With the island’s foreign exchange reserves teetering at a dangerous level of 6.6 weeks of import cover, or $410 million at the end of December 2017, the Central Bank is coming to the rescue of the Freundel Stuart administration with a short-term bailout measure.
In a near six-hour presentation on the 2018-2019 Estimates of Revenue and Expenditure in the House of Assembly today, Minister of Finance Chris Sinckler announced that the bank was negotiating a loan to top up the crucial reserves, which are “uncomfortably” below the international benchmark of 12 weeks.
“The Central Bank is in negotiations for a loan, a private placement, to shore up the reserves since they have fallen to a level that we are not at all comfortable with,” Sinckler said, adding that the details would be revealed in due course.
The Minister of Finance told his parliamentary colleagues that the loan would buy Government time to “bring some order to some of the other things that we have to do on the fiscal side and on the debt side to ensure that we put our house further in order”.
He said the administration had been finding it “exceedingly” difficult to work with the little investment inflows, compounded by the delays in the construction of several capital projects such as the $200 million Hyatt Centric Resort, and the sale of the Barbados National Terminal Company Limited (BNTCL) to the Sir Kiffin Simpson-led Sol Group of Companies.
But today, he held out some hope of a further boost to the country’s international reserves.
“We have had a situation where we had laid out for the sale of the two assets to give a boost to the foreign exchange and at least one of those is the sale of the BNTCL had been delayed, and therefore, those inflows were delayed,” Sinckler said.
“But they wouldn’t be delayed permanently because we expect that the Hilton sale is going to be completed soon, and once Cabinet approves, then those inflows will come,” he added.
Central Bank Governor Cleviston Haynes announced last month that the reserves had fallen to a 22-year low, blaming weak private sector capital flows, net public sector outflows and the delay in the sale of some state assets, even though he dismissed the idea of devaluation of the Barbados dollar.
However, economist Jeremy Stephen predicted the foreign exchange reserves would likely sink even further by the end of the fiscal year in March.
Soon after Haynes made the announcement, Stephen, a University of the West Indies lecturer, said if Government did not quickly slash its expenditure, and if international oil prices continued to climb, come the end of March the reserves could plummet to just five weeks of import cover.
Meantime, Sinckler said today that notwithstanding “some people getting in the way”, construction work on the controversial Hyatt project would start in the second half of this year.
“The Hyatt Centric Hotel . . . construction of that hotel, I am advised, will begin in the second half of this year and will consist of 300 rooms and employ 450 persons, bringing more than US$200 million in investment. The fact that the Hyatt has not started is not because of the fault of the Government. Some of the cousins of the Opposition have filed an injunction and filed a case in the court and the court had to do what it had to do and the people had to wait. But that wait is coming to an end and the investment will start,” the minister said in reference to social activist David Comissiong’s legal challenge to the granting of planning permission for the hotel by Prime Minister Freundel Stuart in his capacity as Minister responsible for Planning.
Stuart’s legal challenge to Comissiong’s right to fight the building permission was thrown out by the Supreme Court, while a date for the hearing of Comissiong’s law suit has not been announced.
The social activist has repeatedly said there is no injunction against the commencement of work, but has warned that the developers stood to lose should work begin and the court rules against them.
Sinckler today said the developers had told the Government they were ready to start.
He also told the Lower Chamber that investors had now expressed an interest in building the long-mooted Pierhead Marina, and discussions were at an advanced stage.
Sinckler also said that the foreign reserves were a major focus of the Barbados Sustainable Recovery Plan, which outlines measures for the preservation of the reserves.
“The plan also contains two other critical objectives. That is the development of parallel approaches through the initiatives of earning foreign exchange and the disbursement of funds associated with those projects. We believe that, yes, Barbados’ reserves are at a critical level, that we can correct the situation in the short term even as we move in the longer term to unlock the resources from the international financial institutions, particularly the Inter American Development Bank (IDB) and the CAF [Development Bank of Latin America] and the CDB [Caribbean Development Bank] once we begin to discuss the implementation of this plan with those institutions,” he said.