What Have We Learnt So Far Regarding DEVALUATION?

The following was posted to FB Senate Page  by Economist Charles Skeete
Central Bank of Barbados

Central Bank of Barbados

  1. The monetary authorities can fix the nominal/official rate of exchange, but not the real rate (reer).
  2. When the nominal rate is fixed, over time there is a tendency for it to become over-valued. This is so especially in small open economies. There is evidence that the official rate of exchange is over-valued (is higher than the reer).
  3. A persistent bop current account deficit suggests we have a competitiveness problem and that national consumption exceeds national production.
  4. A persistent bop current account deficit can be sustained only as long as capital inflows (e.g., FDI and foreign borrowing) are at least equal to the current account deficit.
  5. High debt eventually limits the ability to borrow foreign exchange – except from the IMF.

What can we do?

Option 1: Draw on FX reserves. Unless replenished by a current account surplus, FDI, or foreign borrowing, reserves will be exhausted in short order. Sharply declining reserves will eventually make devaluation and borrowing unavoidable.

Option 2: Reduce the fiscal deficit. Alas recent experience suggests that our heart is not in it. We try to raise taxes we cannot collect and we resist cuts in spending with all our might. Reducing the fiscal deficit is necessary to restore a balance between national consumption and national production. Without credible steps to restore this balance, we will continue to be rated a poor credit risk.

Option 3: We have never been fond of high interest rates, except as a reward for saving. The fact that high interest rates are an alternative/supplement to devaluation as a way to lower consumption is conveniently overlooked.

Option 4: Adopt policies that make the relative price of imports and exports more favorable to earners of export revenues and less favorable to consumers (e.g., devaluation, tax holidays, or other subsidies). We have been willing to use tax holidays and other subsidies to encourage investment in our leading export sector (tourism). This is necessary because we are not price competitive without such subsidies and we have rejected devaluation or a cut in the nominal wage (the standard remedies). As noted above, rejection of these remedies is viable only as long as reserves last.

Concluding Remarks: Restructuring of the agriculture and manufacturing sectors sufficient to restore current account balance are necessary, but are achievable only in the medium and long term. Fiscal and bop imbalance require remedies that will show immediate results. The ability to borrow foreign exchange would give us breathing room. On the whole, I must conclude that an IMF Program is very much in the cards.

Here endeth the final lesson.


  • Some people have also been raised in a steralized bubble. Some people are unaware that once a coconut is cut, that the white part of the shell leaves a brown fruit stain on the clothing, so that even if a vendor wears a brand new cotton t-shirt in the morning, after a day of cutting coconuts the shirt will be full of brown stains which only become evident once the shirt is laundered. Like the stains from ackees (guinep) and from green bananas these stains are impossible to remove. I’ve tried chlorine bleach and other more sophisticated modern stain removers and I’ve yet found a stain remover which works for these fruit stains.

    So a coconut vendor who smells sweary, and looks dirty may in fact be a man who left home two hours ago, freshly bathed, and with a freshly laundered but fruit stained shirt.

    My old man used to say that modern people are so foolish that they seemed to think that food grows in plastic bags in the supermarket refrigerators. They are so wrong. Virtually all food grows in the dirt.


  • @Hants
    plenty brands and most taste like pup. They are all from concentrate, coming from Taiwan or a similar locale. And they tend to lace them with sugar.


  • It is not presently illegal to import coconut water or coconuts,we have imported from T&T in years past where the method for spoilage control in a bottle was perfected by a son of the soil,this bottled water is being imported from Guyana a fellow Caricom territory.

    We should have increased our coconut production,taken advantage of the pasteurisation process perfected by one of our own and established a processing plant long ago which could have been an fx earner as well employing all the youngsters to work the coconut stands.


  • ac February 7, 2017 at 12:40 PM #

    “Tripping all over one self is not a solution. Those who have criticisms must also be aware that there is a high level of responsibility attached to give those solutions that are for betterment instead of dipping from a poisonous well of glandular deceptions to trick and entice.”

