Dollar appeal

No more $2 to $1, advises Arthur

Former Prime Minister Owen Arthur made a strong case today for Barbados to end its currency peg to the United States dollar.

In setting out his case before Parliament during the morning session on the second day of the debate on the 2017/2018 Estimates of Revenue and Expenditure, Arthur said other currencies should be considered to help stabilize the Barbados dollar, which the fired Central Bank Governor Dr DeLisle Worrell had warned was facing devaluation because of the continued printing of money to support Government programmes.

In fact, the former Prime Minister would have taken many by surprise when he dismissed any talk of devaluation as “false”, explaining that the Barbados dollars devalued often, whenever the US dollar moves down against other currencies.

“Our currency is pegged to the United States dollar that is not going down in value, but is going up in value and it is making Barbadian exports more expensive, not because we want them to be more expensive but because of how our currency is pegged.

“Our currency is also making it more expensive for investors coming from the United Kingdom and Germany to be able to make investments in Barbados,” Arthur warned.

Stressing that the US dollar would continue to appreciate, Arthur made the case for the country to begin a “debate on what should be an appropriate exchange rate policy that coincides with our contemporary goods, services and foreign capital flows in the context of what is likely to happen to the currencies against which we are pegged taking into account all the other currencies of countries we do business.”

The former Prime Minister said dollarization- which involves a country using another country’s currency as legal tender for conducting transactions – had been recommended as a positive option for small open economies such as Barbados, since it offered the benefits of greater stability in the value of a foreign currency over a country’s domestic currency.

“Can we not also look to peg our currency, not to a dollar that is appreciating at a time when our reserves are falling, but can we not have a basket of currencies that reflect the weight of respective countries in our trade in relation to goods, services and capital flows and for a while stabilize the Barbados dollar because it is not stabilized now?“ Arthur said.

23 Responses to Dollar appeal

  1. Winston Crichlow
    Winston Crichlow March 14, 2017 at 10:27 pm

    How will it benefit us who are living and working here in Barbados, with no accounts outside of Barbados, in other words, the average Bajan?

    Reply
  2. L.Allan Wilkie
    L.Allan Wilkie March 14, 2017 at 10:48 pm

    Foundations being prepared for devaluation. If we end up paying more for the £ and the USA $, would that not be the same thing as devaluation? This is one of the reasons that the Central Bank has a crisis on its hands. People took out their money at 2-1, will bring it back in at 1-5.

    Reply
  3. Jasmine March 14, 2017 at 11:00 pm

    Investors are supposed to have the funds to invest in Dollars. Don’t let anyone devalue Bim. Will they try the same in their own Country? Don’t bring struggling investors. Location , Demand , Supply. Remember that.

    If they are worthy Investors the rate is fine
    Period

    Reply
  4. ch March 15, 2017 at 2:30 am

    Mr. Arthur may have sound economics but it amounts to devaluation of our dollar. Not an option.
    That will be the final nail and we will never recover, as a country.
    We are suffering and will suffer more and it is unfair to all of us who did not sit in Government and make the wrong decisions.
    But the free rides have to end.
    It is time to cut government jobs- including the Parliament- and salaries and privatize the failing state entities, including the Transport Board, SSA and QEH.
    It is time for another hero, like former PM, Erskine Sandiford who will put self aside for country.

    Reply
    • Randolph March 15, 2017 at 8:39 am

      Sandiford was a disaster,what kind of hero was he?

      Reply
  5. George Hutchinson March 15, 2017 at 6:47 am

    This does not make any sense ! We are at 2-1 now and the tourist are still coming in droves including those from the UK with Brexit and their currency weaker.
    We have no manufacturing or agricultural export base or raw materials to export, and we import almost everything including the raw materials for kind manufacture.

    Mr Arthur needs to say more on this and how this will help us Bajans in the short and long term.

