Fixed exchange rate to remain

 

BARBADOS is remaining with its fixed exchange rate.
 
That’s according to Finance and Economic Affairs Minister, Christopher Sinckler.
 
He told a sit-down meeting with the Barbados Chamber of Commerce and Industry yesterday, that the ultimate goal of rating agencies which downgrade Barbados is to get the country into an agreement with the International Monetary Fund (IMF).
 
While they have not said it openly, the Minister went on, Government is fully aware those rating agencies want  Barbados to go that route.
 
Sinckler said that the problem with that is while an IMF programme for Barbados could get passed the Fund’s staff without a devaluation of the Barbados dollar, it won’t do so through the Board of Directors.
 
“So I do not know how that agreement is going to be possible,” the Minister said.
 
“We have all agreed that a currency devaluation is not and will not be in the best interest of Barbados,” said Sinckler, noting that “we simply cannot afford the luxury of an exchange rate adjustment”. 
 
He said that the position of the rating agencies is that Barbados has to get its fiscal down to manageable levels, below the rate of growth, so that it adds no more to the level of debt. The higher the level of the deficit means the country is adding more debt to finance that deficit.
 
Terming this as fair and reasonable, the Minister maintained that people have been making a case for the sale of Government assets, as one way of dealing with the situation.
 
On this score, the Minister challenged the private sector to indicate which assets the Government should dispose and what they will be worth.
 
He indicated that the sale of assets does not solve Barbados’ structural problems over the medium to long term. According to him, it gives some short-term space in which you are able to get an inflow of capital to do certain things. However, he contended that if an asset sale takes place in one year, it does not help the Government’s cause the following year and then another asset would have to be sold.
 
He argued that the source of the structural problems would not be addressed if Government had to divest any of the State-owned enterprises.
 
Sinckler indicated further that the structure of the Barbados economy is largely reflected in the social development context that includes education, health and water. He argued that if any of these services are cut there will be a social dislocation, not forgetting also that it would mean taking $300 million out of the economy. As such that would affect the private sector, who depends on Government contracts.

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