The Central Bank of Barbados and the International Monetary Fund (IMF) remain at odds over the bank’s financing of Government.
Governor Dr DeLisle Worrell made that admission yesterday as he defended the millions of dollars with which the bank has been directly funding Government’s operations.
In its recent Article IV Consultation with Barbados, the IMF raised concern about the policy and urged the Central Bank to stop.
But Worrell, speaking yesterday during his first quarter Press conference, said the current administration would have found itself in a worse fiscal position had his organisation not assisted, as it had the legal right to do.
“We have made a lot of progress with the IMF but on that one we still have work to do,” he conceded.
The governor said one of the reasons the Central Bank existed was to “finance the Government in appropriate circumstances”.
“So when in May last year we saw that there was a need to accelerate progress in terms of reducing the deficit in order to protect the foreign reserves, we saw that this was something that we needed to put in place. We then went about designing the programme of adjustment, and it is a fiscal programme.
“You have to take it to the Cabinet, the Cabinet then has to consult the Social Partners, then you have the whole process of designing the programme. So it’s August before you actually have the first part of what we thought was the complete programme put in place,” he explained.
“What happens in between there? What we are saying is that the tool that we have for adjusting the economic expenditure is a tool that takes time to put in place and to have its effects. Its effects are going to be spread out over 18 months, so 18 months from the time that you actually do something to the time that you get the full effect. In the meanwhile, you still have to run the Government, that’s what the Central Bank is for.
“So it is in that interim period that you expect that the Central Bank will be financing Government. Once you get the deficit down, once we achieve our six per cent target for the end of this fiscal year, the Central Bank financing will be done,” he added.
(SC)
