No devaluation

PM RESPONDS TO BUSINESS CONCERNS

Prime Minister Freundel Stuart has made it clear his administration would not be “pushing any panic buttons” over the decline in foreign reserves, which stood at just 10.3 weeks of import, or $681 million at the end December 2016.

Furthermore, Stuart said, forget about devaluation of the Barbados dollar.

In light of the less than favourable economic report from the Central Bank of Barbados (CBB) yesterday, the Prime Minister sought to alleviate any fear in the private sector and the wider Barbados community as he addressed the year’s first Barbados Chamber of Commerce and Industry (BCCI) luncheon today at the Hilton Barbados Resort.

Acting BCCI President Edward Clarke (left) seated next to Prime Minister Freundel Stuart during today’s BCCI luncheon.

Stating that a dip in the reserves was expected “from time to time”, Stuart said “the real issue is how we respond”, adding that for many years Government had worked on “a well-honed system of foreign reserves and general foreign exchange monitoring and management” and was therefore in a position to “anticipate and plan for any eventualities in a reasonable and responsible manner.

“Of course, like any other system that is transactional in nature it is to be expected that we will not always perfectly predict the outcome. But to the extent that the system allows us a degree of control over what happens – and more importantly how to respond to what is happening – we have a degree of confidence that has not been misplaced so far,” he said.

Pointing to past steep declines, Stuart said his administration had been able to respond quickly and decisively, stressing Government was not running out of reserves or options.

“It is also for this reason that on this occasion, while we have recorded a decline in our reserves reported for 2016 over 2015, my Government is not pushing any panic buttons as some seem to believe that we should,” he said, adding that the 10.3 weeks of import, which was below the ideal 12 weeks, was still sufficient to meet current daily requirements and defend the currency peg to the US dollar.

“Suggestions to the contrary are unnecessary speculation which quite frankly ignores the economic history of Barbados.”

He said while Government had continued to meet all of its foreign debt liabilities on time, a shortfall in anticipated public inflows was the main reason for the decline in reserves.

However, the Prime Minister said, this would soon change with a number of projects expected to come on stream.

“As fortune would have it, we know, and can say with a high degree of confidence, that over the coming days and weeks those reserve levels will almost certainly be boosted by at least $250 million,” Stuart said, echoing CBB Governor Dr DeLisle Worrell, who yesterday sought to calm nerves by revealing that Government was anticipating over $250 million, including
$68 million on the Sam Lord’s project,
$100 million from the sale of the Barbados National Terminal Company Ltd and
$40 million from the sale of Government’s interest in the Four Seasons property.

In addition, $30 million was expected for the pre-funding of scheduled projects and a further $12 million for an education loan, Worrell had said.

Stuart told the BCCI the expected funds, along with other private sector developments and public sector capital works “will prove more than adequate along with what we earn through the private sector to run the economy and meet all demands, while guaranteeing our fixed exchange rate which, as I said before, has not been under threat.

“So it cannot be that every time there is an adverse movement in our foreign exchange or foreign reserves situation, whatever the reason, the only solution to put forward is that we should devalue the currency of Barbados.”

Charging that devaluation of the currencies of other Caribbean Community states had not produced any “spectacular results”, Stuart said, “put very simply, devaluation of the Barbados dollar is not an agenda item” for his administration.

“There will be no devaluation of the Barbados dollar,” he stressed.

The country’s leader said he was confident a growth rate of above two per cent was achievable this year, but said it should be led by the private sector with a focus on investment and exports.

He also sought to respond to the Opposition Barbados Labour Party which has been suggesting the country was on the road to the International Monetary Fund (IMF).

He said the island’s relationship with the lending agency was distinct from devaluation, contending the IMF was formed as a potential partner and not as a potential predator of its member countries.

“Nonetheless, I do not judge that there is a need at this time to seek balance of payments support from the International Monetary Fund. Our present circumstances in the Government’s view, while requiring close attention, do not warrant a panicky resort to the IMF,” Stuart emphasized.

12 Responses to No devaluation

  1. Hal Austin January 26, 2017 at 3:46 am

    Nice to see our prime minister is an expert financial economist. If no technical devaluation – there has already been internal devaluation – then what is his growth plan, over and above tourism?
    Given the central bank is now telling us that there is no inflation in Barbados, how des this relate to growth? Is nil inflation a result of good inflation targeting o just an act of God?
    What exactly are the imports the foreign reserves are meant to underwrite?
    His claim that devaluation in other Caricom countries has not had any noticeable change is just wrong. Devaluation in a trading nation, and Barbados’ major trading partners are Caricom nations, will impact trade by making Barbados exports more expensive.
    If prime minister Stuart is saying this is not the case then he has discovered a new economic law.
    The bottom line is that we are up a creek without a paddle.

