BE CAREFUL! The Central Bank’s policy of requiring people in Barbados to file tax clearance certificates before being given access to foreign exchange can lead to a destructive black market.
And this would hurt the economy and undermine the ease of doing business in Barbados.
That warning came from Leader of the Opposition Mia Mottley, who said in New York that other countries had to abandon similar policies because they were unworkable and caused significant hardship.
“The bank’s recent claim that it wasn’t imposing a new foreign exchange policy, but was enforcing what was there all along is simply semantics,” Mottley said during an address to Barbadians at a town hall meeting.
“The reality is that there are people now who are being called to produce the tax clearance certificate before they can get foreign exchange. That is the wrong signal to send. In the countries where tax clearance certificates have been required before people can travel, the policy hasn’t worked successfully.”
She added: “What happens when such a policy exists is that you send a message to people that there is either something that’s scarce or there is something to protect. People then find their own ways to protect, and that is how black markets often develop.”
Mottley said Barbadians were not being told “the truth” about the Barbados economy and she intended to “speak to it” during this month’s Budget debate.
“There are too many answers that are not being provided, both in terms of data and the real performance of the economy. That’s regrettable because Barbados previously had a reputation for orderly governance with respect to the economy,” she said.
As an example of what she was complaining about, Mottley said there was a troubling difference between the economic statistics produced by the Central Bank and the Barbados Statistical Service, which had caused uncertainty.
“Regrettably, there is a serious divergence on the performance of the economy since 2007 between the Central Bank’s data and the Statistical Service’s data. Under the law, the Barbados Statistical Service is the only entity authorised to collect data on the Barbados economy. Here’s the fundamental difference. The Central Bank estimates that since 2007, the economy has only declined by two or three per cent. The Statistical Service is saying that in real terms the economy has declined by 24 per cent,” she noted.
“You can say that the numbers were within the margin of error if [the difference] was three or five per cent. But there can be no explanation of any margin of error” when the difference was so significant, she said.
As for the Central Bank’s recent losses, Mottley blamed them on what she said was the bank’s excessive spending at a time when the rest of the country was being asked to tighten its belt.