The latest review of the Barbados economy revealed that the Barbados economy grew by approximately 2% in the first quarter of 2017. Foreign reserves rose to $705.4 million but remain below the benchmark of 12 weeks. Overall, the Barbados economy has recorded gains in addressing some of its economic issues, but challenges remain (CBoB).
After publishing the review, Acting Governor, Cleviston Haynes spoke with the media about Barbados’ economic performance in the first quarter of 2017 (CBoB).
The Central Bank Announces a Tightening of its Monetary Policy
Created 09 May, 2017
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The Central Bank of Barbados announces a tightening of its monetary policy stance through an increase in its Barbados Dollar securities reserve requirement ratio for commercial banks licensed under Part II of the Financial Institutions Act. The increase will require banks to now hold 15% of their domestic deposits in stipulated securities with effect from June 15, 2017.
This is the first increase since 2007 when the ratio was lowered to 10%.
The cash reserve requirement for commercial banks remains unchanged at 5%. The reserve requirements for deposit-taking trust and finance companies, and merchant banks also remain unchanged.May 9, 2017
Notes From a Native Son: Ask Not for Whom the Bell Tolls, it Tolls for Thee
Hal Austin
Introduction:
Barbados is going through one of the messiest political maelstroms in living memory, if not in our post-war experience. It is now on an economic life-support machine. The DLP government is running around like a headless chicken, with its leader Freundel Stuart, arguably the worst premier/prime minister in our history struck dumb and unable to address the nation and incapable of sacking Chris Sinckler, the equally bad minister of finance. And at a time when the BLP Opposition, under its new leader, Mia Mottley, should be mercilessly hammering the government, the party is imploding in one of the most vicious and bitter internecine wars any political party in Barbados has ever seen.
In terms of damage, it is worse than the walk-out by Errol Barrow and his Young Turks to form the DLP, or of Richie Haynes and his supporters from the DLP to form the National Democratic Party. But I believe all these are symptoms of historic change. As most people will understand, history is not linear; it ebbs and flows, is volatile and calm, it can erupt like a volcano and be as reassuring as a moonlit night. The problem with adversarial politics is that it brings out the nasty side of people, the premium is to show the opponent is incapable, rather than to show that one on the contrary is more than capable. It is a feature of our hostile discursive culture, rubbishing opposing ideas, asking the adversary to justify his/her views, rather than putting forward positive alternatives and justifying one’s own recommendations. It is not unknown for opponents to resort to foul-mouthed, vulgar abuse as part of the process.
Ms Mottley’s recent call for an eminent persons committee, was rightly described by Arthur as a ‘gimmick’, what he did not do was to propose a viable alternative. To some people, an eminent group comprising of people of the calibre of ‘Professor’ Frank Alleyne, central bank governor De Lisle Worrell and a few well known names, may simply be kicking the can down the road. What are badly needed are new ideas, new approaches, new policies, a totally and radically transformative new paradigm, a new rescue plan for the nation. These are some of the new ideas, policies and approaches that should be coming from the BLP, its key advisers, its economic spokesman, Clyde Mascoll, and most particularly its senior economic guru and seasoned economic planner, Owen Arthur. This is their time, when they should be pounding the government, ideas and policies should be flooding out of Roebuck Street. Public meetings are in terms of educating the general public, but it must go beyond that to the formation of alternative policies.
The MoF will in his budgetary proposals indicate what measures will be taken to reduce the fiscal deficit in the short term.
We knew that…..nothing has changed……still at the cliff edge.
Having listened to the Acting Governor he did not say anything we are unaware. He confirmed that the underlying problem with the deficit continues to be a problem and the government will have to oversee the required fiscal discipline to reduce the deficit. We wait for the budget presentation which now have to be presented with a general election on the horizon.
David, miles apart in political relevance and comparison but my lawd the US President has – just like the bossman MoF – fired one his chief subordinates, the Director of the FBI.
But Trump is a boss…he has fired Comey because he said that he usurped the authority of the then AG by talking about Clinton’s renewed email problem.
That is the most awesome piece of self-serving and really serendipitous political palaver I have heard in my half-century on earth.
In short Trump has said , you Mr Comey will NOT backrise MY Justice Dept. and offer any info about my team’s Russian shenanigans…get the badword outta here
Trump is absolutely superb, fah real. But one smart does still get out-smart at too smart door!
