No need to worry

THE business community is being assured that there is nothing to fear in respect of the drop in the country’s foreign exchange reserves.

 

According to the Central Bank, at the end of last year the foreign exchange reserves dipped to 10.3 weeks of import cover, but Prime Minister the Rt. Hon. Freundel Stuart is adamant that Barbados is not in jeopardy on account of it, and indicated that delayed inflows, which are likely to come in soon, are expected to boost the reserves.

 

He made the points just moments after Senior Vice President of the Barbados Chamber of Commerce and Industry (BCCI), Edward Clarke, told those attending the BCCI’s business luncheon at the Hilton Hotel yesterday, that the Chamber was “quite shocked” to hear the reserves had dipped. Clarke told the audience, which included Minister of Finance and Economic, Christopher Sinckler and Minister of Industry, International Business, Commerce and Small Business Development, Donville Inniss, that it is imperative that efforts are made to stop that slide. And in fact, he said that the public and private sectors need to work together to immediately address the issue.

 

Meanwhile, PM Stuart acknowledged that the accepted minimum in terms of foreign exchange reserves is 12 weeks of cover, but maintained that the lower rate recorded for the country at the end of last year did not mean that what was in reserve was either insufficient to meet the country’s current daily requirements, or the country’s ability to defend the existing currency peg of 2:1 to the United States dollar.

 

“Suggestions to the contrary are unnecessary speculation, which quite frankly ignores the economic history of Barbados of which I have just spoken. In the early 1990s when Barbados last faced a challenge of a similar nature, we practically ran out of reserves, as we almost ran out of options,” he noted.

 

PM Stuart maintained that on this occasion, the country is nowhere close to running out of either reserves or options. He put forward the position as he explained that one of the main reasons the reserves levels dipped below 12 weeks cover, was because even though the country continued to meet all its foreign debt liabilities on time and in full, the expected and corresponding public inflows, which should have come in before December 31, 2016, did not come in.

 

“But as fortune would have it, we know, and can say with a high degree of confidence, that over the coming days and weeks those reserve levels will almost certainly be boosted by at least $250 million, as the delayed inflows associated with the Sam Lord’s reconstruction project, the First Citizens/CAF-sponsored bridging loan for the upgrade of the Barbados Revenue Authority and Customs, and the completion of the arrangements for the sale of Barbados National Terminal Company Limited, come in,” he stated.

 

He further indicated that along with CAF funding for the Barbados Water Authority’s Water Master Plan Upgrade Project, which was recently approved by the Ministry of Finance for $40 million, together with what is earned through the private sector, will prove more than adequate to run the economy and meet all demands. Likewise, he said, they will guarantee our fixed exchange rate, which he reiterated has not been under threat. (JRT)