IMF not ruling out devaluation of the Barbados currency

The International Monetary Fund (IMF) has refused to rule out the possibility of a devaluation of the Barbados dollar should the country enter a fiscal programme with the lending institution.

IMF Director for the Western Hemisphere Alejandro Werner told Barbados TODAY that devaluation would have to be a choice for Government to make. The Barbados dollar is currently pegged at BD$2 to US$1.

The Central Bank of Barbados and several noted economists have raised concerns about the future stability of the currency due to the country’s dwindling foreign exchange reserves.

At the same time, the Freundel Stuart administration is coming under increasing pressure to enter into a formal arrangement with the IMF in order to drag the local economy out of its present state of virtual disrepair.

Suggesting that the international financial market was losing confidence in Barbados, Werner said Government would have to consider its competitiveness while building “a programme that is consistent and sustainable” when it ponders devaluation.

“If one country, and this is more theoretical, chooses to have one part of the economic system being more rigid, because you choose to have rigidity in the exchange rate regime then you have to have other parts more flexible to accommodate the adjustments that are needed in an uncertain world through these other components of this economy.

“So that would be our position vis-à-vis the exchange rate regime. That is the choice of the country and then the country has to work on a macro financial programme that makes their fiscal situation, external account and their exchange rate regime consistent with that choice,” Werner told Barbados TODAY in an interview on the fringes of the 2017 IMF High Level Caribbean Forum at the Pegasus Hotel in Kingston, Jamaica.

The IMF official revealed that the lending institution was keeping a close eye on the performance of the local economy in light of the recent austerity measures implemented by the Stuart administration.

He gave two thumbs up to the measures, which included a dramatic 400 per cent rise in the controversial National Social Responsibility Levy from two per cent to ten per cent of the customs value of imported and locally produced goods, which Minister of Finance Chris Sinckler said raked in $50 million in the first three months since its implementation on July 1.

As part of a $542 million austerity package aimed at wiping out the fiscal deficit, Sinckler also announced in his May 30 Budget, an increase in tax on fuel, as well as a two per cent tax on all foreign exchange transactions, all of which took effect between July and September 1.

The IMF director said it was “an important fiscal programme to contain the loss of reserves” and rising debt, which he said “has led to a significant deterioration of financing conditions for the Government of Barbados, that has also triggered an important loss in [foreign] reserves and that obviously generated an important fragility to which the Government has reacted”.

He told Barbados TODAY the Freundel Stuart administration and the IMF were “continuously exchanging views”, and that the international lending agency was “giving advice and we are following closely the implementation of the Government’s programme”.

Werner also suggested that the international financial market was losing confidence in Barbados due to the debt situation.

The country has suffered multiple downgrades by international ratings agencies worried that it would no longer be able to service its debts.

“When you are in the middle of a fragile period and when you are in the middle of a situation in which financial markets are losing their credibility in the authorities, it is very important to act rapidly and send a signal that the major concerns, that are in this case the external sustainability due to loss of reserves and the fiscal sustainability due to the increase of debt to GDP [gross domestic product] ratio, are being contained. And then maybe there is a change in policies on the way to fix things here and there within the context of this broad envelope that look to contain these two imbalances:  the fiscal and the external [debt],” he explained when asked about the possibility of Government abandoning the current policy given its record of coming up with new programmes without allowing previous ones to run their course.

A team from the IMF is currently wrapping up its annual Article IV Consultation in Barbados. Werner, who was not able to give a detailed report on the meeting just yet, said he was aware that “the mission is having very constructive dialogue in the field”.

10 Responses to IMF not ruling out devaluation of the Barbados currency

  1. Janette Reifer
    Janette Reifer November 17, 2017 at 10:20 pm

    The Dems can’t fool me. They want to be in office to continue further destruction of devaluing the dollar. I am no altogether fool.

    Reply
  2. Antheia Springer-Williams
    Antheia Springer-Williams November 17, 2017 at 10:27 pm

    “and I hope you understand, I will never, never forgive you. Because looka, looka what you do, to my Emmerton.”