    Reply
  6. Alana B March 15, 2017 at 7:10 am

    So you want to devalue the dollar? Make it easier for investors to come to Barbados. O.k. The argument is to make it extremely expensive to import, contribute to higher import pricing therefore, our shrewd businessmen would then pass on the price increases to all Bajans including the poor and vulnerable or would the businessmen be content to enjoy a reduced profit margin? Well let us all embrace the IMF and welcome inflation and all the fall out of economic woes that inflation would bring which may very well include social fall out like increased crime and violence upon this small society we all so love and call home.

    Who’s interest does the IMF serve really? The IMF has been accused in the past as being a tool for free-market countries only. If so, then is that the best option? Can Barbados trust the powers that be negotiate terms that would truly benefit most Bajans? Just asking.

    Yes, let us welcome increased inflationary pressures if the learned former PM believe this to be in the best interest of Bajans and let us see what happens ‘in the morning’.

    I am deeply concerned.

    Reply
  7. Richard Johnston March 15, 2017 at 7:15 am

    You can still peg it to the US dollar, at a lower rate.

    Reply
  8. Richard Johnston March 15, 2017 at 7:28 am

    Before making the change, require all MPs to reveal their foreign-currency holdings.

    Reply
    • Peter March 15, 2017 at 9:49 am

      That’s the best thing you ever wrote. Richard

      Reply
  9. Clyde Thompson March 15, 2017 at 8:18 am

    Well this is devaluation in any form, beware Bajans don’t be fooled, what are they going to tie the dollar to, the USD is the core of world currencies and most if not all countries stockpile the USD and gold.
    What is Barbados going to stock pile the?????????????

    Reply
  10. Tony Webster March 15, 2017 at 8:35 am

    Gawh blind-muh…the man so right. Between Trumanomics, Hellmanomics (sorry, Kellmanomics) and dat Hook, Lyne,and Sinking feeling…we dollar. , or more correctly, dem US-Dolluhs in “reserves” dat we got lef-back….right now gone UP in value. The not-so-small irony of all this, is that right now, it would take LESS BB$ outa wunna pockets…to go buy yuhself a new -brand Lansriver super deluxe, or Lexus, or any big ride yuh jes’ cyan live wideout. Never mind, that the F/X balances wud tek anudder hit. True as John 3:16 yeh!

    BTW, I recall a grammar-schoolboy saying since 2013, dat we should seriously look at a currency backed by a basket of currencies. The onlies’ li’l difficulty now, is that what with the Euro; the pound sterling; ; the renminbi, and the CAD$ currencies all having seriously uncertain outlooks… It might be much easier to just tickle the par rate vis-vis the current backing currency. Bohsie, is a blessing I ent got nutting “saved” pon de bank, and enjoying a good night’s rest…

    Reply
  11. MG March 15, 2017 at 8:51 am

    I don’t know if this one is a little to high for me. I normally get Mr. Arthur’s points but this one missed the marked for me and is making no sense!

    Reply
  12. Donild Trimp March 15, 2017 at 9:12 am

    Owen Arthur is on the right track.

    “Dollarization” is the way to go. Set it up the same way as LIBERIA.

    Make the US Dollar the legal tender of Barbados and Barbados currency available only to purchase items worth $5 or less.

    This is the way to go. Very good idea Mr.Arthur.

    Come on DLP let’s get this idea off and running.

    Reply
    • Richard Johnston March 15, 2017 at 9:22 am

      But then you can’t print money freely any longer.

      Reply
  13. Donild Trimp March 15, 2017 at 9:38 am

    @Richard Johnston “But then you can’t print money freely any longer”

    No need to print money because the economy will be injected with an unparalleled rise in foreign investment.

    If the politicians are serious about pulling Barbados out of the rut, then they should consider Mr.Arthur’s hint re “dollarization”.

