Oct 2016 Financial News

As Barbados works to erase deficit, No plans to devalue

Oct 18, 2016

Barbados does not plan to devalue its currency. The island’s Minister of Finance Christopher Sinckler said devaluation will not make sense.

“The type of economy we have just does not suit currency devaluation, or even currency volatility in terms of floating pegs as you may have here in Trinidad and Tobago. It just doesn’t work,” he said. 

“We don’t export a lot of commodities or manufactured goods, so there would be no reason for doing that. Most of what we do is through import, so if you reduce the value of your currency, it increases the amount you will have to pay on the amount imported.”

Sinckler, who was in T&T for a Barbados Investor Forum at the Trinidad Hilton and Conference Centre yesterday, said one of his government’s goals is to reduce the country’s deficit to about two per cent by 2019.

Following the global economic downturn, the Barbados economy declined by four per cent. 

In its latest assessment earlier this year, the International Monetary Fund said the island appears to have “turned the corner” with activity picking up. Real gross domestic product (GDP) grew by 0.8 per cent last year, underpinned by a surge in tourism arrivals and employment increased by two percent.

Sinckler said on an accrual basis, the deficit now stands at approximately 5.4 per cent. 

He admitted that achieving the a significant reduction in the deficit is going to be difficult because it means changing the way the public sector performs in terms of building efficiencies.

“So that is why we are being as deliberate as we are, and not trying to do all in one, because the disruption would be too much but we are phasing it over time,” he said.

The minister added that with a new revenue authority and new taxing positions in place, the expectation is that economic activity will picks up because of investment. 

“We’ll begin to see more pick up in those areas, so you get your revenue going up, you get your expenditure coming down—the closer they are between the two means a lower deficit over a period of time. That’s how we are approaching it,” he said.

Source:
Nadaleen Singh
Trinidad Guardian
Tuesday October 18, 2016

http://www.guardian.co.tt/business/2016-10-18/no-plans-devalue