Governor of the Central Bank, Dr. Delisle Worrell, believes that the “narrow economy” is not a shortcoming if appropriate policies are pursued.
Worrell gave Barbadians this assurance earlier today while addressing Rotary Club West at Accra Beach Hotel and Spa at Rockley, Christ Church.
The Government’s chief economic adviser told Rotarians that by using fiscal tightening to preserve the island’s exchange buffer, the country had been able to maintain its policy independence.
“The policy framework is robust with constant monitoring and feedback to allow for timely policy adjustments as needed,” he said.
Earlier, Worrell noted that Barbados had been able to maintain its buffer of foreign reserves since the onset of the 2008 crisis and had done it in the face of economic contraction.
He explained: “Thanks to this buffer, we may pursue appropriate policies independently of policy advice that may not be in the country’s interest… Small open economies need foreign exchange in order to grow because they cannot produce the range of commodities needed to support modern lifestyles. In this, they are different from large economies which have domestic substitutes for everything they need, at prices which ordinary people can afford.”
Worrell argued that in the short run, Government’s policy must be to limit spending so that the demand for imports did not exceed the expected foreign exchange inflows. In the longer term, he added, growth must be led by investment in the sectors that earn and save foreign exchange.
He gave Barbadians the assurance that the exchange rate was secure, and protected by adequate foreign reserves.
Worrell boasted that arising out of the security of the country’s exchange rate and adequate foreign reserves Barbados was able to resist adopting misguided policy. Stressing that meticulous care was being taken in the management of the local economy by the Ministry of Finance and the Central Bank.
The veteran economist said: “Reserves are monitored daily and every month decisions are taken about the fiscal measures needed to make sure that expenditure on imports does not exceed available foreign exchange.”
He disclosed that the medium term strategy to balance the fiscal accounts and bring down the ratio of debt to GDP was on track, pointing out that expenditure must be reduced by raising additional tax revenue or lowering government expenditure. He noted too that Government’s fiscal policy did not need to be any tighter unless there was a substantial loss of foreign reserves, adding that Barbados’ debt to GDP ratio was no higher than that of other countries adversely affected by the international economic crisis, including industrial countries.