GOVERNMENT has
a new deposit interest rate strategy that is expected

to realise a slew
of benefits
for Barbadians – among them:
the more efficient allocation of
their savings.

That is according to Minister of State in the Ministry of Finance, Clyde Mascoll, who told the House of Assembly yesterday that the strategy was part
of Government's drive toward the liberalisation of the capital market.

The new strategy is a consequence of a change in the 1972 Central Bank Act which removes power from the Minister of Finance to prescribe interest rates on deposits and other liabilities and places it with the Central Bank, thereby increasing its powers.

Mascoll outlined
a five-point list of benefits – including improved savings allocations –
that should accrue
to Barbadians from the new deposit rate strategy: increased possibilities
for diversification
of investment risks; increased investors' confidence; attracting finance for productive investment projects;
and stimulating growth and development.

"The credit unions, for example, will become even more attractive," Mascoll explained, "because minimum interest rates will be determined
by the market forces,
and as owners of the credit unions, savers will benefit from greater profits and dividends".

He had earlier traced the historical evolution of the interest rates saga going back to the Interest Rates Act 1970 which allowed the then Government to fix the minimum rates to be paid on deposits in commercial banks, through to the gradual increase in autonomy for the Central Bank over the years.

Mascoll acknowledged, however, that with liberalisation there must be even tighter fiscal policies, particularly given the uncertainty about the outflow of capital from Barbados to the rest of the region and about who was waiting to invest in the region, as well as the inflow of capital from the rest of the region.

"But what we are certain about," Mascoll declared, "is that today more people are willing
to come to Barbados to invest from the rest of the region than Barbadians are willing to go to CARICOM to invest.
So there must be something attractive
about Barbados."

According to him,
the shift in responsibility for the deposit rates was all part of moving the economy to a liberalised state given Barbados' commitment to the CARICOM Single Market and Economy. (AB)