The discourse regarding devaluation of the Barbados dollar is most interesting when we think about it in the context of the average Bajan.
The Government is proposing to increase spending by $0.2 billion. It looks to be small in a decimal place but it is $200,000,000 in increased spending.
Presumably, a devalued Barbados dollar should attract more visitors and improve the overall economy but will that happen given the current Government’s ineffectiveness and the failure of the BTMI to recognize the competitive world it is operating in?
Undoubtedly, once visitors arrive, under a different exchange policy, they will presumably spend more given that what once cost 50 cents in a 2:1 situation might only cost 33 cents in a 3:1 environment. Through VAT, perhaps the Government would divert some revenue to improving its foreign exchange reserves but its ability to do that given its debt load remains to be seen.
However, the average Bajan, who is already feeling financially stressed, will feel it more because every imported product bought and paid for in US$$ or UK £ will become more expensive and the standard of living will come under attack. More people may end up having to choose between their medications or feeding themselves.
The assumption by the current government, which is spending 60 per cent of its revenue on debt servicing, is that it can magically find ways and means to increase its foreign reserves. This is doubtful given their track record and inflationary commitment to printing money. Ask the Italians and Greeks how that is working for them!
But who will really benefit most from devaluation? The members of the BTMI will do very well under a devalued currency. The BTMI members and others quote prices in US$$ or UK £s, and given their past behaviours, there likely will be no efforts to reduce prices. Thus in a 3:1 exchange rate scenario ,they will get a de facto 50 per cent increase in revenue in Barbados $$s with no effort of their own. Those revenues will go mainly to their bottom line.
There will be VAT payable on those dollars but they will still retain the vast majority of their windfall from devaluation. It would be naïve to suggest they might share some of it with their staffs.
As I look around, speak with cab drivers, beach vendors, restaurant staff and walk the beaches each day, there can be no doubt this is a very quiet high season. Vacancy rates are clearly down regardless of the spin the BTMI offers.
Doing some quick research, it amazes me at how unrealistic many hotel and villa operators are. For example, a $550 US per night single bedroom apartment on the west coast is currently empty and has been for most of February and March to date. Occupancy is estimated at 30-35 per cent; yet rates for 2018 are being quoted at $575 per night or 5 per cent higher. Is that realistic and helpful to the economy?
Would it not be in everyone’s interest to ask less and be full?
Cash flow would be more consistent, the ability to attract repeat tenants who will stay 1-3 months would increase and financial planning would be so much easier and the whole economy would benefit.
Whereas and until the Government and business build an economy for Barbados that is diversified away from tourism as its core, Barbados has to compete with the rest of the Caribbean, if not the world, for the tourist dollar. Failure to do so will see this wonderful country continue to struggle financially.
Will devaluation help Barbados? Only the top will get a win while the average citizen gets hurt more unless there is a change of thinking at the top. Think about it folks as 2018 approaches and the polls beckon.
Puslinch, ON, Canada
St James. Barbados