Foreign Reserves Fall
The latest Central Bank report states that Barbados’ foreign reserves stood at 6 hundred and 81 million dollars, the equivalent of just 10.3 weeks of imports – at the end of 2016.
However, the Bank notes that expected inflows of 2 hundred and 50 million dollars, will help restore the reserves. Nearly half of this money will come from the sale of the Barbados National Terminal Company Ltd., which is still to be approved by the Fair Trading Commission.
A disbursement of $68 million on the Sam Lord’s project was awaiting confirmation that all conditions had been met. Proceeds from the sale of BNTCL, an amount of $100 million, were awaiting approval by the Fair Trading Commission. An amount of $30 million for the pre-funding of scheduled projects was awaiting Parliamentary approval, as was a further $12 million for an education loan. An amount of $40 million is expected from the sale of Government’s interest in the Four Seasons property.
The report also shows that the Central Bank continues to be the main financier of government debt. However, the Bank is adamant that this should stop.
The fact that Government spends more on the current account than it receives in taxes and other current receipts is the reason for the increase in Central Bank lending to Government. There is general agreement that any additional financing by Central Bank should be avoided. The sale of assets owned by the public sector would also assist in eliminating the deficit. Government’s dependence on the Central Bank to finance its deficit, limits the Bank’s ability to influence interest rates appropriate for Barbados’ circumstances, as is the standard practice used by central banks everywhere.
The Barbados Central Bank is reporting the economy grew by 1.6 percent last year and forecasts annual growth of two percent over the next five years. However, Governor, Dr Delisle Worrell also recommends the sale of more state assets and government spending cuts.
An increase in productivity in the delivery of public services is urgently needed. Such an increase could accelerate the forecast rate of growth by at least one percent, by improving business facilitation, bringing forward the implementation of investments, and improving the attractiveness of doing business in Barbados. In addition, the productivity gain would permit a reduction in the wages bill and transfers to public entities, without any reduction of the level and quantity of services offered. This reduction in wages and transfers would assist in eliminating the Government’s deficit on its current account.