Central Bank Governor Cleviston Haynes giving his first quarter economic review yesterday. (Picture by Lennox Devonish.)
Barbados' foreign reserves problem is so serious that Government is seeking a US$60 million to US$70 million bail-out from the private sector.
Governor of the Central Bank Cleviston Haynes revealed yesterday that for the first time in 27 years, the bank was requesting the private sector to repatriate some of its overseas funds as Government faced a major foreign loan payment next month.
But the private sector funds will not be enough.
Haynes, who delivered the first-quarter economic review yesterday during a press conference at the bank, said Government’s effort to divest assets, including the Barbados National Terminal Co. Ltd and the Hilton Barbados property, needed to proceed so that the reserves problem could be fixed.
His concerns came as the Central Bank reported that “higher public sector debt service obligations than usual contained the growth of international reserves at the Central Bank to $14 million for the period”.
“As a result, the import cover of 6.9 weeks at the end of March remained below the 12-week minimum holding that the bank considers as adequate,” Haynes said.
Barbados’ reserves were $423 million at the end of March, compared to $709.4 million in the same quarter last year.
With the island due to service the US$225 Credit Suisse loan next month and in December, Haynes said the authorities could not afford to take any chances with the falling reserves.
“In 1991 as part of the adjustment effort, several private sector entities came together and provided on a voluntary basis, support to the Central Bank to help keep our liquidity at a certain level which we went through the adjustment phase. And once the adjustment was over, we were able to return those funds to those individuals,” he said.
“The bank contemplates that we will do some similar exercise on this occasion. We do so on the understanding that in the early 2000s, the bank allowed some of our corporate entities, particularly in the financial sector which had large investment balances, to invest some of those balances abroad on the condition that should the country need them in the future, that those funds would be returned to assist as they were done in ’91.”
Haynes added that the private sector funds would be sought on the understanding that “we would reciprocate in much the same way as we did once the challenge was over . . . by allowing them to take those funds back out.
“That is what we envisage and therefore in that context we anticipate that we should be able to stabilise the foreign reserves during this second quarter once we start to receive those funds,” he said.