RESERVES CONCERN

THE Barbados economy ended last year with reserves that could have financed just about 6.6 weeks of imports, and this is causing concern to the Central Bank of Barbados.

The Bank’s Governor, Cleviston Haynes, said that they are worried about the level of reserves and the trajectory they are taking.

At a news conference yesterday, Haynes, flanked by his Acting Deputy, Michelle Doyle-Lowe, and Public Affairs Officer, Novaline Brewster, said that rebuilding the reserves has to be one of the critical issues going forward for the economy.

Analysing the performance of the economy for 2017, Haynes told the media that the reserves fell by $274 million last year – ending that period with a reserve stock of $410 million, compared to $683.6 million a year earlier.

“This provides approximately 6.6 weeks of import cover, well below the desired benchmark of 12 weeks,” he told the news conference at the Tom Adams Financial Centre.

The Governor pointed out that this outcome partly reflects the ongoing weakness in private sector capital flows and net public sector outflows, and the delay in the receipt of planned divestment proceeds that were intended to boost the reserves.

“This second consecutive year of a major reduction in the reserves was also significantly influenced by the impact of the delayed execution of a planned divestment transaction,” he told the media.

The top economist said that given this situation there are two key priorities for 2018.

The first, according to him, is to strengthen the adjustment effort to reduce the fiscal balance to a sustainable level, facilitate a reduction in the debt-to-GDP ratio over time and engender the investor confidence required for promoting acceleration in economic activity over the medium term.

“Secondly, we need to complement the adjustment effort with significant public and private capital inflows that restore the stock of reserves, at least in line with the 12-week benchmark,” Haynes suggested.

He explained that the Government has taken measures aimed to contain aggregate demand and that this is reflected in the decline in the consumer imports during the second half of last year.

“But clearly, the containment of demand is not sufficient to restore the reserves to the level that we would want to see,” he said noting that there remains a need for significant capital inflows.

According to the Governor, “We are not going to be able to rebuild the reserves simply through the contraction which although necessary is not going to be sufficient.”

The CBB official noted that in recent years the flows of private sector capital has fallen quite significant even though a number of projects were identified which can enhance growth as well as boost the reserves.

However, he lamented that these projects were not executed on a timely basis, and said that Barbados has to build capacity to generate foreign exchange and to unlock the investments identified.