Avoid more shutdowns

The Central Bank of Barbados has not yet assessed the cost of Government’s last COVID-19 lockdown, but Governor Cleviston Haynes is certain the economy cannot bear many more of these disruptions.

And against the backdrop of the approaching 2021 hurricane season which experts warn will be active, Haynes said there was only so much that a small open economy like Barbados’ could sustain. This was within the context of the COVID-19 pandemic shock, the effects of the La Soufriere volcanic ashfall and possible severe weather systems in the coming months.

“We do believe that the economy has buffers to be able to withstand the shocks, but if you keep getting beaten up, then eventually those buffers are eroded.

“Clearly, that is not something we want to see. We recognise that we are approaching the hurricane season. One does not want to see too many more shutdowns because every time that you shut down, you lose momentum and you create uncertainty. We don’t want to have those shutdowns; they are costly.

“The fact is, we believe we have buffers that will enable us to be able to withstand the types of shocks that we are facing. But clearly, a hurricane is a shock of a different order and ideally, we would not want to have to undergo that, at this point in time when we are dealing with COVID, and to some extent the spillover effects from the volcano in St Vincent,” the Governor explained.

The Central Bank governor outlined that much of the country’s defences were within the $2.6 billion held in international reserves, some of which he said, had been drawn down to assist in sustaining the economy and to provide direct assistance to individuals and businesses.

Haynes told the media that officials expect the island could lose about $100 million of its reserves by the end of the year. However, he anticipates Barbados will have no difficulty servicing its external debt.

Responding to a question from the public on how much of the island’s reserves were borrowed and how much was earned, he said it was important to appreciate the impact of COVID-19 on most aspects of the economy and to accept the fact that not much foreign exchange was earned during this very trying period.

Haynes said most countries around the world were forced to borrow extensively to respond to the impact of COVID-19. As a result, he said discussions were taking place at the international level about the possibility of ring-fencing debt incurred due to the pandemic.

According to the Governor, the Barbados government has identified in this year’s Estimates, a provision to borrow $500 million in 2021. (IMC1)