The vital tourism industry, Barbados’ main revenue earner, is being blamed for also shipping critical foreign exchange out of the country.
And with the island struggling to overcome a 14-year low in its foreign exchange reserves, a former Central Bank economist is warning now is the time to plug the opening that is suctioning out these reserves.
Managing Director of Antilles Economics Stacia Howard this morning told a panel discussion on Improving Economic Performance Through Enhanced Tourism Competitiveness that while tourists were coming in record numbers and bringing in foreign exchange, too much of that money goes right back out through the importation of goods and services for the tourism sector.
“When we take out loans, especially foreign loans to refurbish our properties, we have to pay back that debt using foreign exchange. So there are a lot of leakages that go out of the country, and it is not that we can necessarily stop doing those things, it is to be aware that the money we are earning is not being retained in the country. And there may be ways in which you can substitute some of that for local production and local services to help minimize some of that leakage,” Howard told the panel discussion which formed part of the Barbados Hotel and Tourism Association’s (BHTA) quarterly meeting at the Hilton Barbados Resort.
In fact, the former Central Bank senior economist wondered whether there was any link between the record tourist arrivals of just over 632,000 last year and the drop in foreign exchange reserves, which stood at 10.3 weeks of import cover at the end of December 2016.
“You would see that last year we had record numbers of arrivals and our reserves dropped under 12 weeks. Is that the fault of tourism? You did your job – the tourists came – but because the relationship between tourism and the rest of the economy needs strengthening that is why we don’t always reap the rewards that we need to reap.”
Howard admitted that the local economy was driven by the tourism industry, which she said had the potential to lift Barbados out of its current economic slump.
She said the bread and butter industry helped to drive economic growth through investment, visitor spend and employment.
However, the former CIBC FirstCaribbean International Bank strategy and economic analyst insisted that for the sector to “lift the country further we have got to up our game even further”.
“We’ve got to get very critical about everything we’re doing. We’ve got to look carefully. Do we need to spend the money now? Can we wait? Can the foreign exchange reserves afford for us to do this now? If we do it now, how are we going to do it in a way that minimizes the impact on the reserves? How are we going to do it in a way that minimizes the impact on employment?”
Howard added that while hoteliers had to do what was considered best for their companies and what “make the most sense”, they should find ways to use more locally produced items.
“So you reach a point where as an industry… you can make a decision, what are we going to do as a group to help make sure that we minimize all of the leakages between us the rest of the economy, and do our best to make sure that we are not just getting more tourists here but the tourist are coming are the ones that can help lift us out?” she said.