In a confession of sorts, Minister of Finance Chris Sinckler Monday admitted that the Central Bank’s printing of money was “not good” for the ailing Barbados economy and it must be “brought to a halt as soon as is practical”.
“It is not a sustainable policy, it doesn’t work well, it doesn’t look good, it doesn’t smell good, it is not good,” he told the post-lunch session of debate on the 2017/2018 Estimates of Revenue and Expenditure.
According to the him, the Central Bank provided financial support to the tune of $714.5 million at the end of December 2016 to help finance the underlying deficit and to cover a shortfall arising from the refinancing of maturing debt.
Insisting that the Freundel Stuart administration had little choice but to resort to the Government’s primary banker to avert chaos in the Barbados economy, Sinckler said the ruling Democratic Labour Party (DLP) was prepared to stand guilty as charged.
“If the price of saving lives and livelihoods is a downgrade from Moody’s or a bad report from S&P . . . if that is the price that we have had to pay to protect ordinary citizens from the worst ravages of this recession it is a price we willingly accept as a Government.
Sinckler, who appeared to be in a fighting mood, slammed critics saying the Government has had to endure the attacks of an “abusive Opposition and the wrath of “economic terrorists” called rating agencies.
“However wrong some may say it was, we did what we feel was in the best interest of the poor, powerless, the vulnerable in this society,” he maintained.
Sinckler, who fired former Central Bank Governor Dr DeLisle Worrell last month, was however at pains to point out that the Central Bank did not print money at his request.
He explained that the bank in consultation with the Ministry of Finance has a cash flow committee, which meets to analyze the country’s cash requirement and determine what level of support the bank would have to provide in the event of a shortfall.
“They don’t wait on any call from the Minister of Finance to any Governor of the Central Bank or anybody that working in there. It doesn’t happen that way, I have never called any Governor of the Central Bank or any body in the Central Bank to tell them – look print money,” Sinckler told the House.
He also snubbed calls for Government to impose fiscal rules to prevent the Central Bank from financing Government expenditure saying experts from the Caribbean Regional Technical Assistance and Centre (CARTAC) and the International Monetary Fund (IMF), which recently advised Cabinet on the matter strongly advised against the move.
“One thing the expert said to us is to get your structures in the economy right first, do the thing that is required first before you put any laws in place, because you are going to put the laws in place and then end up having to change them.”
The minister of finance however acknowledged that Government was “borrowing too much money from the Central Bank” and it had to face up to the issue.
He said a major target of this year’s Estimates was a reduction of the fiscal deficit from 5.1 percent to 4.4 per cent of the Gross Domestic Product.
“We still think that 4.4 [per cent] is too high. We need to bring it down further so that it financeable but we need to do it in a responsible way that does not unravel the entire society and we are going to be meeting with all groups in the society and interested persons and work it out how we can get to the stage of phasing out Central Bank lending.”
Sinckler said Government’s strategy would entail increasing project flows to finance public sector activities and reduce the impact of high foreign debt service borrowing while speeding up fiscal consolidation efforts to restore confidence.