Barbados will do whatever it takes to protect value of the currency, says Worrell
Barbados’ institutional framework is strong and it gets credibility from the fact that its foreign exchange rate has never been devalued.
Governor of the Central Bank of Barbados, Dr Delisle Worrell, showered this praise on policy makers in Barbados last night while addressing officials of the island’s credit union movement.
“The peg protects Barbados from high inflation and protects the real value of national savings. It gives investors an additional degree of re-assurance, therefore it is a strong investment looking to the long term. Countries that devalue often have difficulty attracting long-term investment, people have a focus on the short-term because they are not sure what values would be going down the road.
“And the fact that we have maintained that lends credibility to government policy because Barbados has proved time and time again that when it is necessary to take the adequate measures, however painful they may be in the short term, to protect the value of the currency we will do so and I think that the Budget was the latest example of our seriousness in this regard,” Worrell explained.
The governor explained that up to March this year, Government had no severe problems with foreign reserves, because they were higher than when the crisis struck in 2008.
He explained that it was the drop in foreign reserves in May this year that drove the Freundel Stuart Administration to introduce an austerity programme for the next 19 months.
“So that is one of the two challenges we have, the challenge of adjustment. We need to make the adjustment so that we maintain an adequate level of foreign exchange reserves. Our reserves are more than adequate, but we do not want to run them down rapidly because they are there so that they provide that assurance that we always have more than enough to meet the country’s import needs.
“But our underlying challenge is about growth because that is what is going to enable us to continue to improve our standard of living. Growth in the local economy depends on foreign exchange because Barbados’ economy is fuelled by foreign exchange. Everything that we need to maintain our quality of life is either imported or has a high import content. Without foreign exchange we cannot improve the quality of our lives,” the governor explained.
Worrell told his audience that growth in the local economy had to be led by sectors that were either going to provide a surplus of foreign reserves over their own needs so that they can fuel all the other inputs or by the energy sector” where we can do our own thing and save foreign exchange”. (NC)