    @ ac


    Your above comments clearly indicate that you finally came to the realization that there AREN’T ANY FUNDAMENTAL DIFFERENCES between the BLP and DLP.

    The DLP, while in opposition, constantly CRITICIZED the former BLP administration. “They had criticisms, but were unaware that there is a high level of responsibility attached to give those solutions that are for betterment instead of dipping from a poisonous well of glandular deceptions to trick and entice.”

    An example of “dipping from a poisonous well of glandular deceptions to trick and entice,” is your 2008 election manifesto. After campaigning the length and breadth of this island telling Barbadians about corruption, cost over-runs, auditor general’s reports, lack of accountability and transparency, the DLP said they would make a CHANGE, after 9 years at the helm of government, there has NOT been any ATTEMPTS to CHANGE the STATUS QUO, as PROMISED.

    And if you were to analyze the modus operandi of this inept DLP administration, you would immediately know the reasons why. There are SIMILAR CASES of corruption, cost over-runs, lack of transparency and accountability under this DLP administration, thereby indicating this lot is SIMILARLY as CROOKED as the former BLP they criticized.

    How does the DLP expect to face the electorate with Michael Carrington, a crooked lawyer who shamelessly with-held (stole) money from a disabled senior citizen?

    Liked by 1 person

  • In reference to carrington.
    Question how is it that Mia has been repeatedly returned to Parliament as a representative of her constituency after the many illegalties brought against her with the most recent docked in the courts of barbados.


  • If Mottley wins, she’ll turn out to be one of the best. Watch out!!


  • How is it Attorney General Adriel Brathwaite promised on the floor of parliament to investigate the matter of Mia’s practicing certificate and report to Barbadians yet months later we wait?



  • Well Well & Consequences

    I took a taste of the coconut water at Loblaws, pure crap from Asia. Jamaica now exports coconut water to Canada.

    Simple…….it’s very difficult teaching foolish people common sense, I am reaching the stage of thinking they are best left to their own sordid fates.


  • Ammm all things done in their right time



  • You are always alluding to some case between her and George Payne. However, if the case is YET to be heard in Court, then in the ABSENCE of a TRIAL and a RULING by Magistrate or Judge, according to the law and the Universal Declaration of Human Rights, article 11, Mottley is entitled to a “presumption of innocence.” In other words she is PRESUMED to be INNOCENT until proven guilty.

    Conversely, the records clearly show that Carrington illegally with-held his former client’s, Mr. Griffiths, property and refused to acknowledge requests for payment. Griffiths subsequently sought redress through the Court. The evidence he presented was enough to move Justice Cornelius to RULE in his FAVOUR and ORDER the crooked lawyer to return such property in addition to accrued interest.

    For the benefit of BU contributors and to “BRING BALANCE” to this issue” perhaps you would care to LIST “the MANY ILLEGALITIES brought against” Mottley and how many times she was ordered by the Court to repay money she illegally with-held from clients.

    Remember, no amount of political rhetoric and irrelevant generalized statements will detract from this issue of lawyer ethics.

    Liked by 1 person

  • Who the hell is Philip Hunte


  • well Carrington”s case was brought before a judge and the final judgement found no guilt on carrington”s part of having stolen anyone monies and that is a fact ,
    Yet you insist and persist of turning the outcome of the judges judgement into alternative facts
    However my reference to scrupulous allegations against MIa in the barbados court is a fact which you are willing to overlook


  • IMF Staff Recommend St Lucia CIP Revenues be used Primarily to Reduce Debt

    by caribbeantradelaw

    Alicia Nicholls In the  Concluding Statement of their 2017 Article IV Mission to St. Lucia released February 6, 2017, International Monetary Fund (IMF) Staff recommended that revenues from the island’s Citizenship by Investment Programme (CIP)  be used primarily to reduce the island’s high public debt and that limits  be placed on the amount of CIP […]

    Read more of this post


  • Look, to engage in a discussion about Mottley’s case BEFORE it is heard in Court and a verdict rendered, would be a presumptuous determination of her guilt or innocence. However, Carrington’s case was HEARD and a VERDICT rendered.

