The Central Bank I knew would NEVER dream of misleading ordinary citizens. There was a time in this country when every Barbadian felt a personal bond with the Central Bank of Barbados. This bond manifested itself through the interaction of the Bank’s Governor with the public and the words of advice often dispensed.
When the Governor said to save, Barbadians saved. When the Governor’s advice was that we needed to tighten our belts, Barbadians duly responded. This behavioural response by the public was not by accident; it was due entirely to the faith and trust reposed in the institution and its Governor that they would look out for the interests of the ordinary citizen.
Whether you support any political party or none at all, the words of advice from the Governor of the Central Bank was heeded by all and sundry because of the faith and trust which moulded that bond.
Having worked at the Central Bank myself where I started my career as an economist, I still have some latent or residual regard for the institution because I know and understand the power of the institution. The decisions that central banks make pretty much determine whether people will get work or not at the most basic level. However, the institution in which I worked and the one that exists today is chalk and cheese.
What is truly ironic about my assertion is that whilst some people have retired or moved on, there are still a lot of the same people working there today as compared to when I left in December 2005. This is especially so in relation to the management of the institution. How have I arrived at my chalk and cheese conclusion?
In 2015, a decision was taken to allow financial institutions to set their own interest rates on deposits. This was swiftly followed by interest rates moving from 2.5% to 0.5% almost overnight. Shortly thereafter, the Central Bank on behalf of (or perhaps more appropriately, in cahoots with) the Government of Barbados, suddenly dangled before an unsuspecting public a New Savings Bond Series with a yield or interest rate of 5.5%.
I deliberately use the phrase “unsuspecting public” because of the personal bond I mentioned earlier. Naturally, because of the faith and trust in the institution, Barbadians who were now being bombarded with some rather slick marketing by the Central Bank, were enticed to invest in what were promoted as safe investments. A Safe Way to Save More was the slogan if I remember correctly.
Savings Bonds are backed by the Consolidated Fund of the Government of Barbados and, as such, their safety as an investment has never been in any doubt. Except that during this whole promotional exercise about wanting everyone to take advantage of this wonderful opportunity, the Central Bank never told Barbadians that they were printing $50 million every month to help our Government to pay
So imagine they were actively promoting these bonds as a safe investment whilst withholding important information from the public about the Government’s ability to pay its bills. This is an especially important omission. The fact that the Central Bank has been printing money for well over three years now, brings into question the safety of the bonds simply because under normal circumstances, Government would just seek a supplementary from the Consolidated Fund to meet any short term obligations.
So how can these new savings bonds be promoted as safe investments if there is no money in the Consolidated Fund? This is where “me and the Central Bank” part ways as my grandmother would say. By withholding this information from Barbadians, the Central Bank broke that personal bond with the people of this country. Full information should have been provided so that if people wished to move forward, they would have done so with a clear understanding of the associated risks involved.
I started this article by saying the Central Bank I knew, would NEVER dream of misleading Barbadians. Barbadians have been misled and that personal bond is no longer there. I do not think a lot of us have fully grasped what has taken place and what will be required to fix what has become a very broken system.
This brings me to my conclusion. The management of the Central Bank is collectively responsible for what has been allowed to happen. In order to start to rebuild that faith and trust, the new Acting Governor must, in my view, disclose all the information surrounding the decision to mislead the public. He must also face the proverbial music and hold public press conferences to aid in this effort.
Whilst the next economic press release is expected to cover the period January to March 2017, he should indicate the level of foreign exchange reserves held by the Central Bank up until the end of the week prior to the press release as a minimum. He must also signal to the public the clear steps he has taken since assuming office to return to the Bank’s mandate of maintaining the fixed exchange rate of BD$2:US$1.
He should indicate to the country that you cannot print money and maintain a fixed exchange rate at the same time and therefore, under his stewardship, he will do what is legally required of him to protect the interests of ordinary Barbadians from devaluation. Anything short of this will relegate Mr Haynes to a mere placeholder in the annals of history.
Clevie, Barbados has been marking time for too long. The personal bond between the Central Bank and the people as our primary guardian against devaluation is more important than politics. You have to decide whether you will contribute further to destroying all that Barbados has come to be known for or whether you will do your job and start to repair that most sacred bond between the Central Bank and the people of this country.
(Ryan Straughn is a University of the West Indies and Central Bank of Barbados-trained economist. He is the endorsed Barbados Labour Party (BLP) candidate for the constituency of
Christ Church East Central at the next general election.