Sinckler: New measures to boost foreign reserves

The Barbados government Monday sought to reassure the country that the currency is in no danger of devaluing, amid concerns over the state of the economy and the firing last Friday of the governor of the central bank. 

At the same time, the government will now require investors and developers to sell some foreign exchange to the central bank, aimed at boosting the country's foreign reserves.

Finance and Economic Affairs Minister Chris Sinckler acknowledged that the foreign reserve levels are now below the 12-week threshold for import coverage, but downplayed it, saying it is not the first time in the island's history that this has happened.

"We previously operated this economy successfully with lower levels of reserves in 1998 and in 1999," Sinckler told a news conference.

He said that the government, led by Prime Minister Freundel Stuart, noticed some slippage in reserve levels in 2016, following a relatively stable foreign exchange market position in 2014 and for the greater part of 2015.

"This was even though the difference of inflows as against outflows of foreign exchange in the market, over the previous year, remained generally in balance," said the finance minister. "In fact, during the past year, unlike 2013 and part of 2014, we did not see any major private-sector calls on the country's reserve levels, as oil prices remained low and private foreign inflows started to recover as anticipated projects got set to push off."

Sinckler noted that Barbados met its foreign debt obligations to the tune of BDS$382 million in 2016, and that the current reserve levels were adequate to defend the Barbados currency, the BDS.

On Tuesday, the political opposition criticised the finance minister, saying he failed to address the issue of why central banker DeLisle Worrell was fired.

"Barbadians expected Minister Sinckler to address the reasons why he fired the governor. He did not. Barbadians thought that he would allay their concerns about the printing of money and its adverse consequences on Barbadian households and businesses. Those fears are heightened because he said they 'will print as much as is necessary'," said the Barbados Labour Party in a statement.

Expects a boost

Sinckler said he expects the country's foreign reserves to be boosted by more than BDS$200 million from three sources - the sale of Barbados National Terminal Company Limited, expected to yield over BDS$100 million; drawdown of the first tranche of a loan from EXIM Bank of China for the Sam Lord's Castle tourism project; and release of a First Citizens Bank bridging loan for upgrades to Customs and the Barbados Revenue Authority - thereby pushing the levels back up above 12 weeks of imports.

The Stuart administration is also undertaking measures this year to ensure that foreign reserves remain at a sustainable level.

Sinckler said he has issued new guidelines to all investors and developers seeking tax-waiver support for investment projects in Barbados that, effective this month, at least one-third of all foreign exchange brought into the island must be sold directly to the central bank.

- CMC