Governor of the Central Bank of Barbados Cleviston Haynes. (Picture by Reco Moore.)
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BARBADOS’ FOREIGN RESERVES have slumped to their lowest level in 22 years, but Central Bank Governor Cleviston Haynes sees no reason to press the panic button.
Overall, Barbados’ has lost more than $1 billion in foreign reserves since 2012, the bank’s statistics showed.
Yesterday, on the same day the International Monetary Fund’s (IMF) executive board urged Barbados to take action to “build adequate international reserves”, Haynes reported that the island lost $274 million in reserves last year alone.
According to the bank’s 2017 economic review, “the stock of international reserves declined further to $410 million”. Representing the equivalent of 6.6 weeks of imports (well below the accepted 12 weeks of imports benchmark), this was the lowest amount of foreign reserves since 1995.
Haynes said the reserves “partly reflected the ongoing weakness in private sector capital flows and net public sector outflows, and the delay in the receipt of planned divestment proceeds that were intended to boost reserves”.
“We are concerned about the level of reserves and the trajectory of the reserves. I think that the Government has taken measures which are intended to contain aggregate demand and I think we have begun to see that reflected particularly in consumer imports. We have seen the decline in consumer imports in the second half of the year,” he told the media during the economic review at the Tom Adams Financial Centre.
“But clearly the containment of demand is not sufficient to restore the reserves to the level that we would want to see and therefore . . . we have mentioned the need for significant capital flows. We are not going to be able to rebuild our reserves simply through the contraction; we do need additional capital flows both in the public and private sector.”
The governor however stressed there was no need to panic about the current state of foreign reserves.
“I would not encourage panic. We have challenges which we have to face up [to] but it does not require panic. It requires us to address the issues which confront us, to do so frontily and . . . quickly. I think that is within our power to do; panic won’t get us anywhere,” he said.
“The foreign exchange market has obviously gotten a little tighter. What individuals need to recognise is that while the Central Bank has a cache of foreign reserves, not all of the foreign exchange that comes into the economy comes to the Central Bank. A substantial portion of that actually goes into the banking system.”
He added that “the banks are not selling as much of those surplus funds to us as we would like and in some cases, they have actually come to us to provide foreign exchange”.
In a statement issued yesterday on conclusion of Barbados’ 2017 Article IV Consultation, the IMF’s executive board raised concern that while the current account balance continued to narrow, “international reserves are falling”. (SC)
Download the Bank's full report here.