Worrell: Time to switch to the US dollar
THE time has come to say goodbye to the Barbados dollar.
This is the view of former Central Bank of Barbados Governor Dr. Delisle Worrell while delivering a review for his July Economic Letter. He pointed out that the fear of the deadly Covid-19 virus has disrupted economic activity everywhere to an extent that calls for a radical and practical change in economic strategy.
According to Dr. Worrell, “Our dollar, like the other currencies of the Caribbean, is on its way to extinction. The currency is of value only within our 166 square miles, and of limited value even at home, because most of what we buy and sell comes from abroad anyway.”
“We earn next to nothing on savings in Barbados dollars, and what local currency savings we do have is under constant threat of devaluation. We needed local currency decades ago when most payments were made with notes and coins, which were scarce in the island. With most transactions now done by cheque, credit or debit card and online, and with a good supply of US dollars from visitors, it makes sense for the Central Bank to redeem all the outstanding Barbados dollar notes and coins, and to abolish the Barbados dollar once and for all.”
Dr. Worrell explained that this move would immediately relieve all Barbadians of fears that their savings will be worthless when they retire and assure foreign investors of the value of their investment and the expected returns from that investment.
“The Central Bank would still be able to provide an overdraft to Government, using the reserves which commercial banks are obliged to hold with the monetary authority.
He explained that the Central Bank would not be able to create new money to lend to Government. “Only the US Federal Reserve can create monetary liabilities in US dollars. The changeover to the US dollar would need to be carefully planned, fully advertised and explained, and skillfully implemented by the Central Bank. It would be advisable to begin the makeover of the public sector with the Central Bank, and task the renewed Central Bank with this as its first assignment,” he said.
He stressed however that the most urgent task is to restart the tourism industry, which he said Barbados cannot do alone.
“The importance of the earliest possible revival of tourism cannot be overestimated. The Barbadian economy is fuelled by foreign exchange, and tourism provides two-thirds of our foreign exchange. Nothing can make up for that loss in the near term.”
“In order to bring forward the procedures and protocols that will restore confidence in Caribbean tourism, an international cast of actors must be mobilized. The systems and guidelines needed must be developed, agreed and implemented by a worldwide coalition of governments, international agencies, international hotels, airlines, travel companies and all other tourism players.”
“The most effective way for Barbados to engage in this global effort might be via the agency of the Caribbean Tourism Organisation and the Caribbean Hotel and Tourism Association. These discussions should be conducted at the highest level by all parties, including the Prime Ministers of Caribbean tourist destinations,” he said.