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imf’s idea to devalue currency won’t work for bim, says central bank governor

by Emmanuel Joseph

Barbados has rejected “notions” by the International Monetary Fund and rating agencies that it should devalue its currency as a strategy for growth.

Governor of the Central Bank of Barbados, Dr. Delisle Worrell told a news conference today that while those agencies had not directly recommended devaluation to Barbados, it was a notion proposed during a recent meeting at which he made a presentation.

“Devaluation strategy cannot work for Barbados,” Worrell insisted.

He said his statement yesterday that any alternative strategy to the existing Medium Term Fiscal Strategy would threaten the exchange rate, was motivated by a sense among economists that a growth strategy for countries faced with export problems, was devaluation.

“That is coming from the rating agencies, it is coming from the IMF. As I pointed out, that is a strategy that might work for a country that supplies its own consumption. A growth strategy that might make sense for Brazil or for China,” the Central Bank boss asserted.

He explained that if the Brazilian currency was devalued, imports from the United States and elsewhere would become more expensive, but the domestic producers who were competing with those imports, could substitute for the imports.

“So your domestic producers grow and your economy grow,” the veteran economist declared. Worrell said Barbadians have rejected any devaluation, because they understood that since this country did not produce what it consumed, that strategy could not work.

“It cannot work for any country like Barbados, which does not produce the things that it consumes,” argued the Government’s principal economic advisor.

He said he had made a presentation to an international audience that included investors and the rating agencies and explained to them why devaluation could not work for Barbados. Worrell said he told the global stakeholders that such a strategy would depress economic growth in small open economies like Barbados, instead of growing them.

The Central Bank Governor also told the news conference that the Government’s Medium Term Fiscal Strategy was on track, adding that he was yet to hear an alternative one that would bring in foreign exchange. He pointed out too, that Barbados may never experience another 35 per cent increase in visitor arrivals from CARICOM, now that REDjet had ceased to operate.

He expressed confidence though that the investment climate in Barbados was superior, considering the major returns currently available to investors.

Asked if the upcoming general elections would negatively impact on prospective investments due to the uncertainty of how the result would turn out, Worrell said he did not think so. His view was that there was a fundamental understanding by both political parties to protect the island’s foreign exchange and foreign reserves.

Worrell insisted that the one thing Barbados had not been able so far to be proud of, was the quality of service it provided in the public and private sectors.†He said he believed the country must improve the quality of its service in order to cement its place in the global market place.

On the issue of the relations with Trinidad and Tobago, the Central Bank Governor suggested better management. While arguing that Trinidad’s widespread investments in Barbados was a good thing, he encouraged locals who had money to come forward and take up ownership in various companies or projects.

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