Barbados Labour Party (BLP) leader Mia Mottley is painting a dire picture of the state of the island’s foreign exchange reserves, predicting they could plunge to as low as $100 million by the end of this year.
It was only on Monday that Minister of Finance Chris Sinckler urged Barbadians not to panic over the state of the reserves, and to pay little attention to “armchair pundits” who speak of the continued rapid decline.
Mottley today predicted that the first quarter report from the Central Bank of Barbados would likely show some improvement in the reserves, which fell to $410 million, or 6.6 weeks of import cover at the end of December last year.
However, while admitting there was some level of stabilization in the first quarter of this year because there were no foreign debt payments in March, and there were inflows from the Caribbean Development Bank (CDB) and the Inter-American Development Bank (IDB), the BLP leader predicted the worst was yet to come.
“In the second quarter, which is what we are in now, we are going to have to find $73.7 million for Credit Suisse, we are going to have to find and $27 million for Deutsche Bank, we are going to have to find for the Caribbean Development Bank and the Inter-American Development Bank another $25.9 million and that is just between April 1 to June 30, and we happen to know that the majority of it is in June,” she said.
“Before December 31 this year alone we are talking about an excess of $260 million, while in relation to the inflows we would be getting less than $100 million,” Mottley, said while stating that latest Central Bank worst-case scenario projections showed Barbados’ reserves plummeting to as low as $100 million by December 2018. She did not reveal how she obtained that information, which could not be immediately verified.
In any event, Mottley called on Central Bank Governor Cleviston Haynes to decide whether or not “he is a servant of the people or a creature of Minister of Finance Chris Sinckler”, arguing that Haynes owed Barbadians greater transparency than what was being offered in the Bank’s quarterly reports.
Rushing to the defence of economic commentators, she accused Sinckler of “trying to fool” Barbadians with a $10 million jump in the reserves, which she said would be reflected in the Governor’s first quarter report for 2018.
However, she speculated that the report would omit information showing that foreign loan payments were expected to reduce the reserves by a further $330 million in 12 months.
“The Governor of the Central Bank must speak plainly to Barbadians and not allow a minister with an electoral interest to paint a picture through blue coloured lenses . . . .To tell us that the country is good because the reserves are now at $420 million – only $10 million more than December 31, 2017- is to distract when he knows that the trajectory is going downward,” Mottley said.
“Chris, you are swimming in waters too deep. You need to stop it. Zip it up and stop fooling people,” she added.
In his comments on Monday, Sinckler did not reveal the current state of the reserves, arguing that to make that announcement would pre-empt the Central Bank’s report for the first quarter.
However, he stressed that there was no need to panic and that all speculations would be addressed very shortly.
“There is absolutely no need for any panic; reserves are reported on a quarterly basis. We do not report on a daily or weekly basis and there is a very good reason why this is the case . . . .The first quarter of this year has ended and the Central Bank will very shortly do its quarterly report and all of the speculation about reserves would be addressed at that time and I am not going to jump ahead of the Governor of the Central Bank. At that time we will see, and I think some people will see what they want to see and hear what they want to hear because people have this delight about talking about the things [that are] wrong with Barbados,” he said.
The minister also stressed that Barbadians should take comfort in the fact that there have been no cries of chronic foreign exchange shortages from businesses or financial institutions.
However, Mottley today argued that it was this very mode of operation that had earned the Central Bank a ranking of 84 out of 89 countries worldwide on the latest IDB Central Bank Independence Transparency Index, well below the Bank of Guyana, which ranked 42nd overall. She also accused Sinckler of trying to “influence the Governor’s first quarter report in light of the horrendous report in the IDB quarterly bulletin”.
As part of a special analysis on how Caribbean institutions were working, the IDB examined the Central Bank’s independence and transparency and found both were deficient. Barbados had an overall transparency index score of two within a range of zero to 15.