The President of the Small Business Association (SBA), Dean Straker, says his members are currently walking on “thin ice” after hearing the grim economic news delivered by Acting Central Bank Governor Cleviston Haynes yesterday.
Of grave concern to the SBA is the state of the country’s foreign reserves, which have plummeted well below the 12 weeks benchmark to reach just 8.6 weeks of imports or $549.7 million at the end of September, putting more pressure on the stability of the Barbados dollar.
“I think this is even more concerning when you realize that this position reflects the situation as at the end of September. So, there is nothing that has happened in October that would have improved the foreign reserves, but a lot has happened that would have further depleted our reserves . . . because importers would have been making their orders for Christmas,” Straker told Barbados TODAY, adding that he expects the reserves to be even less at the end of October.
“Of course this is of great concern to us small business members, as the Government has not been able to bring the fiscal situation under control. We continue to spiral downwards, and quite frankly, I think everybody should be concerned,” he said.
The SBA spokesman is equally worried that the sector, which has traditionally found it difficult to access finance, could find it even more difficult to secure loans in light of the Central Bank’s announcement of a further tightening of its monetary policy that will require commercial banks to hold 20 per cent of their domestic deposits in stipulated Government securities.
Straker said the economic situation on a whole was not engendering any measure of confidence within the small business community.
His concerns were echoed by Executive Director of the umbrella Barbados Employers Confederation (BEC) Sheena Mayers-Granville who said though the BEC was by no means surprised by the latest Central Bank report, it was a further indication that the island would be unable to achieve the desired economic turnaround in the short term.
In his review of the country’s economic performance for the first nine months of this year, the Governor reported that the island’s foreign reserves had declined by $133.9 million and that the national debt had climbed to 144 per cent of gross domestic product (GDP) at the end of September.
Haynes also called for immediate spending cuts in a bid to stabilize the Barbados dollar, which is currently pegged two to one against the United States currency, as well as the country’s overall fiscal position.
Of particular interest at this time is the country’s fiscal deficit, which was estimated at $279 million for the last six months. And while tax revenues increased by $98.6 million, due in part to the controversial National Social Responsibility Levy, which raked in $48.8 million over the past three months, Government’s overall revenue outturn was dampened by weaker import duties and a fall in withholding taxes.
While agreeing with the Central Bank’s assessment, the BEC executive warned that the desired action was not likely to be taken overnight.
“So we are hoping that overtime . . . we can correct these imbalances and have our economy back on stream, where those macro indicators can be moving in the right direction,” she said, while warning that the island’s credit ratings also needed to improve following a series of economic downgrades.
The latest such blow was delivered by Standard & Poor’s last month when it lowered its long-term local currency sovereign credit rating on the island to ‘CCC’ from ‘CCC+’. At the same time, S&P affirmed its long-term foreign currency sovereign rating at ‘CCC+ in what was the 20th downgrade to occur under the ruling Democratic Labour Party administration since it took office in 2008.
“Our downgrades didn’t happen overnight, so we don’t expect recovery to happen overnight, but we definitely have to have a turnaround in how our economy is going and start to rebuild,” the BEC spokeswoman said. [email protected]