So I am confident that he has in fact just affirmed his IMPEACHEMENT.
This is a lovely moment to be a political watcher! Oh my lawd!
Anyhow back to the CB change …it has brought Mr Austin’s ‘Notes’ from hibernation so we should (except Bushie) all be happy!!! smile,
Good piece @Hal but what gives you the impression that the BLP team really have innovative ideas or rather can actually implement some of the ‘new’ things you have advocated ??
Barbadians should brace for the removal of the $25 000 allowance for income tax calculation. Justin Robinson posts on BU so ask him if this has not been proposed in the meetings between BRA and the Ministry of Finance. Bajans will soon be fleeing to Venezuela. Things will be that bad here.
Same old, same old………
Life here moves so fast under this inept government that I forgot all the wrong this government has done to us.
It was only on filing my income tax this year that I remembered that this government has taken away just about every deduction that we used to be able to take……….nothing at all for mortgage interest, home repairs………….
Thanks Stinkliar, I cannot wait to see the back of you morons.
In my opinion , this was a good ,open, sensible and sensitive press conference . An attempt was made to cover all the areas.
Not one regret over Comey’s firing.He deserved it.What he did to Clinton in the dying days of the 2016 election was criminal.Karma.
Trump is well on his way to impeachment.Ive never known a man to make so many mistakes and missteps.His counterpart Nixon did the same when he wanted Cox out of the way of the Watergate scandal.It still bit his ass into oblivion and the Russian connection will bite trump’s ass the same way.
Wow, the economy actually grew and more than the 0.something% we were accustomed too for the last couple of years.
@ David at 6 :18 PM
A statesman would present a budget that addresses the issues quite clearly posited by the Governor{ag}. The fact that there is an election following should not influence the content. If the DLP wins after the budget then he can claim the Electorate gave him a mandate.
But decisions have to be made sooner or later.
The U.S. Dollar Index which measures the US dollar’s value against an entire group of world currencies like the Euro, the Canadian dollar and the British Pound, is currently at its highest level in 14 years, and therefore so too is the Barbados dollar. Some people want to insist that the US dollar’s high value is just fleeting speculative mania and that the bubble is about to burst, but other more informed observers say that far from loosing strength, the Trump administration’s policies are likely to make the US dollar rise even further.
Given that our economy’s principal source of foreign exchange for the foreseeable future will be the tourist industry, all but the blind can see that our obsession with a 2:1 exchange relationship with the US dollar is going to continue hurting us badly.
Fixed exchange rate made sense because our dollar’s steady value against a strong international currency served to help us keep prices of our imported commodities from the United States fairly stable. Of course, a pegged currency also helps entrepreneurs feel more confident about their foreign currency investment returns.
It is time for us to stop “defending a peg” and start defending our economy. In fact, the old peg is broken already ! From the day the Central Bank’s US dollar reserves fell below the level of equivalent (2:1) Barbadian dollars in circulation our currency no longer had effective convertibility.
Our sacred dollar is patently overvalued. Some business houses and hotels have already tried to make amends by offering specials or trying to offer greater value to extend their survival, but these tactics will not be sustainable.
Yes, certain imports will be more expensive after we adjust the peg – principally petroleum products – most of them however, we should be using with greater self-discipline. Currency adjustment will no more usher in a hike in the cost of living that our own inflationary pressure would because we are rather in a deflationary mode in which Barbadians are deferring spending for the rainy days they imagine ahead.
Allow the Barbados dollar to adjust its exchange relationship with the US dollar downward by 26% so that one US dollar would buy Bds$ 2.70 instead of Bds$2.00. If the 2.70 figure rings a bell, it should, because the Eastern Caribbean Central Bank (ECCB) currency has been anchored to the US dollar at 2.70:1 since 1965! We have had the same history as the member countries of Organization of the Eastern Caribbean States. We share the same geo-economic area and so we have similar ambitions and challenges. Together the OECS islands have a population of 620,000.
Pegging our dollar at par with the EC dollar lowers transaction costs and offers increased regional trade and investment opportunities among ourselves in hard currency sparing commodities.