    Reply
  2. Peter January 26, 2017 at 7:56 am

    I really, really hope that there will be no devaluation. my thing is that I do not trust DEM. They lied from day one and is continuing to do so. Denial is a politician quickest draw card. The Barbados dollar will be protected by Trinidad consortiums with free-flowing accounts in Barbados. Also expect lots of British investors to move their monies to safe countries whose dollar is tied to the US dollar as Richard Johnson quite correctly stated that almost all international trade and financial clearing are done in US dollars. Even precious stones and metals. More Barbados dollars is being printed because there is a demand. I do NOT choose sides but now I am feeling relatively safe with this economy even though it is very overburdened with taxes and negligence in certain key areas. The Hyatt confirmation now due to begin construction in June is a marvelous move, and will show great results once in operation. Lots of supporting business will piggy-back on this. A certain plus for Barbados.

    Reply
  3. Hal Austin January 26, 2017 at 8:37 am

    Peter,
    Remember the consensus is usually wrong. The economy is now officially in deflation, investors will move money out of Barbados, not in to, unless they see a competitive advantage.
    I will tell you who this will hit: Barbadians living in the UK – in London – who are home owners who are considering returning to their native land.
    Apart from their savings and pensions (state and occupation), most will be thinking of selling their homes and buying/building locally.
    Until June 3, their UK homes would have been valued at about Bds$1.5m – the average price of a London homes is $500000.
    At current exchange rates, that home will now be worth Bds$600000. That is a serious devaluation in the pound value.
    These people will have to think seriously about returning home at this point.
    If they have savings and transfer them to local banks, they will get an interest rate of 0.25 per cent, and will even have to pay to get their own money through ATM charges and increases in the cost of cheque books.
    Barbados is an expensive place to do business, whether corporate or individual, whatever the official propaganda.
    The only people who will find Barbados attractive as an investment destination are people who want to launder money, give their money legitimacy.
    We need to tighten fiscal policy and be innovative. There is a paucity of ideas in official circles.
    No one wants to break the consensus because they are scared of being proved wrong. It sis safety in numbers.
    :Look what such thinking did to the global economy in 2008.

    Reply
  4. Peter January 26, 2017 at 8:48 am

    Hal, You are perfectly spot on with the returning nationals bit. My two brothers who once lived in the UK, sold everything and moved to and are now very successful in the USA with their families. They only visit nowadays. I perhaps pass through London more often. Barbadians who want to retire and return home are losing big time. Money laundering is difficult but the wealthy are moving their funds for rate protection and offshore investments.

    Reply
  5. Don Keyote January 26, 2017 at 9:13 am

    “Devaluation in a trading nation, and Barbados’ major trading partners are Caricom nations, will impact trade by making Barbados exports more expensive.”

    Somebody shoot me, please. I seem to have awakened in La La land. I hope the above quote was a “mis-speak”

    Reply
  6. Gearbox1964 January 26, 2017 at 9:35 am

    I have a serious question. What would it take for Fundel tuh ring de bell right now???

    Reply
  7. Hal Austin January 26, 2017 at 9:38 am

    Keyote

    If a bottle of Bajan rum cost EC$20 in the EC, and the EC dollar is devalued by 20 per cent compared to the Bajan, then that bottle of rum will cost 20 per cent more ie EC$24.
    Unless Bajan rum drinkers in the EC have a pay rise, or the Bajan producers take the hit, that extra cost would impact their disposable income. It will also add to the consumer price index.

    Reply
    • Peter January 26, 2017 at 10:43 am

      Hal old boy Nobody buys Barbados rum in the EXC. It us usually smuggled in. Ask Dennis Johnson. One can get a 2Lt. bottle of Johnny Walker Black for US$10.00 in Carriacou or even Bequia. Just fix up the customs officer and you good to go.

      Reply
  8. Alex Alleyne January 26, 2017 at 9:57 am

    “Read my Lips”.

    Reply
  9. Leroy January 26, 2017 at 10:52 am

    Mr. Fruendel Stuart comes out looking like the elder, level headed statesman shaking the hand of Mr. Maloney affirming he has everything under control, “No devaluation of dollar” thrown in for good measure to show he is large and in charge.
    Optics and politics is a strange animal, nevertheless, its easy to be a knight in shining armour when you have allowed a situation to get to a point where a political hero is needed and we the public (atleast half of us) will eat it up like manna and honey til next elections.

    Reply
    • Gearbox1964 January 26, 2017 at 11:59 am

      So true…create a big problem and then expect praise and credit for solving the big problem that you yourself created…and some brainless people actually do give you that praise and credit. LOL

      Reply
  10. Peter Dash February 1, 2017 at 1:59 pm

    In the history of devaluation, it is proceeded by many denials from the top . Then bankruptcy of reserves follows and pop goes the weasel of the currency. Enjoy my blogs on Barbados fx, Bitcoin etc at petedash.com and upcoming book Operation Golden Bear with some Barbados ‘tid-bits.” on banking. That being said, there does not appear to be any imminent devaluation but I think it will eventually come. The main bookstore in Bridgetown has my first book,ZUrabia with a lot of content on Barbados..

    Reply

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