It is the silly season and if we are to judge from debates of the past leading up to a general election, it is unlikely such an important issue will take place devoid of political claptrap. All indicators about the health of the foreign reserves confirm that this government has been unable to change the downward trend. At his last utterance the minister of finance confirmed that Barbados’ foreign reserves are holding at 8 weeks of import cover.
It feels like déjà vu to some of us who experienced the period of the early 90s presided over by Erskine Sandiford. There was flight of foreign exchange and pleas had to be made by the government to the Barbados Mutual Assurance Society and other companies that enjoyed permission to invest a percentage of pension funds overseas to assist the country by transferring to the Central Bank of Barbados. While addressing an ICAB session this week minister of finance Chris Sinckler issued a similar plea to the private sector- to return forex to the country to bolster the foreign reserves. Was there a hint of distrust to be gleaned from the minister’s tone that the private sector is hoarding forex?
Another interesting observation arising from the minister’s address was the obvious impatience directed at the Commissioners of the Fair Trade Commission as it relates to the pending application for the sale of BNTC to Simpsons Oil. It is unusual for a minister of finance to be blatantly critical of a regulator. What if minister of commerce Donville Inniss were to criticize the Central Bank for example? Surely the minister of finance- given his lofty position in government- should be aware of the reason why the FTC decision is pending? Is this an attempt to intimidate the Commissioners of the FTC? An element of desperation perhaps?
The greater concern about the depleted foreign reserves is not that Sinckler hinted that the government can compulsorily acquire forex held by commercial banks if the forex situation continue to deteriorate. We can only speculate what the principals of the Canadian banks are plotting in reaction to the recent decision by the Central Bank of Barbados to increase the reserve requirement and now the veil threat by the minister of finance to access forex held by commercial banks. BU cannot find a single case where a so called third world country intimidated an international bank.
What minister Sinckler and the government must appreciate is that the current state and his mouthing will not inspire confidence in the market. In fact, it is clear the private sector has lost confidence in the government. One only has to listen to head of the Barbados Private Sector Association Charles Herbert who represents that sector. One has to listen to Eddie Abed who represents the Barbados Chamber of Commerce. One has to listen to Dean Straker who is head of the Barbados Small Business Association. This is not an exhaustive list.
If we analyze the graph there is the obvious conclusion to be made that the government has been unable to implement policies to earn adequate amounts of foreign exchange. The policy of selling the family silver- analogous to when another DLP government in the 90s sold C&W shares- is not sustainable. If the FTC approves the BNTCL deal all it does is to kick the foreign exchange can down the road. There is a hole in the bucket dear Lila, dear Lila.