On loan

State currency manager to borrow to shore up reserves

With the island’s foreign exchange reserves teetering at a dangerous level of 6.6 weeks of import cover, or $410 million at the end of December 2017, the Central Bank is coming to the rescue of the Freundel Stuart administration with a short-term bailout measure.

In a near six-hour presentation on the 2018-2019 Estimates of Revenue and Expenditure in the House of Assembly today, Minister of Finance Chris Sinckler announced that the bank was negotiating a loan to top up the crucial reserves, which are “uncomfortably” below the international benchmark of 12 weeks.

“The Central Bank is in negotiations for a loan, a private placement, to shore up the reserves since they have fallen to a level that we are not at all comfortable with,” Sinckler said, adding that the details would be revealed in due course.

The Minister of Finance told his parliamentary colleagues that the loan would buy Government time to “bring some order to some of the other things that we have to do on the fiscal side and on the debt side to ensure that we put our house further in order”.

He said the administration had been finding it “exceedingly” difficult to work with the little investment inflows, compounded by the delays in the construction of several capital projects such as the $200 million Hyatt Centric Resort, and the sale of the Barbados National Terminal Company Limited (BNTCL) to the Sir Kiffin Simpson-led Sol Group of Companies.

But today, he held out some hope of a further boost to the country’s international reserves.

“We have had a situation where we had laid out for the sale of the two assets to give a boost to the foreign exchange and at least one of those is the sale of the BNTCL had been delayed, and therefore, those inflows were delayed,” Sinckler said.

“But they wouldn’t be delayed permanently because we expect that the Hilton sale is going to be completed soon, and once Cabinet approves, then those inflows will come,” he added.

Central Bank Governor Cleviston Haynes announced last month that the reserves had fallen to a 22-year low, blaming weak private sector capital flows, net public sector outflows and the delay in the sale of some state assets, even though he dismissed the idea of devaluation of the Barbados dollar.

However, economist Jeremy Stephen predicted the foreign exchange reserves would likely sink even further by the end of the fiscal year in March.

Soon after Haynes made the announcement, Stephen, a University of the West Indies lecturer, said if Government did not quickly slash its expenditure, and if international oil prices continued to climb, come the end of March the reserves could plummet to just five weeks of import cover.

Meantime, Sinckler said today that notwithstanding “some people getting in the way”, construction work on the controversial Hyatt project would start in the second half of this year.

“The Hyatt Centric Hotel . . . construction of that hotel, I am advised, will begin in the second half of this year and will consist of 300 rooms and employ 450 persons, bringing more than US$200 million in investment. The fact that the Hyatt has not started is not because of the fault of the Government. Some of the cousins of the Opposition have filed an injunction and filed a case in the court and the court had to do what it had to do and the people had to wait. But that wait is coming to an end and the investment will start,” the minister said in reference to social activist David Comissiong’s legal challenge to the granting of planning permission for the hotel by Prime Minister Freundel Stuart in his capacity as Minister responsible for Planning.

Stuart’s legal challenge to Comissiong’s right to fight the building permission was thrown out by the Supreme Court, while a date for the hearing of Comissiong’s law suit has not been announced.

The social activist has repeatedly said there is no injunction against the commencement of work, but has warned that the developers stood to lose should work begin and the court rules against them.

Sinckler today said the developers had told the Government they were ready to start.

He also told the Lower Chamber that investors had now expressed an interest in building the long-mooted Pierhead Marina, and discussions were at an advanced stage.

Sinckler also said that the foreign reserves were a major focus of the Barbados Sustainable Recovery Plan, which outlines measures for the preservation of the reserves.

“The plan also contains two other critical objectives. That is the development of parallel approaches through the initiatives of earning foreign exchange and the disbursement of funds associated with those projects. We believe that, yes, Barbados’ reserves are at a critical level, that we can correct the situation in the short term even as we move in the longer term to unlock the resources from the international financial institutions, particularly the Inter American Development Bank (IDB) and the CAF [Development Bank of Latin America] and the CDB [Caribbean Development Bank] once we begin to discuss the implementation of this plan with those institutions,” he said.

emmanueljoseph@barbadostoday.bb

23 Responses to On loan

  1. Bajan boy February 12, 2018 at 10:54 pm

    Why this cu#t don’t stop pussy footing with this country??

