It’s economic madness, warns US think tank

Assurances by Prime Minister Freundel Stuart and Minister of Finance Chris Sinckler that there will be no devaluation of the Barbados currency under their watch, have seemingly failed to calm nerves, as concerns continue to be raised about the possibility.

With the country’s dwindling foreign reserves at their lowest levels in 14 years, Governor of the Central Bank of Barbados Dr DeLisle Worrell has warned unless corrective action is taken the dollar will not be safe.

In this context, a visiting economist has warned the authorities that it was not possible to “devalue your way to prosperity”.

John Tammy, a fellow in economics at the American libertarian think tank, the Reason Foundation – a public policy group promoting choice, competition and a dynamic market economy y- said any devaluation would have catastrophic consequences for the country, and would result in higher prices, demands for greater salary increases and social disorder.

“If you devalue you injure your citizenry, you injure your producers who need to import goods to export; you increase the cost of transportation, and you also reduce investments in the productivity enhancements that make you more competitive in the first place. Devaluation never works,” Tammy last night told the annual forecast dinner of the Chartered Financial Analyst Society of Barbados at the Hilton Barbados Resort, even as he suggested that Barbadians would not sit idly by and accept reduced spending power.

“Are they just going to sit back and say, ‘well we’ll just accept without protest the fact that our Barbadian dollar buys less?’ No, they are going to demand higher wages to reflect the decline in the currency.”

It was only last month that Stuart 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.

This notwithstanding, Stuart had told the Barbados Chamber of Commerce and Industry luncheon that there were sufficient reserves to meet current daily requirements and defend the currency peg to the US dollar and that “suggestions to the contrary are unnecessary speculation”  which ignored Barbados’ economic history.

“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,” he had said.

Sinckler had earlier told Parliament he would rather resign than oversee the devaluation of the Barbados dollar.

Tammy’s comment would have strengthened the resolve to keep the current exchange rate of Bds$2 to the US dollar.

The political economy editor at Forbes magazine reasoned that devaluation would limit the country’s ability to purchase goods, thereby hindering its ability to export.

“So the very notion of devaluation falls on its face,” he said.

“You think you can decrease the Barbadian dollar without it greatly increasing the cost of global transport of the goods you produce?  Oil is priced in [US] dollars. You have a peg to the dollar. If you devalue the cost of transport is going to grow.”

“Does anyone in this room think that if you devalue the currency the price of those imports will stay the same? You quite simply cannot devalue your way to prosperity,” Tammy added.

He said instead of considering devaluation, Government should seek to increase investments to help the economy rebound.  

16 Responses to It’s economic madness, warns US think tank

  1. Hal Austin February 17, 2017 at 4:17 am

    Where is the balance, the alternative view. The CFA is not a political organisation. It is a highly reputable financial analysts body.

    • Richard Johnston February 17, 2017 at 10:35 pm

      The CFA did not make that statement. A nutcase libertarian did.

  2. Tony Webster February 17, 2017 at 5:00 am

    News, Mr. Tammy? Hope you enjoyed your visit, and will return soon wid family, friends etc.

  3. Angus Benn
    Angus Benn February 17, 2017 at 6:33 am

    If I was the prime minister. With all these set of confusion. I will call election. Reason I don’t want to go down in history, as the worst prime minister ever run Barbados. Now is the best time to call election. The minister of finance refused to go to the IMF , when he was warned about the state of the economy. He was not listening to Mr mascoll and Mr Owen Arthur. If you love your country. There is something call HISTORY.The country is already destroyed. I live under all 7 prime ministers. The only time It was like this was under mr Sandiford.

    • Gearbox1964 February 17, 2017 at 9:22 am

      Too late Angus…he will go down in history as the worst PM ever…that is a foregone conclusion. But I agree that he should call election and spare us anymore agony by his administration.