“Pegging our dollar at par with the EC dollar lowers transaction costs and offers increased regional trade and investment opportunities among ourselves in hard currency sparing commodities”
Tell us what the OECS group produces or buys where a reduction in the peg from 2 to 2.7 will produce meaningful trade? They don’t manufacture cars nor machinery, any significant construction material we use, technological equipment, supplies to the hotel industry, and we all make rum.
And businesses from Barbados and other Caricom neighbours already own and run many of the firms in the OECS. And we compete with some for Int’l Business, one in particular St.L, is already home to several Bajan owned offshore firms.
I cannot see the synergies.
A fair start from the new GoCB. I think I will call him “however”….his report was “blah blah happened; however…..
He picked where the former Gov left off, only the stated funding by the CB to the Gov was 76m over J/F/M, not $50/month tossed out by Worrell. Or maybe that will be reflected in the next economic update?
The key document will be the Budget, and his report precedes that, thereby avoiding the journalist questions of “Governor do the measures in the Budget meet with your ideas of fiscal discipline?”
Do not allow the Bds$ to adjust downward. We are an import country, always have negative balance of payments every single year. When we import, we have to use foreign currency (US dollars). If the Barbados dollar is devalued or adjusted downwards, then we have to use MORE Bajan dollars to buy goods in the regional and international market. At least that’s what I think……
The model being followed cannot sustain itself without increased taxation or better collection of taxes. That is the reality. It cannot sustain itself without major construction projects. We do not want to change how we think and plan so we will be perennially fighting” persistent poverty”. George Beckford addressed this conundrum 45 years ago. We walk about paying too much attention to the current pooh pooh economists , who are really promoting party economics or election economics. In order to create the dynamism that Hal yearns for we need a major mental shift.
Dr. George Brathwaite calls for proper governance, in reality the plantation economy had its birth in slavery, not proper governance. We cannot plant corn and reap okra. Until Brathwaite and others of his training go back to Best, Beckford and others, they would remain trapped in the economies and economics of the Arthurs, Masocolls and Sinklers, who are bent on extending the plantation model.
For those who predict Armageddon and the fall of the current world economic system, they would do well to understand that Europe was doomed once slavery was abolished. The system was given life because the model was first repainted with the industrial revolution and in its current reincarnation it will move to automation via technological innovation.
We need to move toward realism and not intellectual one upmanship.
We got adult suffrage in the 1950’s . Almost seventy years later, our black women are still working in the fields for wages that are an insult to any country. That is persistent poverty
That is the economy of the BLPDLP.
VTO (Vote them OUT)
Governor Haynes raised the E word while addressing one of the fault lines in our economy- entitlements.
Once again…………..
With the huge amounts of Bajan cash lying unused in our economy (due to sale of Bajan public companies, return of private company deposits to depositors, gov’t printing of cash to pay bills), it would be impossible for our local economy not to grow. Just inflation alone will make the economy ‘grow’ in terms of circulating cash, even if not a single can more of corned beef is sold.
That is not our problem. As I’ve typed before, the biggest problem the next gov’t will face is a further depletion of foreign reserves when the DLP cork is pulled from our bottled-up economy.
Our problem is the rationalisation of gov’t spending which can only be addressed by shedding dead-weight statutory corporations in order to tern tax-spenders into tax-payers.
Bajan individuals and companies can pay no more taxes, we have to widen the tax base at reduced tax rates by creating more tax payers.
Consider this: if every BTB bus was given to its driver (and routes auctioned in 5-year blocks) and CBC was given to its employees, immediately the tax burden disappears and the operators have become tax-payers. The question of selling price is moot.
“I contend that for a nation to try to tax itself into prosperity is like a man standing in a bucket and trying to lift himself up by the handle.” – Sir Winston Churchill.
Here is a society that complsins about too much taxes but conviently forgets that they do not pay for the bulk of free education and free health at out of pocket expenses.
We are hanging on to the coat-tails of an overvalued currency so we will have difficulty selling our products and services in markets that are not pegged to the US dollar unless we can offer higher value (by an estimated 25%). The Chinese recognized that their currency was overvalued against the US dollar . . . what . . . do our expert economists think we can swim out of this crisis without seeing that we are barbarously overvalued in almost everything we are trying to sell !!! Import prices can be controlled by helping our merchants find less expensive suppliers from non-US suppliers. In fact, the smart ones are doing it already.
