Among the things Barbados should learn from the contentious debt issue in Washington, that had the financial world on edge, is the need to diversify its foreign reserves holdings.
That’s the position of Sir Courtney Blackman, first Governor of the Central Bank of Barbados, who told the BARBADOS BUSINESS AUTHORITY the island should not see the extension of the United States government’s debt ceiling as the end of the challenges facing the United States dollar, in which Barbados holds most, if not all, of its reserves.
“It is not too late to diversify, certainly into other currencies, because the US dollar was weakened by the controversy,”?Sir Courtney said. “We must recognize that it can be weakened even more.
“[Diversification] should be done as a matter of course. I really don’t know how much diversification of our reserves has already taken place but I would say it’s something we should do.”
Sir Courtney’s call came on the heels of a similar appeal by Winston Cox, former executive director for the Caribbean at the Inter-American Development Bank in Washington.
In his book, Central Banking In Theory And Practice, A Small State Perspective published more than a decade ago, Sir Courtney argued for a policy of “a precaution” against a “rainy day” in foreign reserves management in order to guard against total ruin should the financial wolf be at the door.
“The current situation is really the rainy day,” he said. “I do not know the profile of the foreign reserves but we should take steps to diversify and we should have some gold or hold some of our reserves in currencies other than US dollars. This is what we should have been preparing for.”
The “rainy day” portion of the reserves, he suggested, could be in gold.
