Lowe: Simply unsustainable

“Government’s debt position is simply unsustainable and something needs to be done quickly and the foreign exchange situation is even more urgent, simply because we rely on foreign exchange and it underpins the stability of our dollar.”

This was the assessment made by Shane Lowe, Strategy and Economic Analyst at CIBC FirstCaribbean, during the Barbados Chamber of Commerce and Industry (BCCI) breakfast seminar, which was held at the Lloyd Erskine Sandiford Centre yesterday.

Lowe highlighted, “The debt situation is quite challenging and there are implications for foreign exchange reserves and the stability of the economy… Between 2012 and 2016, reserves fell from about 20 weeks of import cover to just about ten weeks, just about half.

“We want to be able to finance that current account gap. Since 2013 that has not been the case and the main reason for that is that because government credit rating has climbed to such a level, it cannot access international capital markets to close that gap... Also, issues with government bureaucracy and business facilitation has slowed inflows of foreign exchange for foreign direct investment and that has also led to decline.

“Therefore, the Government has to find a way to not only re-access international markets, but also accelerate some of the projects that it has been speaking about to get foreign exchange to close that current account gap.”

Lowe added, “We hear that we import too much. Typically Barbados, like many other Caribbean countries, does import more than it exports except for last year. In Barbados, we were able to earn as much foreign exchange in tourism, rum to match the exports, primarily because of the improved tourism performance last year and lower oil prices.

“However, the issue is that Government, because it cannot re-access international markets, has had to use the foreign exchange reserves to pay the debt.

“There is a fiscal problem and a balance of payment problem and they are connected. IMF outlined in the last Article report certain measures that essentially speak to a public sector reform as well as reducing Government’s reliance on the Central Bank for financing.”

The analyst believes the BCCI is an important voice in Barbados and they need to continue to speak about the issues Barbados continues to face. (NB)