@Lee
The Governor pledged his commitment to maintaining the currency peg AND the removal of the minimum savings deposit rate.
Frustrated Businessman,
Thanks for bringing to the table another form of privatisation that is not discussed. You can also add some of the Gems hotels.
The reality is the government wants the cash to spend recklessly and so the Simpsons et al with ready cash are preferred buyers.
@ Frustrated B May 10, 2017 at 6:56 AM #
Skippa…
You are operating at a level that is way above the brass bowlery currently endemic in this place… Way ahead of your time boss….
@ Hal
What Frustrated B proposed is NOT privatisation, and it is NOT new.
These assets that the political jackasses, currently riding on the backs of Bajans, are selling off like PARROS, actually ALREADY belong to Bajans…. to ordinary Bajans such as the workers, customers etc.
Handing the CBC and Buses over to staff is a good start, but the hand-over needs to be a bit more complex (as deeper analysis will show) – since CUSTOMERS, SUPPLIERS, neighbours etc are also default owners.
The assets should be HANDED over to co-operatrives whose membership is open, and automatic, for ALL Bajans.
These Co-ops should then allocate resources to the workers under guidelines decided collectively…. and the government should be limited to going to parliament and talking shiite – with no power to influence state assets.
The only problem is that Caswell played the donkey and refused to BUP….
This is why Bushie always said that the idea of Arthur ‘selling’ BNB to Bajans was a load of shiite…. Not even a BBBBB would spend his savings to buy assets from HIMSELF…. so that a shiite government would have the cash to give to white shadows.
Govt spending well lets tackle the big three health care cost . education cost .import bill and wage bill tackling those those four in an efficient manner would make a huge difference.
Education cost and health care cost can be cut with a determination by govt that those in higher income brackets carry some of the burden with a tightening to acess and less strigent to thr most eldey children and elderly with limited income
Imported items especially foods and clothes increase in tariff. Businesss would baulk but govt has to make those decisions in the best interest of country in order to level the playing field making sure customer choices are narrowly limited to buy bajan first.
Wage bill might mean lay off or separation packages for those who are coming close to retirement age and a further frezze on hiring.
The unions might baulk
@Hal & FB
The government wants forex what sell to locals what!
Round and round the mulberry bush we go
……The government wants forex what sell to locals what!
…….With the huge amounts of Bajan cash lying unused in our economy (due to sale of Bajan public companies, return of private company deposits to depositors, gov’t printing of cash to pay bills), it would be impossible for our local economy not to grow. Just inflation alone will make the economy ‘grow’ in terms of circulating cash, even if not a single can more of corned beef is sold.
……………………………………………………………
How else can those two goals operate in tandem other than through the IMF backed programme?…..any different ideas other than China&UAE?????
As’s…the government had 9 years to tackle all those issues, if they couldn’t do it in 9 years, they will will not be able to do it in another 9 or 90 years, they are incompetent.
It would take a govt with balls to tackke those gorilliphants that bajans take for granted. A govt whose only interest is the survivalv of country and not in pursue of election results
Yes it can happen but who is willing to pay the price is a question of importance and which needs to be answered by society and which plays much importance to reduction of defecit.
So while we kick the proverbial political can down the road in pretense k the reality is one that citizens refused to grasp out of fear the consequences might hit their pocket books.
So while we play the blame game who are willing to make all of the named sacrifices that would eventually makes life easier for future generations
Any hands up ..i do not think so
On page 3 of the central bank report under International Reserves check Figure 3 -NetNet Financial Flows from 2014.
Staying on page 3 under Monetary and Financial Sector the central bank report explains that liquidity increased because some banks decided to substitute some government holdings with cash.
Really!
On page 9 of the report under heading Summary of Government Operations with the exception of Goods & Services all current expenditure items increased Jan-Mar 17 over 16.
@ David @ 10: 07 and 10;08 AM
This increase in liquidity surfaces when there is economic uncertainty. Individuals save more for turbulent days ahead, such as potential loss of jobs. They refuse to borrow and Banks refuse to lend because of uncertainty of collecting debts when due, You may notice that the banks preferred to hold cash rather than lend to GOB. Essentially the raising of the reserve ratio is to force them to hold more GOB bonds. This should reduce the level of liquidity. But it is not sustainable. The way out of this is for the banks to resume lending to the private sector.