    Reply
  2. harry turnover February 13, 2018 at 4:49 am

    …..and he in even got na RH shame to be coming every fortnight talking bout measures to improve the economy.
    Sinckler,you have been saying that FOR THE LAST 10 FRIGGIN YEARS.
    YOUR policies ARE NOT WORKING…. you caan see they are like the South Coast Sewage stink ?…everything bubbling up and coming back at ya ?
    For ten years you have been putting diesel in a gasoline engine and although you see that the economy is going nowhere,you still using diesel…to do what Sinckler ? that is tantamount to pumping 10 bullets in a dead man.
    Leave de people place and let an ECONOMIST do the job…SH8 man.

    Reply
  3. Tony Webster February 13, 2018 at 6:22 am

    C.B.B. Guv…the next whipping-boy being set up to take lashes on M.O.F. behalf. Totally unfair; egregious; and utterly desperate. No lender in their right mind, or without dark, ulterior motives, would lend the C.B.B. a dime, as their role and function does not extend to the broad swathe of economic authority and responsibility which rightfully abides at the M.O.F. and our Cabinet of miss-fits.

    Very watery broth, Mr. Sinckler…almost transparent you might say…as the and motivation is seen clearly for what it is; a fig leaf that covers not a single sin of the many visible about your corpus and those of your colleagues in cabinet. Our C.B.B. Guv ought to resign rather than drink from this poisoned chalice.

    Reply
  4. Samuel Clemens February 13, 2018 at 7:30 am

    At the end of the day I think Mr. Sinclair’s heart is in the right place but he’s just not intellectually capable of being a Minister of Finance. He’s out of his depth and has no one to turn to for help. What I’m afraid of is that we we may not have anyone in public service capable of running our economy.

    Everyone in the private sector and banking circles calls for the removing of foreign currency restrictions and the encouragement of growth through investment, both local and foreign, yet every gov’t, even that under Mr. Arthur who was a great economist, tightens the reins on the economy more and more.

    There have been calls from all sources for the government to immediately stem the flow of foreign currency to preserve the reserves but have you noticed that no one, not the leader of the opposition nor the intellectuals and UWI, has presented and actual way to do it. If the BLP really cared about Barbados, and if they had real confidence in their abilities, why don’t they simply put their plan out there and let the public see it? It’s clear that they, like all politicians, want power first, and maybe they’ll think about the people afterwards.

    Reply
  5. Adrian Shorey February 13, 2018 at 7:59 am

    Samuel Celems Barnados has one of the most stringent foreign exchange laws in the world and it still seems not to be working for the island. I have been saying all along over and over the government needs to remove the restictions. Further give the right to local citizens to open foreign exchange accounts since this only applies to a business or any foreign nations who get pay in another currency other than bajan dollars it make kore sense.

    Reply
    • Adrian Shorey February 13, 2018 at 8:12 am

      Sameul Celemens, Barbados has one of the most stringent foreign exchange laws in the world and it still seems not to be working for the island. I have been saying all along over and over the government needs to remove some of its restrictions on the foreign exchange laws. Further give the right to all citizens to open a foreign exchange account since it only applies to business or a foreign nation who is paid in another currency other than bajan dollars which make more sense.

      Reply
  6. Michael Berry February 13, 2018 at 9:01 am

    Barbados relies on a constant flow of foreign investment. In recent years this has fallen to low levels, less than a third of what used to come in. The result is that the difference has been financed by spending foreign reserves. Why has this happened? Because foreign investors have lost confidence in a country whose credit rating has plunged, foreign reserves are dwindling and debt has skyrocketed. Instead, they have been selling Barbados assets at discounts (falling property prices) compounding the outflow of foreign exchange. It is a self-sustaining downward spiral unless broken decisively.