    Whether you like it or not, the result of that case PROVED Michael Carrington is a DISHONEST LAWYER when he WILLFULLY and UNLAWFULLY WITH-HELD his former client’s funds. And this “is a FACT which you are WILLING to OVERLOOK.”

    FACT #1:
    In 2000, Michael Carrington sold John Griffiths’ late aunt’s property at Dayrells Road, Christ Church, paid Griffiths $44,950 and WITH-HELD the sum of $210,000, for which he could not gave account.

    FACT #2:
    After14 years of Carrington ignoring his pleas to pay the sums with-held, Griffiths filed a CIVIL SUIT against the dishonest lawyer. On December 9, 2014 Madame Justice Jacqueline Cornelius RULED in his (Griffiths) FAVOUR.

    FACT #3:
    Justice Jacqueline Cornelius ORDERED Carrington to give an account of monies outstanding from the sale and pay Griffiths over $208 900, the balance from the sale of a property which included a banker’s cheque with cash value of over $84 194, the remaining proceeds of an estate which was inherited by Griffiths, which he had received on Griffiths’ behalf, within 28 days, and pay all monies shown by the same account to be due, along with interest retroactive to May 13, 2014 until the entire sum is paid, and legal costs of over $7 700 incurred by Griffiths.”

    Since this was a CIVIL SUIT the Court ACTED within its JURISDICTION when Justice Cornelius, based on the evidence presented, ORDERED Carrington to PAY the sums he unlawfully with-held.

    Her verdict was tantamount to “guilty verdict” under a CRIMINAL SUIT.

    Surely if Carrington had not intentionally with-held Griffiths’ money, the Court would have RULED in HIS FAVOUR.

    You and Carrington should be THANKFUL Griffiths did not file a CRIMINAL SUIT. If he had, based on the evidence, Carrington’s dishonest ass would be in HMP Dodds all now.



  • Not necessary to give an analyse of the court order
    However by injecting and inserting unfounded and untruths all accountable to your own words of interpretations is dishonest and tantamount to deception


  • Mia is positioning herself to hold the highest office in the land and it should be of more concern to you that like Trump she has a bag laden with scrupulous allegations which is transparently clear makes her character fall below a passing grade of integrity
    After all for the past seven and half years you have waved the banner of corruption Transparency and integrity against govt ministers holding their feet to fire so in that vein the same principle should apply to Mia with all fairness and reasonableness
    Instead what you pursue is a path to discredit and challenge the audacity of anyone who dare point out while shoving and trying to out maneuver in order to give Mia a pass


  • Chuckle…the consortium have acknowledged defeat in the upcoming election,even they could not continue the spin as the wicket just could not take anymore.


  • @ ac

    Yes, you are indeed correct!!! It is “Not necessary to give an analysis of the court order,” because Mottley’s case is YET to be heard by the Court.

    “However, by injecting and inserting unfounded and untruths, with “reference to (your) scrupulous allegations against Mia, all accountable to your own words of interpretations is dishonest and tantamount to deception.”


  • Well Well & Consequences


    Piece….both governments spent decades killing Bridgetown and are now lamenting that it’s dead….when did they not notice that the lighting is horrible across the island.

    So how do they plan to liven up the city….dress up all their yardfowls and have them go to Bridgetown and wukup for the tourists…steupps.


  • Well Well & Consequences


    The ZR operators are calling out the lying politicians and ministers of the DBLP parties…that’s a start, they and the whole population have been lied to so many times over the decades by politicians, who can blame them.


  • Well Well & Consequences


    Everyone knows I am not a fan of Bille the goat…but the people really, really, really cannot put this fool Blackett back in parliament…has it not occurred to him that Billie in her declining years is seeing the errors both governments made in the last 50 years in not consulting with the people, their employers, BEFORE making all those stupid, visionless decisions that have destroyed even the infrastructure, the judiciary, the roads, the lives of the majority etc and any sensible governance…..on the island.


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