A FEW ECONOMISTS may propose it, but no Barbados Government, especially the Fruendel Stuart administration, would consider devaluing the nation’s dollar, pure and simple.
How come? People of all walks of life in the 50-year-old independent nation don’t want it; the two major political parties, the ruling Democratic Labor Party led by Stuart, the Opposition Barbados Labor Party headed by Mia Mottley and any pressure group are convinced devaluation is out of the question.
Just as important, the fallout from a change in the exchange rate would be worse than any benefit.
That unequivocally strong stand came from Minister of Tourism and International Transport Richard Sealy. He told BARBADOS BUSINESS AUTHORITY that devaluation wasn’t an issue for consideration on anyone’s agenda.
“I don’t think that’s something we would contemplate,” he said. “I am not aware of any plans in draft or otherwise to look at the parity of the Barbados dollar.
“I can speak for where I sit in the Cabinet and where I have sat in or out of the Government. It’s that straightforward.
Indeed, Sealy, who has acted as prime minister in the absence of Stuart, said Barbadians across the board moved in lockstep when it came to the value of the dollar: don’t interfere with the two-to-one parity of the nation’s currency against the United States dollar, an exchange rate that has been in existence since the 1970s.
Sealy made his comments after welcoming passengers and JetBlue airline executives at a reception and later a breakfast. The group made the inaugural flight heralding the introduction of a weekly scheduled service out of Newark’s Liberty Airport in New Jersey recently.
“I think that Barbadians agree that realistically it [devaluation] is not an option. The minuses outweigh the pluses by a huge margin,” he said.
The consensus across Barbados was that changing the exchange rate was unnecessary and an inappropriate and ineffective response to the challenges the country was facing.
“They are some economists and others who reduce this thing to a bogeyman, devaluation,” added Sealy. “Some people from outside of the country – going as far back of the 1990s, may be even earlier – recommended we should change it. We have not. And we should not change it. That is my position.”
As a matter of fact, when asked if a proposal was taken to the Cabinet to change the parity would he be the first to oppose it, the minister answered in a way which suggested he would reject it.
Sealy, a member of Parliament for more than a dozen years, went further to explain that no political party in and out of House of Assembly had backed devaluation and he didn’t believe they would change their minds now.
“The National Democratic Party, the Barbados Labour Party, the People’s Pressure Movement, the Democratic Labour Party, everyone has agreed that [devaluation] is not for us.”
The issue of devaluation resurfaced against a backdrop of frequent downgrades of the nation’s credit rating by both Moody’s and Standard & Poor’s, the major Wall Street rating agencies. They have relegated the rating to junk bond status.
Barbados, which in the late 1990s and the turn of the 21st century enjoyed a stellar rating of A-minus, now has one of lowest. And it may go even lower sometime in the next 12 months.
Although Sealy hasn’t said anything or made any move that would suggest he has higher political ambitions on his radar screen, his regular victories at the polls at election time, the fact that he has led the pivotal ministry, which virtually dictates the country’s economic fortunes, plus his stints as acting prime minister have fuelled speculation that he would be a natural successor to Stuart, should the prime minister’s office become vacant.
The issue of devaluation surfaced after the International Monetary Fund issued a recent statement asserting that Barbados’ economy continued to “face major challenges, including low growth, a very large fiscal deficit and a high debt burden”.
The Fund warned that instead of the one per cent growth forecast by the Barbados Central Bank, the gross domestic product was expected to contract by 0.6 per cent this year.
But Minister of Finance Chris Sinckler was quick to counter the Fund’s bleak forecast with a statement, making it clear that devaluation – the “bogeyman” – as Sealy saw it, was out of the question.
“Neither the Government nor the people want a devaluation of the dollar and as the Government, we are determined to do what is required to maintain the fixed exchange rate and honour our financial commitments,” said Sinckler, who is facing mounting pressure to kick-start the economy and get it moving at a robust pace.
“The Government is committed to the programme of fiscal accommodation, and we are seeing major signs of renewed economic growth in Barbados,” he added.
“As a Government and a people, we will stand shoulder-to-shoulder and overcome the challenges we currently face.”
Sealy’s remarks were made in response to questions from this publication and his reaction seemed designed to stiffen the resolve of Sinckler and the Government to hold the line against devaluation.
Actually, the IMF, the World Bank, the Inter-American Development Bank and the rating agencies are well aware of the political dangers for any Government which devalues the currency.
It would face defeat at the polls. Conventional wisdom holds that any political party which is held responsible for devaluing the dollar would be thrown out of office by the electorate at the first opportunity.