    Other countries have faced the same problem but they have not imposed more restrictions. They have made their countries more attractive to foreign investors, welcoming investment and offering incentives such as residency or even passports. So you have one of two paths to follow: 1) impose more restrictions on outflows and continue to shrink or 2) encourage the inflows to return and chart a path to growth.

    Cutting government spending will yield small dividends and impose hardship on those laid off. Imposing more taxes will not significantly shift revenues; the only thing that will is a growing economy. Barbados needs growth and it will not come from internal sources. It will only come from increased foreign investment: more visitors and more buyers of holiday homes.

    And for all the Barbadians who find the above anathema but have bank accounts or own a home in either the US or Canada, if either country told you they would restrict your ability to sell your house and repatriate the proceeds, you would probably find a way to get the money out and you would not be investing any more.

    Reply
  7. Spectre February 13, 2018 at 9:11 am

    The MO is borrow borrow borrow, deflect deflect deflect!!!

    Reply
  8. David Brathwaite February 13, 2018 at 9:26 am

    Will this not add to the national debt? Are we trying reach the record of being the most indebted country in history?

    Reply
  9. sticks and stones February 13, 2018 at 9:59 am

    Seems like Commisiong is fighting to push barbados further over the fiscal cliff. Cannot for the life of me understand how his reasoning which is by way of standing in the way of economic progress would provide economic stability for barbados . further more when all Commissiong political angst and grandstanding is done he has absolutely nothing to offer fiscally or progressively to help barbados.
    No more than leaving a trail of ash and dust which would negatively affect mostly the poor

    Reply
    • David Brathwaite February 13, 2018 at 7:10 pm

      What about the failed policies of the current administration that has driven us to said fiscal cliff?

      Reply
  10. Jay don February 13, 2018 at 10:22 am

    @ sticks and stones? You don’t understand what comming is doing? He’s standing in the way of progress?? Well let me explain i, there is sewage flowing in the streets because the sewage system is overwhelmed and in need of repair. Building a massive hotel in town, by the beach, wthout an environmental assessment is insane. This would not only restrict localacess to the beach for generations to come, but would definately make our sewage problem worse, traffic problem worse, diminish quality of life for the locals and make Bim a less attractive tourist destination.

    Reply
  11. Ossie Theophilus Moore February 13, 2018 at 11:13 am

    The so called educated elite on the island state Barbados who on its fiftieth year of independence called for Barbados to be a republic are the very ones who hindered investors near and wide from investing during critical international investment times. The asking of a nation to change its written history by hiding its monumental past history and a sluggish attitude at finding potential investors compiled with low productivity and business ethic.

    Reply
  12. Roverp February 13, 2018 at 12:53 pm

    Plaster does not fix the problem

    Reply
  13. sticks and stones February 13, 2018 at 12:54 pm

    The sewage problem is a failed project which was initiated by the blp.
    A failed project which govt is finding difficult to resolved. Commissiong along with his croonies are the sole town criers of all things economically negative against those mesaures which can provide growth for the country.
    One day coming soon when all is said and done barbadians would find out that Commissiong mouthings were formed out of self interest revenge and a sickening need to remain relevant in the eyes of barbadians but it would be too late.
    Too late to refuse the bitter pill it was fed by Commisiong

    Reply
    • David Brathwaite February 13, 2018 at 7:17 pm

      Absolutely not so. The South Coast Sewerage Project was initiated in 1990 and the final paper work was signed off in April 1993. The BLP came in to office on September 6, 1994 when everything was signed and sealed and could not be changed.

      I am making this point not to be political, but for historical accuracy. We should not just says things in these comments that are provably untrue.

      Reply
  14. Greengiant February 13, 2018 at 12:56 pm

    @Samuel Clemens: The critical points you’ve made are indeed the most critical. The intellectuals, U W I lecturers in economics, the opposition has not presented a method to control the flow of foreign reserves. They haven’t because both leading parties have neglected to borrow to invest in ‘green house’ agricultural production.

