The Institute of Chartered Accountants of Barbados says the continuing decline in the level of foreign reserves is of great concern.
In a statement, executive director Reginald Farley said an adequate foreign reserve buffer, estimated at 12 weeks of imports, is a key component in Barbados’ economic stability, maintenance of the fixed exchange rate, and investor confidence.
“The fact that reserves have declined every year since 2012 from 20.2 weeks of imports to 6.6 weeks of imports is a worrying trend. The low level of foreign reserves places Barbados in an increasingly vulnerable position to external economic shocks such as increases in the price of oil. In fact the Central Bank noted that last year the price of imported fuels rose by 24 per cent while the volume of fuel only increased by three per cent,” he said.
Farley said the state of public finances also remained a cause for concern.
However, he said it was good to note that the fiscal deficit was on a downward trajectory and the Central Bank had slashed its printing of money to finance the deficit from $714.5 million in April-December 2016 to $96.8 million over the same period in 2017.
“Arrears owed by Government in the form of tax refunds and payments to suppliers of goods and services are still a problem. No official figure has been provided by the Government but based on available information it is creating cash flow challenges for some businesses and individuals.
“There is a need for the implementation of measures to increase investor confidence, speed up implementation of major investment projects, and boost productivity and service levels in both the public and private sectors,” Fab said.
The ICAB head also pointed to the recent further fall in Barbados’ ranking in the Ease of Doing Business from 117 to 132 (out of 190 countries.
He said this was a stark reminder of the need to implement the structural reforms to make Barbados more efficient and business friendly.
“Additionally, the Barbados Private Sector Association (BPSA) strongly recommends that the Government enter into negotiations with a suitable multi-lateral for a loan that will provide security to the foreign reserves and may give a short-term reduction in interest payments.
“ICAB is of the view that such an arrangement would be more attractive if it has the additional benefit of supporting the required fiscal discipline and governance reforms across the public sector,” Farley said. (PR/NB)
