Former Prime Minister Owen Arthur made a strong case today for Barbados to end its currency peg to the United States dollar.
In setting out his case before Parliament during the morning session on the second day of the debate on the 2017/2018 Estimates of Revenue and Expenditure, Arthur said other currencies should be considered to help stabilize the Barbados dollar, which the fired Central Bank Governor Dr DeLisle Worrell had warned was facing devaluation because of the continued printing of money to support Government programmes.
In fact, the former Prime Minister would have taken many by surprise when he dismissed any talk of devaluation as “false”, explaining that the Barbados dollars devalued often, whenever the US dollar moves down against other currencies.
“Our currency is pegged to the United States dollar that is not going down in value, but is going up in value and it is making Barbadian exports more expensive, not because we want them to be more expensive but because of how our currency is pegged.
“Our currency is also making it more expensive for investors coming from the United Kingdom and Germany to be able to make investments in Barbados,” Arthur warned.
Stressing that the US dollar would continue to appreciate, Arthur made the case for the country to begin a “debate on what should be an appropriate exchange rate policy that coincides with our contemporary goods, services and foreign capital flows in the context of what is likely to happen to the currencies against which we are pegged taking into account all the other currencies of countries we do business.”
The former Prime Minister said dollarization- which involves a country using another country’s currency as legal tender for conducting transactions – had been recommended as a positive option for small open economies such as Barbados, since it offered the benefits of greater stability in the value of a foreign currency over a country’s domestic currency.
“Can we not also look to peg our currency, not to a dollar that is appreciating at a time when our reserves are falling, but can we not have a basket of currencies that reflect the weight of respective countries in our trade in relation to goods, services and capital flows and for a while stabilize the Barbados dollar because it is not stabilized now?“ Arthur said.