    Reply
  14. Peter March 15, 2017 at 10:14 am

    The best thing this DEM government can do is as Donald Trimp wrote. Peg the Barbados dollar 1 to 1 with the US dollar. trade over the counter with US dollar. A study was done and it reviled that countries that trade locally in US dollars have NO PROBLEMS. Bermuda, Cayman Islands, Bahamas, St. Maarten/St. Martin, USVI, BVI, Aruba Curacao, Bonaire and even Guyana. Give Barbadians more spending power. discontinue VAT and replace it with a Over the Counter fixed sales tax. 10% on all goods produced kocally. Not brought in and assembled. 12.5% manufactured within Caricom . Not assembled and sent to Barbados, and 15% on all other. Forget adopting another currency. The world trades in US dollars no matter what. If businesses and restaurants offer a further 10% off their listed prices if persons use US dollars hard cash, that will stimulate purchases and bring the economy back to great buoyancy. Allow a few Branded stores to operate here. Like WalMart, Target, J C Penny, Macy’s Burdines, and a few others. All those Caribbean shoppers who are affected by Trump’ s executive orders and are refused US Visas, will flock to Barbados to shop, paying in US hard cash. Hotels and restaurants will do additional business, Taxi men will be happy and those same Caribbean shoppers will stimulate travel with lower cost of travel Inter Island barrels through direct shipment. I will write about a high speed ferry service in another comment.

    Reply
  15. Carlton March 15, 2017 at 11:14 am

    Do nothing, keep all civil servants employed, better yet give them the 23% wage increases the NUPW is planning to strike for, print the money and continue all the transfers to the state enterprises until the foreign reserves run out. When it runs out and we can’t service foreign loans (default) , merchants can’t get enough for imports, supermarket shelves will start to get bare, and a general scarcity of imported goods will follow. The black market rate for USD will skyrocket. Unrest and disorder will occur anyway.
    This is the path we are on now. What do we prefer, some sharp medicine now, and try to hold tight for better or continue down the slope??

    Reply
  16. Don Marshall March 15, 2017 at 12:09 pm

    We are marked by a crisis of confidence and this is spinning off in directions that altogether puts pressure on the peg. While Arthur made an interesting suggestion ithat if implemented it wont restore waning confidence in whatever fixed exchange rate regime chosen. Indeed to shift alignment from the US dollar – which in this present conuncture is far more stable than the uncertainties around the Euro and the sterling given Brexit and rising anti-EU sentiments- will generate fear and doubts unparalleled in the economic history of Barbados. And that will undo the newly fixed exchange rate regime. Unless we are saying we wish a floating exchange rate akin to Tdad – and that is another debate as well – we ought to return to the immediate task of securing a low intereat loan to prop up the foreign reserves and medium term strategies for earning more foreign exchange.

    Don Marshall (Dr.)

    Reply
    • Donild Trimp March 15, 2017 at 1:06 pm

      @Don Marshall: The US dollar will be the currency used in Barbados for all purchases over $5.

      Barbados currency will be used for all purchases $5 and under.

      Not a difficult task to accomplish.

      Reply
  17. Don Marshall March 15, 2017 at 12:10 pm

    We are marked by a crisis of confidence and this is spinning off in directions that altogether puts pressure on the peg. While Arthur made an interesting suggestion ithat if implemented it wont restore waning confidence in whatever fixed exchange rate regime chosen. Indeed to shift alignment from the US dollar – which in this present conuncture is far more stable than the uncertainties around the Euro and the sterling given Brexit and rising anti-EU sentiments- will generate fear and doubts unparalleled in the economic history of Barbados. And that will undo the newly fixed exchange rate regime. Unless we are saying we wish a floating exchange rate akin to Tdad – and that is another debate as well – we ought to return to the immediate task of securing a low interest loan to prop up the foreign reserves and medium term strategies for earning more foreign exchange.

    Don Marshall (Dr.)

    Reply
  18. Omar Gadsby March 15, 2017 at 2:25 pm

    Mr Arthur is 100% correct. We need big and bold steps to increase confidence and take us out of this CCC conundrum. We need to make Barbados attractive for foreign direct investment FDI and really competitive with our tourism product. However, FDI is the solution for the 4 – 5% growth rate we need. We too expensive with the USD peg. 40% of fx transactions in Barbados are in GBP. We do not need to persistently import USD strength and weaknesses at the worst times for our economy.