    Reply
  3. Anton Brown
    Anton Brown November 17, 2017 at 10:37 pm

    Look this bare madness, and a real heart breaking shame. These ppl hell bent on getting claim to Barbados one way or the other. No country that have went to the IMF is better off today. PM Stuart really did a
    number in the Bajans but worst I️ can’t
    believe my fellow Bajans allowed this to be done to them. Doing nothing and being inactive have never wrk. Silence have never
    wrk, ppl who refuse to take a proactive stand
    in their government have always paid the price. Until the Bajans become more involved in government things done stay the same
    and both the ppl now and generations to
    come gine pay the price. Everybody to blame for this one in equal parts
    Look the country already received a CCC+ rating from S&P which is a reflection of a country ability to pay back any money borrowed, next the IMF already not promising they won’t devalue the BArbados Dollar, third the country already operation on its reserve which is being depleted.
    How the heck with the dollar devalue, reserves being depleted, tourism being the major source of income to the country do they expect that money to be paid back? Next what happens when you a country becomes indebted to the IMF espically small least developed countries like Barbados to the IMF?
    Wunna better wake up and educate wunna self about the negative effects of borrowing from the IMF and the dangers both socially and economically for the countries borrowing money. Wunna better also understand when leafy developed countries with no voting right borrow money what happens.
    Wunna got the Internet, start researching and finding out what happens? Wunna really in for a rude awakening if wunna think that’s the way to go?
    Every single Bajan was warned years ago, one day wunna gine wake up and find a Barbados no longer belong to you all, and how it would be sold off

    Reply
  4. Bevan Green November 18, 2017 at 9:48 am

    Please ignore de IMF. They need to destroy another Caribbean Economy to continue the colonization procesx

    Reply
  5. Donild Trimp November 18, 2017 at 1:45 pm

    —— “two thumbs up to the measures, which included a dramatic 400 per cent rise in the controversial National Social Responsibility Levy from two per cent to ten per cent of the customs value of imported and locally produced goods” —-

    Totally agree.

    Add my two thumbs up to this great move by the Minister.

    Once again, good for Barbados.

    Reply
  6. Alex Alleyne November 18, 2017 at 3:02 pm

    Who runs BIM the elected Members of Government or the IMF . CHRIS TAXLER done say on the “devaluation issue”. “”””NOT UNDER MY WATCH”””.
    So look out MIA, one foot in the grave before you start and you talking about increasing the numbers of MINISTERS.

    Reply
  7. Sheron Inniss November 18, 2017 at 7:33 pm

    Grenville I hope you will tell the IMF they are no longer welcome in BIM. If you will promise me that I ready to start canvassing on your behalf.

    Oh I want it in writing.

    Furthermore, the american dollar isn’t worth what paddy shoot at if you follow what happens in the USA. I mean the real news; not the fake news.

    Reply
  8. archy perch November 19, 2017 at 4:42 pm

    We too busy fighting one another politically to worry about really getting together and making things right in Barbados. We have been bent on destabilizing the DLP administration since January 16th 2008. The late former BLP Senator Ivan Linton bombarded the airways daily with his diatribe attacking the government. Indeed preparations were made by the small man to take over the reigns of government within a year because the so-dubbed “wild boys” it was claimed could not handle it.The BLP and its ignorant supporters have done a great job is talking Barbados down and have over the years corrupted the media and so too social media with their negative vibes.Political polarization has been the BLP’s major achievement, and making bad decisions the BLP leaders biggest achievements also. She said general election
    s would be in December and her party is ready, and now I heard her say Parliament has to be dissolved on March 6, 2018.Bloops and blunders specialist.

    Reply
  9. David Hall November 23, 2017 at 7:11 am

    The current DLP government is fully responsible for the state of our affairs. No one in this administration has a clue on how to fix this economy. What I find mind boggling is that they are desirous of gaining another term. What better can they do which they have not already done. Furthermore the DLP is raising talk of morality. But as none of the candidates for election are offering themselves as saints, Barbadians must vote on COMPETENCE. Given that reality, its hard to see how the DLP can be credible.

    Reply
  10. J.C. P. November 26, 2017 at 8:24 pm

    It would benefit companies in the USA to have Barbados to devalue because it will make the USD be able to buyout stuff in Barbados easier. Holders of the USD will be able to buy more in Barbados for less $. Sort of like when you plunk down a single USD in Jamaica or Guyana and they have to count money for so to give you back in the local currency.

    Reply

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