  4. Kim Marshall February 17, 2017 at 8:05 am

    We have already established that devaluation is not a viable option for our country. The question is, and has been for some time now then what tough measures will the Government take to stop our dwindling foreign reserves from reaching lower levels. We are now in a crisis and it is time to DO something and stop talking or looking at things as the time for doing that has long passed. We need the Government to stop worrying about their ability to be re-elected and do what it takes to help Barbados even if that means losing the Government. So we fire Mr. Worrell and even Mr. Sinckler. What next? That is where we need to go and I am growing increasingly concerned that as this crisis level grows more finger pointing and less and less problem solving at such a critical time will be happening. This is about Barbados! It is and never will be about any political party or person! We need to get out of this crisis by doing what is uncomfortable for maybe many at this time but we have no choice now. Get to it!

    • hcalndre February 17, 2017 at 11:53 am

      @Kim Marshall: How would you rate this PM on a 1- 10, or among the PMs since 1966 where does he fit?

  5. Hal Austin February 17, 2017 at 8:07 am

    Kim Marshall,
    Who is ‘we’?

  6. seagul February 17, 2017 at 8:20 am

    We are force to admit that no reliable solution for the global economic crisis has been found yet. The debt problems in the Eurozone and its slide towards deeper recession are just the tip of the iceberg. The traditional powerhouses of global development the USA, the EU and Japan are seeing their leadership erode. There is increasing competition for access to resources. The western economic powers are weakened by the crisis which has exacerbated social and economic problems. We can clearly see this for a fact now. The consequences of these shifts can be disastrous for us all. If we continue to organize this society around protecting the privileges of people that are already rich, not prosecuting politicians, allowing people to avoid taxes, then ordinary people would and should revolt.

  7. Alex Alleyne February 17, 2017 at 8:39 am

    I do remember the then PM Barrow said ” I hope the Governor of the Central Bank will have the decency to resign and don’t let me have the privilege of firing him”.
    PM Stuart should fire both Sinckler & Worrell.

  8. Gearbox1964 February 17, 2017 at 9:27 am

    Alex…the entire gov’t should be fired…they are all worthless. Please ask Fundel tuh ring de bell!

  9. Michael Berry February 17, 2017 at 9:30 am


    CFA Barbados hosted its annual forecast dinner and we had two guest speakers. They presented their views. The Q&A session did see the speakers questioned and challenged. We facilitate a forum for discussion, education and analysis.

    If you want a good read on this issue there was an article on Bloomberg yesterday titled “Tale of two currencies: Egypt sets itself apart from Nigeria” by Paul Wallace. Worth reading in the present context. It might help inform.

    And yes, we are not political, we represent the investment profession.

    Michael Berry, CFA
    Public Awareness Chair
    CFA Barbados

  10. hcalndre February 17, 2017 at 12:11 pm

    Mr. Tammy: one thing that you can be assured of is that there would be no unrest in barbados, don`t care how bad things become, bajans are not made of that cloth and the PM and politician knows this, so there`s no need for concern.

    • Gearbox1964 February 17, 2017 at 4:55 pm

      Don’t forget 1937. We may bend very far…but there is a breaking point.

  11. Hal Austin February 17, 2017 at 2:21 pm


    As you know, I have the highest regard for the CFA Institute and only recently have been singing its praises against MBA inflation.
    I particularly admire the Institute ethical code and still read its books almost every day, although not a member.
    I welcome CFA members involvement in the debate, although that does not mean CFA experts are always right.
    As I have said before, what the economy badly and urgently needs are: de-pegging from the Greenback and pegging against a basket of currencies and commodities while floating against the others; using Bds$50m of the reserves to establish a locally domiciled balance sheet bank; a proper audit of state assets and the privatisation of non-core services; job creation; a bigger GDP send on education, most of it at the entry level so that in 15 20 years we will reap the benefits; reform of the NIS, including a compulsory saving scheme; widespread infrastructural developments, including slum clearance and the development of a night-time economy; and a massive small business development, including the dry dock and diversifying away from tourism. And, finally, the development (in partnership with a country such as Dominica) of an agricultural and food sector.

  12. Hal Austin February 18, 2017 at 2:26 am


    The RSS is gearing up for any social breakdown. Our prime minister has just signed away our security to some bogus Caricom organisation.
    The hands behind this manipulation are the Yanks and Canadians, with the Brits giving their support.
    But look at Central and South America for examples of military police at work, or in major US cities.
    Be aware, be very aware.


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