Barbados’ foreign reserves problem is getting worse, and a “concerned” Central Bank wants Government to get cracking so they return to more stable levels.
The international reserves fell by $133.9 million to reach $549.7 million at the end of September. At 8.6 weeks of import cover, this is well below the 12-week benchmark of comfort.
The decrease was larger than for the same period last year and was “principally due to a decline in net short-term private inflows that offset a modest improvement in net public sector flows”.
Acting Central Bank Governor Cleviston Haynes delivered the bad news yesterday as he reviewed the economy’s performance for the first nine months.
He was concerned that measures needed to top-up the reserves, especially Government’s planned divestment of assets, were taking too long.
The economist told the media that having taken steps to dampen demand for foreign currency, the authorities now needed to find ways to increase the supply.
The reserves stood at $705.4 million at March 31. This provided 10.7 weeks of import cover. They fell again to $635.5 million at the end of June, or 9.7 weeks of cover.
“At the bank it goes without saying that we are concerned about the direction in which the reserves have been going. The reserves act as a buffer for the exchange rate peg, which we have held for over 40 years and which we believe is consistent with the future long-term growth of the Barbadian economy.”
“There are certain transactions which the Government wants to undertake, primarily divestment transactions, which are designed, if achieved, to boost the international reserves over the short term and to bring, not necessarily back to the 12-week benchmark that we have indicated is most comfortable for us, but at least to change the trajectory at which the foreign exchange is moving.”
Haynes said it was important for the divestment initiatives, specifically the sale of the Barbados National Terminal Co. Ltd. and Hilton Barbados resort be “implemented and concluded in a timely basis”.
“And in a sense that is really our concern at this point, the pace at which some of these transactions have been moving because when they move slowly, that, I think, has an impact on persons’ perception of the trajectory for the reserves. We have to address the reserves issue on two sides. We have to address it on the demand side, and some of the fiscal measures that have been implemented are designed to address it on the demand side, but we also need to address the reserves on the supply side.
“The extension of that is that we need to be able to get our private sector investment projects going such that those will also contribute towards the build-up of our foreign reserves situation.” (SC)