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Exchange rate ‘secure’

rhondathompson, [email protected]

Exchange rate ‘secure’

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Dean of the Faculty of Social Sciences at the University of the West Indies Cave Hill Campus, Dr Justin Robinson, does not see devaluation of the Barbados dollar on the cards at this time, despite Moody’s Investors Service recent downgrading of the island’s bond rating.
The Barbados currency remains pegged to the United States dollar, and Robinson argued that the island’s foreign exchange reserves are “more than adequate” to protect the fixed exchange rate.
“Last year at this time if you had asked me I would have given you a different answer but I think that the success of this year is that the reserves have been restored and they are pretty solid” he responded when quizzed about any likelihood of devaluation in the wake of Moody’s downgrading.
“I don’t see the direct line between the downgrade and the currency” he said, “Our ability to maintain the fixed exchange rate is driven by the level of the foreign exchange reserves.”
Responding to questions from the media at the Cave Hill School of Business last Wednesday, Robinson said the fall of Barbados’ credit rating by three notches earlier this month reflected the weak state of public finances. He was also concerned about Government’s challenges to raise the finances it needed and the state of public finances.
“We have to fix the public finances and it is not an overnight fix. It is going to take some time” he said, and pointed out that as Government sought to attempt fiscal consolidation there was the problem of immediate financing,  which he considered “the big challenge for the economy at this juncture”.
Asked whether laying-off public sector workers was the solution, Robinson said “I don’t think sending home people can ever be an answer.”
“I think from where I sit, what the job cuts in the public sector reflect is that in trying to fix the public finances they [Government] are trying to get their expenditure down to the level of the revenues they have and the financing they can raise. The difficulty with that is that the biggest item of expenditure is your wage bill probably followed by debt service. There is probably not a lot you can do about your debt service, so if you want to make meaningful cuts in expenditure to get it closer to the level of revenues you have, plus the financing, then you have to look at the wage bill.”
He suggested the options open to Government in the current situation were either to increase revenues or cut expenditures. But he dismissed any notion of tax increases, saying “I think most people in Barbados think we have topped out in terms of taxes, so the focus shifts to expenditure.”
Since Government’s wage bill was its single largest expenditure, he submitted it was the obvious area in which action could be taken. (GC)