As Barbados’ trade deficit expands by $252.6 million, former Central Bank of Barbados Governor Dr DeLisle Worrell is arguing that long-standing import dependence is necessary for the Caribbean to maintain a high standard of living.
The Central Bank’s January to September economic review said Barbados imported $3.18 billion in goods in that period, up from $3.01 billion in the same time last year.
Governor Dr Kevin Greenidge said: “Rising imports and weaker exports widened the merchandise trade deficit. The deficit grew by $252.6 million during January to September as imports expanded 5.6 per cent.
“Higher demand for food and beverages, hybrid and electric vehicles, and the importation of cranes and other equipment lifted the import bill, while construction projects boosted purchases of construction materials.”
In his economic letter for November, Worrell made a case for imports, saying that “the patriotic sentiment that Caribbean countries import too much is at odds with the reality that our standard of living in this region is made possible by imports”.
“The fact is, the greater the level of imports, the higher is the standard of living. In order to increase the GDP of Caribbean economies we must therefore increase our capacity to import,” he asserted.
“That means investing in tourist accommodation and services, exploiting oil, renewable energy and mineral resources, hosting more international business, financial and educational services, and investing in rum and other manufacturing facilities, all with a view to have more foreign currency available for imports.”
Worrell’s view was that “Caribbean nations’ sense of independence confronts the reality that everything that supports our modern way of life is either imported or made with the use of imports”.
“It is impossible to sustain the standard of living of even the least well off unless the full range of imported items is available. In economic terms, import dependence is a structural feature of small economies like those of the Caribbean,” he stated.
“This should not be considered a weakness; it is just a feature of the economy, like the time zone in which the country lies. In an import-dependent economy an increase in the rate of growth will be accompanied by a proportionate increase in imports.
“An increase in imports is usually a good sign, an indication that investment is rising and the economy is on a sustainable growth path. The corollary is also true: a decline in imports is usually a sign that the purchasing power of the national income has fallen.”
He explained that “the very high standards of living enjoyed by the people of countries such as Iceland, Malta and Bermuda is testament to the fact that import dependence does not limit the growth potential of small economies”.
Worrell said that import dependence “simply means that our countries must keep increasing their earnings of foreign exchange to allow them to purchase more imports”. Attracting more foreign direct investment was key to this, he believed.
“What stands in the way of expansion in these activities are exchange rates that are frequently under threat of devaluation, persistent deficits on the current account of the public sector, and a government bureaucracy that fails to deliver public services effectively and with tolerable levels of productivity,” Worrell advised.
“The solution to the Caribbean’s problem of anaemic growth lies with addressing these domestic issues.”
Leave ALL thinking to Management.