Shush to the whispers of devaluation
Economist Dr Clyde Mascoll has said it. Now, Dr Don Marshall has said it too.
We guess we really need not worry about devaluation for now. Or should we?
As both Dr Mascoll and Dr Marshall would have us believe, the Barbados dollar is not in any immediate danger of any write-down.
Yet, Dr Marshall goes on to warn that it could be –– underline could be –– if the current “whisper campaign” does not cease.
“. . . It’s important to get the bogeyman out in the open, because of the deleterious effect that a whisper campaign can have,” said the political economist as he addressed a luncheon meeting of the Barbados Chamber of Commerce and Industry yesterday.
Speaking on the topic Defending The Barbados Currency Peg: A Matter Of National Priority, Dr Marshall drew reference to Argentina, which he noted was in a “vicious cycle of inflation, high unemployment and devaluation”.
He explained that it was facing this kind of dilemma because of a “whisper campaign” that manifested itself “in capital flight; the construction of black markets because of the hoarding of foreign currency, and so on”.
The noted University of the West Indies lecturer went further to caution that even in “the best of circumstances where your economic fundamentals are fine, or in some cases are reasonably fine, what happens is that you get an undermining of the local currency”.
All of this really amounts though to a lot of speculation. As Dr Marshall rightly pointed out, there is “speculation, currency speculation and then there is massive devaluations”; so we will leave it at that.
Our feeling is that in spite of whatever is currently being whispered, there are obvious economic fundamentals that this island needs to face up to.
Even when our officials have chosen to hit back at agencies such as Moody’s and Standard & Poor’s, they have in the same breath been forced to admit to our myriad of economic challenges. These range from a ballooning fiscal deficit, which stood at 11 per cent of GDP for 2013/2014 compared to eight per cent the previous year, to our deteriorating foreign exchange reserve position.
The current level of borrowing is also enough to raise eyebrows; so too are the recent moves to increase the domestic ceiling, despite the Government’s assurances that actual spending of these funds would not be allowed to hit the roof.
Added to that, there is the ongoing layoff situation in the country, which is affecting both the public and private sectors and a growing dependence on the Central Bank to finance the state’s short-term debt.
In such an environment, it is easy to see why agencies have retained a negative outlook on Barbados, while remaining concerned about the pressure that is building on the local currency, whisper campaign or not.
Even Dr Marshall has had to admit to the need for urgent restructuring and for the Freundel Stuart Government to address the widening deficit.
But the position we are in today is certainly not because of any whisper campaign or focus thereof.
And such a focus now will definitely not get us out of the current rot either.
We have had the expert opinion of agencies, with no emotional connection to any administration, either past or present, warning us over and over of the increasing pressure being brought to bear on our domestic currency.
And that people are talking about what is now a well established fact, is not no attempt at self-fulfilling prophesy, but rather an acknowledgment and beseeching of us all to assist in a turnaround.
Our problems are many and varied. They include, but are not fully incapsulated in what Dr Marshall also had to say about poor service, a lack of innovation, a reign of incompetents, and merchants of doubt.
However, we draw the line on any whisper campaign, which we could believe could be permanently drowned out by decisive action on the way forward for this economy.