@Bernard
In theory who can fault your position but is there more? If the government is printing money greater than what the increase in reserves is to achieve what? What about the risk policy of banks by pushing the liabilty to the regulator by holding greater cash reserves versus government securities?
@ David
We are currently playing a zero sum game , where at a certain level of logic there will be no winners and no losers . But the Society as a whole loses. Who will break this chain? Will a new administration be a catalyst for this change? We can only wait and see.
@Bernard
Let us not touch the unemployment figure explained by Jeremy Stephen a moment ago. What is the number of unemployed not being capture because they have been without work for greater than one year.
@ David ,
We agree . In that submission I did state that raising the reserve ratio is also a temporary fix and will not be sustainable. Instead of CBB lending, it is now commercial bank lending to GOB.
@ David 11 :09 AM
He is so right. This happens when we turn a rule of thumb into an Economic/Statistical law that like the laws of the Medes and Persians changeth not.
If I were to estimate the real level of unemployment it would include all those who were willing to work but found none since 2013.
Unfortunately the poltical class and their minions will seek to manipulate using a 9% unemployment number. This is why many in our midst have earned the title dullard.
@ David 11:34 AM
I do not think they are dullards . They suffer from confirmation bias . They discount information that is inconsistent with their political positions.
@ David
The government wants forex what sell to locals what!
+++++++++++++++++++++++++++++++++++++++++++
Exactly.
A Parro wants cash to get a quick fix, what care ’bout what family what??!!
The point is that an INTELLIGENT family would deal with that parro’s donkey URGENTLY…. right after he sold the family TV …and BEFORE he got rid of the damn stove…..
Allan Chastanet was on the news giving his verybsound and sensible reasons for closing down Radio St Lucia.CBC radio and TV should be put on the chopping block but dare we hope?Even in Guyana there is a choice of local TV programming.In Barbados we know one only.Its called DLPTV for good reason.
Shocked at the relative low level of posts attached to this topic. Just saying.
Sorry….delete level and insert number
We are not!
Bajan NY @ 4:58 PM
The issues raised in the presentation were raised and debated in BU household over the past two years. Most BU bloggers would be repeating the same points. I think the MOF presentation may generate more discussion. If his proposals are the same as before expect a similarly low level of discussion.
Actually, Bajan in NY, I came on here to make the same point. I kept checking in for new posts but was surprised to see that a topic like this is garnering few comments….but let it be a topic on President Donald J Trump….lol!
Have we as a people become so disbelieving of any news that comes from this government that we dont bother to comment on the Central Bank report. I can tell you hardly anyone in my circle believes this report………………businesses are suffering, many are closing, there is hardly anything happening in the economy yet the economy grew by 2% and the unemployment rate is 9%?
No wonder not many care to comment!
As I passed by Bay Street and looked at the spot where this Hyatt is to be built, I question how on earth a 15-storied hotel as displayed in the model is going to hold on that small plot of land.
Does anyone wonder why every project Mark Maloney undertakes utilises taxpayers’ land?
Hard Rock…………………taxpayers’ land at Brandons
Coverley houses……….taxpayers’ land at Coverley
Hyatt Hotel……………….taxpayers’ land at Bay Street
Bushy Park racing track……land taxpayers will have to pay for eventually
Can the average black man ask the government for a plot of land?
How can we find out how much this inept government got for our land?
Or was it given away? ………….as if any of these morons in the DLP ever even brought a piece of legislation to purchase a square foot of land in the interest of the taxpayers of this country?
@BC “If his proposals are the same as before expect a similarly low level of discussion.”
If we get another load of miscalculated projections, where you need a miracle or two for them to be realised, I would expect a firestorm. But Bajans don’t seem particularly interested in public financial management. Until…. it effects them.
In Oistins a few weeks back, I was chirping a bunch of locals on topical issues. When I asked one about devaluation, she tells me “my son in Amurika, does send me US$500 a monph. Now I does get nearly $1000 bajan dullers at de bank, but effin dey devalue, I might get $2000? Dat would be good for me”.
@Prodigal
“Can the average black man ask the government for a plot of land?”
Since when is Maloney “average”? And when could an average person of any skin tone ask for, and receive, public land? Maloney is widely known to be well connected to the government of the day.
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