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Central Bank head calls for further fiscal adjustment

SHAWN CUMBERBATCH, [email protected]

Central Bank head calls for further fiscal adjustment

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GOVERNMENT’S FISCAL DEFICIT is still too high and this means Barbadians will have to tighten their belts some more.

There is also a need to introduce measures to “dampen demand” for foreign exchange, thereby ensuring a healthy amount of international reserves are in hand.

Acting Central Bank Governor Cleviston Haynes said such policies were necessary, even as he reported that the economy grew by two per cent in the first quarter.

Speaking at the first Central Bank press conference on the economy since July 2014, Haynes said reducing the fiscal deficit and shoring up the foreign reserves were the key things Barbados had to focus on now.

However, he said the exact policy prescriptions would come from Government.

“The bank has ongoing engagement and discussion with the government. The issue for us is the size of the deficit and therefore we have been discussing with them the need for further fiscal adjustment . . . so as to bring the fiscal balance in line with the available resources to finance it,” he said.

Haynes added: “With the decline in international reserves that we have experienced over the last few years there is a need for us to further dampen demand. I think the measures that we have taken hitherto [have] had some impact but there is obviously a need for us to dampen demand some more in order to assist in the rebuilding of the foreign exchange reserves buffer.”

Reporting on the economy for the first quarter, Haynes reported “moderate growth” that was attributed mainly to a positive tourism performance.

Also, while the international reserves increased by 24.3 per cent between January and March, the amount in hand at the end of that period was $705.4 million, still below the 12 weeks of import cover benchmark.

In terms of the outlook, the economist said overall economic growth this year was projected to be between 1.5 per cent and two per cent.

This was predicated “mainly on the strength of tourism and new construction activity”. (SC)