at the same time impact the printing of money.
In fact, he said the revenue returns from fiscal 2016-2017 and those projected in the 2017-2018 Estimates of Revenue and Expenditure would show a substantial cut in the deficit.
He said the deficit reduction exercise had taken much longer than expected, but insisted Government was going in the right direction.
Sinckler recalled that in his Budget presentation last year, one of the objectives was to try to contain the printing of money, with a view to eventually eliminating it.
The minister explained that the Central Bank and Ministry of Finance meet through the cash flow committee to look at the country’s financing requirements regarding the recurrent expenditure, and that a determination is made based on the amount of revenue expected for any given period.
“Once that is known, the Government and Central Bank issue, through an auction, various types of instruments to which financial institutions and even individuals in some respects, may subscribe.
“Of course, if in any week the Government is short of resources to ensure your garbage is collected and the Central Bank has to accommodate by providing the shortfall based on what they get in from the other financial institutions, then that is what people refer to as printing of money,” Sinckler pointed out.
He explained that if revenues and expenditures produced a significant gap and the commercial financial sector was not taking up enough of that deficit, somebody had to meet those needs.
“Until such time as that deficit can be reduced . . . that residual can be shrunk and if possible eliminated. Once it reaches a level where the commercial institutions are taking less of Government’s paper and depositing more of their liquidity in the banking system because they cannot get rid of it of lend it, because the appetite for credit it low . . . the Central Bank would utilize some of those resources or from its own resources, the Central Bank may lend the Government,” he stressed.