Tue | Oct 17, 2017

Arthur warns of financial crisis in Barbados

Published:Tuesday | February 14, 2017 | 5:04 PMCMC
Owen Arthur

Former Barbados Prime Minister Owen Arthur says he is concerned that the island’s Central Bank could soon be running out of foreign reserves and that the Caribbean island is headed for a serious financial crisis.

Arthur, an economist, who served as prime minister from 1994 to 2008, said the reserves at the bank have fallen from BDS$1.5 billion (One Barbados dollar =US$0.50 cents) to BDS$600 million and that the Freundel Stuart government has three months to get its act together to avert a collapse of the economy.

“Barbados’ foreign reserves have plunged from about BDS$1.5 billion to just BDS$600 million. They fell by BDS$200 million in December and they are likely to continue to fall, so that by June there is a possibility that unless something is done … Barbados could virtually run out of reserves,” Arthur told the Barbados Nation newspaper.

“The next three months will perhaps become the most decisive in the modern Barbados experience and could determine what happens to us as a country for the next generation,” he added.

Arthur told the paper’s New York desk that the current impasse between Central Bank Governor Dr. DeLisle Worrell and Finance Minister Chris Sinckler is more than just a difference in fiscal policy.

“There is an inevitability to this precisely because a lot of very bad policies have been instituted at which the Central Bank has been at the centre,” he said.

“Dr. Worrell would have accommodated the government and he knew he should not have,” Arthur said.

A former finance minister, he said the bad policy of printing money to cover government’s deficit over the past few years is partly responsible for the country’s current economic situation.

He said measures such as project funding and privatisation geared to boost the economy have not worked and that the government has exhausted its ability to borrow from local banks, the National Insurance scheme and on foreign markets thereby running out of options to support the foreign reserves.

“That whole process by which the Barbados economy was being driven into the ground has to be addressed within the next three months or we have no future,” Arthur warned, adding that the time is right for a stronger Central Bank, a strong Finance Minister and a strong Prime Minister.