Mottley takes issue with Central Bank’s printing of money
Thu, 05/19/2016 - 12:00am
Opposition Leader, Mia Mottley, has made it clear that she is not in favour of the way in which the Central Bank has been printing money to help finance the country’s deficit.
The St. Michael North East Member of Parliament raised the issue in the House of Assembly on Tuesday, as she made her contribution during debate on the Savings Bonds (Validation) Bill, 2016 – a Bill that would validate the issue of savings bonds and the collection of monies raised from the issue.
Mottley stated that of major concern to the Opposition was the fact that, “in spite of the multiple warnings of the danger of Central Bank financing of the deficit and the pressure that it puts on the exchange rate peg, the Central Bank has in fact increased on the end of December to the end of March, in three months, its financing of the deficit, its printing of money, by another 57 to 58 million, in the first three months of this year”.
The implications of this, Mottley said, are dire.
“If you print money, local currency that is not earned in foreign exchange, it’s not backed by any foreign exchange earnings in any way, you are increasing the spend in the economy. Then we all know that when Barbadians spend, 60, 70 cents in each dollar goes outside to purchase goods and services that are not delivered or manufactured locally, that are not of local origin. And when that happens, it means that we have to find the foreign currency to be able to pay for those goods and services that are being utilised by Barbadians,” Mottley argued.
“If the Government was able to constrain the deficit, there would be no need for us to be raising the level of financing, whether it is treasury bills, treasury notes, savings bonds or any of these things. There would be no need for it. None whatsoever. But the reality is that we have just ended this fiscal year that ended at the end of March, with a deficit that is higher than what the Minister (of Finance) projected that we would have. This must mean that Government’s fiscal consolidation is not working at the pace at which it was expected to work,” the Opposition Leader added.
She meanwhile suggested that the country should request of Parliament “a mature debate with respect to the monetary stability of the country and the very unfortunate circumstances that has seen the Central Bank move from zero government paper in the year 2008 to 1.128 billion dollars in government paper by the end of March 2016”. (RSM)