    Reply
  19. Mark Adamson March 15, 2017 at 10:40 pm

    I have decided to help reproduce the following recent Facebook post (edited for greater clarity), so that many persons critically reading it would have a better understanding of the tremendous political economic and financial problems that have been coming about for Barbados and many of its different political economic and financial sectors – as a primary result of the continuation with currency ratios involving the transaction of US dollars and cents and Barbados Dollars and cents pursuant to certain commercial and financial agreements between the relevant parties. Indeed, these problems have come about and have reached worry proportions, whether or these ratios amount to pegs or not.

    So here we go.

    “Douglas Trotman, Thanks very much for the link.

    Anyhow, I have fundamental difficulties with Dr. Delisle Worrell’s reasoning on the printing of money to finance government deficits having to be the principal cause of exchange rate instabilities in the Caribbean.

    Here is why.

    1) There is no material or human behaviour that can be sensed by any human being as exchange rates/or tying or pegging of currencies to one another.

    2) There is no material or human behaviour that can be sensed by any human being as the printing of money (money is not computerized electronic numbers).

    3) There is no material human behaviour that can be sensed by any human being as a fiscal deficit, whether in the government or private sectors of this region.

    You see, Dr. Worrell is one of many economists from this Caribbbean who lack substantial amounts and measures of critical thinking skills. Indeed, one of his and their elaborate weaknesses is to have been swallowing hook, line and sinker, many of these Western Eurocentric political economic and financial ideologies, philosophies and psychologies that have been imported into our Caribbean region, without the necessary application of critical thought to them, well before accepting them for application to our Caribbean circumstances, or whilst they continue to be implemented by the various components of these various sectors, without serious analysis of their very and continuing baleful consequences upon our countries.

    With the implementation of governmental and, in some cases, private sector, policies – to support or counter nothing that is happening – contrary to their false beliefs that these things are actually happening, it must mean that in the case of those three false situations above, that the receipts of individuals, businesses and others will continue to be harassed, whittled down, and stolen by especially the governments of these regions, as the evidence must show.

    For instance, in respect of (1), by governments of Barbados maintaining the false belief that currencies are exchanged between individuals and groups of individuals based here and foreigners – that there is equality between the currencies at any given ratio – rather than they believe that they are transacted between different individuals and groups of individuals at a ratio of, say, 2 BDS $: 1 US $, (really nil money costs/money benefits arising), in Barbados’ case, some of those individuals will be adversely thinking that US dollars (and cents) are a far more superior currency to the Barbados Dollar to have and keep, as that, in the context of imports, it is easier for many locals to think that it takes not so many US dollars/credits to give to US exporters of US goods and services, whilst at the same time there is a great amount of work and business that is needed to be done here in Barbados by locals and others, before coming by Barbados dollars – assumed as receipts, and – all the while – it is still not realized the greatest local circulation of the Barbados Dollar possible.

    By preservation of this particular so called exchange rate policy, it is seen that Barbadian exporters of goods and services overseas are able to get US credits but are unable to realize their goods and services – in the main – impacting substantially in the US markets.

    So, at the end of the day, rather than many local citizens and foreign citizens falsely thinking that there are exchange rates between foreign currencies and the local currency of Barbados – given that there are no relationships between the currencies and which must form part of the reasons why there ought to be no considerations from any one of the pegging of foreign currencies with the local currency, these people following the relevant odious aspects of economics, continue to falsely think that there are exchange rates and currency pegs, thus it altogether having continued to be seen how local political economy actors are worst politically economically financially off than the foreign political economy actors, in the main.

    All it takes in circumstances where there can possibly be no language describing the pegging or tying of any foreign currencies with the Barbados Dollar, and no language describing what cannot be materially humanly practiced – exchanges rates – is for Barbadian based entities when receiving goods or services from foreign exporters of goods and services to Barbados to help send the credits in the electronic language of US, Euros, Chinese Yuans, etc, that they (foreign exporters) wish to denominate those aspects of the transactions, to the financial institutions used by the foreigners. And with regard to exporters of local goods and services to any external markets, to have the receivers of their goods and services help send the credits in the electronic computerized language of US, Euros, Chinese Yuans, etc, to their banks here in Barbados.”

    NB. Similar principles can be used if currencies were actually used by locals and foreigners in such cross border commercial and financial transactions.

    Reply

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