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Barbados Finance Minister brushes aside criticism of central bank

Published:Wednesday | November 2, 2016 | 11:00 AM
Sinckler

Finance Minister Chris Sinckler has dismissed reports that the Freundel Stuart government has been using the Central Bank of Barbados (CBB) to print money to meet the island's financial requirements.

Addressing supporters of the ruling Democratic Labour Party (DLP) on Sunday night, Sinckler said the cash flow committee meets monthly and determines the government's revenue and expenditure and that the CBB is used as a last resort to finance any deficit.

He said approaches are made to the private entities, including banks and non-banking financial institutions such as mutual funds and insurance companies.

"So we issue Treasury bills and those kinds of things. If when you do that and you issue BDS$50 million but only BDS$30 million is taken up, you still have BDS$20 million dollars to fill.

"The central bank is the government's bank and the bank of last resort then comes in and says to the government, 'I will take the other BDS$20 million'," he said.

MONEY SERVES NEEDS

Sinclair said that the printing of money by the central bank is not a sustainable practice and that the money is used to service critical needs of the island.

"Because the government takes care of its debts and salaries and wages out of its income stream, its revenue, and it has left-over expenses to deal with to ensure that the country remains stable, that people can live and be productive in this society and maintain a stability in the economy of Barbados, then the Central Bank comes in and does it.

"So that money is spent on the people of Barbados. It is not fritted away, it is not spent wildly, it is not given away, it is spent on you, the public of Barbados," Sinckler added.

Last month, the CBB noted that the government's financing needs for the period April to September were met by tapping BDS$326 million from domestic sources.

It said the national insurance increased their investment in securities by BDS$91 million and insurance companies and other non-bank investors provided BDS$4 million worth of financing. In addition, there was a BDS$84-million switch from foreign to domestic financing because of amortisation of foreign loans.

"The resulting money creation by the central bank financing government was BDS$114 million. The pressure of government's ongoing cash flow needs is reflected in the failure to narrow the gap between the Barbados and US 3-month Treasury bill rates, which remains at 2.81 percentage points," the central

bank said.

- CMC