    We need an agricultural sector where the yield can be controlled and predicted within the most severe weather conditions. Only then can the BADMC be assured of the supply of produce, thereby reducing the significant outflow of foreign reserves for food. We need to get our micro manufacturers to have their production done under one roof, so as to reduce the unit cost of products, we need to support the Barbados Revenue Authority’s work so we can maximise the collection of taxes based on the quantity of business activity within the country, as well as self employed persons.

    I can go on, but the problem is that the two leading parties have been prostituting the people’s interest in the beds of the hiest bidders for too long. When new candidates join these parties with a history of economic prostitution they get contaminated quickly, so we’re back to square on. Neither the D L P or B L P really cares about the people, this is about themselves alone. If the cared the government would have made better use of the constituency councils to engage the people on critical issues, and the opposition would have supported the sale of the state entities to shore up the foreign reserves. The said B L P have sold state entities during times of plenty in Barbados, so what’s the issue now? Seeing that it’s a buyers market in Barbados’ real estate market currently, to even mention the under value of entities tell me that the opposition is out to fool those who are not aware of market conditions.

    Whoever wins the next election will have the same challenge the government currently faces, the people will have similar challenges as well. Nothing will change overnight so the focus of all political parties should be to do all they can to get the country in better economic shape. Seeing that the people can marry any husband later this year, all prospective husbands should do more than just talk. Currently the two leading parties are just presenting empty talk. There’s nothing that should convince the electorate to replace the D L P with the B L P. The history of political change in Barbados has resulted from national swings. Previously the swing could only land you in George street or Roebuck street. That has now changed thankfully.

    Reply
  15. Carson C. Cadogan February 13, 2018 at 2:12 pm

    It is the private sector’s duty to earn foreign exchange, not the Govt. The Govt does not own any commercial businesses.

    I wish that Barbados Today would point that out to CHARLES HERBERT.

    The Govt. must not borrow a cent to shore up foreign reserves. All this is doing is to saddle the country with more debt to please the lazy Barbados Private sector.

    Reply
  16. Carson C. Cadogan February 13, 2018 at 2:26 pm

    If the Barbados Private sector is worried about the levels of foreign exchange , let them go out and earn it.

    This buy and sell and buy and sell that the Barbados Private sector engage in is what has the country in the position that it is in. The Barbados Private Sector, with the notable exception of the Hospitality sector, is import driven. They run all over the World buying container loads of trinkets and mark them up 1000% and consider themselves as business people.They used lashings of foreign exchange while earning not one red cent in foreign exchange.

    They are too backwards, I dont feel for them at all.

    If CHARLES HERBERT’S PRIVATE SECTOR want to see who REAL private sectors operate, they should take a crash course in Private sectorism from the Trinidad, Jamaican and St. Lucian private sectors.

    Now we are talking PRIVATE SECTORS!!!!!!

    Reply
  17. Carson C. Cadogan February 13, 2018 at 4:21 pm

    On another note Barbados Today, how far advance is the Court case between Edmund Hinkson and Payne????

    Reply
  18. luther thorne February 13, 2018 at 8:37 pm

    All the DLP and its operatives do is BLAME other people.

    The fact of the matter is that they have no creative ideas or solutions. They are lacking.

    Its like a 5ft point guard lamenting that he cant dunk or a no.11 batsman looking for pity because he does not have the skills to score a century in a Test match.

    Reply
  19. Cecil Brooks February 13, 2018 at 9:10 pm

    How much of every US dollar paid per night for all the hotel rooms we have in Barbados reaches these shores? for example if I booked a hotel room at Sandals for a two week vacation and paid US $5,000 in the USA to Sandals using my credit card, would that payment go to a bank in Barbados or the Central Bank in Barbados. If this payment stays off shore, how much of this money really reaches Barbados? yet I assume that things purchased for sandals in Barbados is bought from the funds that the people and government of Barbados have to find. (the US dollars). In other words how much of each US dollar a company like Sandal have off makes it to Barbados.

    Reply
    • Carson C. Cadogan February 14, 2018 at 12:30 pm

      Cecil Brooks

      Sandals has thus far invested $700million in Barbados. How much have you invested???

      Reply

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