Tue | Jan 23, 2018

Barbados PM reaffirms no devaluation of local currency

Published:Friday | January 27, 2017 | 12:00 AM
Freundel Stuart, prime minister of Barbados.

Prime Minister of Barbados Freundel Stuart on Wednesday reiterated there will be no devaluation of the Barbados dollar, less than a week after his Finance Minister, Chris Sinckler, delivered a similar message in Parliament.

Addressing the luncheon of the Barbados Chamber of Commerce and Industry, Stuart said there was no persuasive evidence that devaluation exercises in other Caricom countries had produced any spectacular results or facilitated the outcomes they desired.

"Put very simply, devaluation of the Barbados dollar is not an agenda item for the present government," he said.

The currency is pegged 2 to 1 to the US dollar.

Stuart charged that in the face of real growth in the traded and non-traded sectors, noticeable improvements in the balance of payments, falling inflation and declining unemployment, "pundits, publicists and prophets" had been steadfastly predicting a devaluation of the Barbados dollar, or had been calling for a programme with the International Monetary Fund (IMF), or for privatisation of some of the government's assets.

He said that as long as the island continued to trade with other countries, there would be fluctuations in its fortunes, depending on what was going on in the economies of its trading partners.

"So, it cannot be that every time there is an adverse movement in our foreign exchange or foreign reserves situation, whatever the reason, the only solution to put forward is that we should devalue the currency of Barbados," he said.

During his wide-ranging address, Stuart also said he did not judge a need, at this time, to seek balance of payments support from the IMF.

"Our present circumstances in the government's view, while requiring close attention, do not warrant a panicky resort to the IMF," he said, even while noting that Barbados had recorded a decline in its reserves in 2016 to 10.2 weeks of cover.

"We have all accepted that, ideally, at least we should maintain a minimum of 12 weeks of import cover. It does not mean that what we have in reserve is insufficient to meet our current daily requirements or, in fact, to defend our existing currency peg to the US dollar," said Stuart.

The PM said over the coming days and weeks, the reserve levels would almost certainly be boosted by at least BDS$250 million as the delayed inflows associated with several projects, including the Sam Lord's reconstruction project and the completion of the arrangements for the sale of the Barbados National Terminal Company Limited, are received.

Last week, Sinckler dismissed possibilities of a devaluation of the local currency, saying he was prepared to resign if this occurs.

"I assure the people of Barbados, I will speak on the economy very shortly, but nobody is going to force, ring, or bully me into making statements," the finance minister told Parliament. "What is the purpose of panic in an economy that is growing?" he said.