CARIBBEAN360 -BRIDGETOWN, Barbados, Wednesday January 25, 2017 – Barbados’ foreign reserves have fallen to the lowest level in 14 years, according to Governor of the Central Bank of Barbados Dr DeLisle Worrell.
However, Worrell sought to calm nerves by revealing that Government was anticipating over $250 million, although he did not say how much of that cash would come before the end of the current fiscal year, which ends March 31.
In delivering his latest report on the economy on January 24, the Governor said the reserves had fallen below the benchmark 12 weeks of import, standing at about 10.3 weeks.
The $681 million in reserves at the end of December 2016 was $246 million less than the $927 million – or 14 weeks of imports – recorded at the end of 2015.
The extent of the problem was further manifested in the amount collected through foreign finance last year, which was approximately one-third of the total collected the previous year.
And while the private sector performed a lot better, its intake was also lower than in 2015.
“There was an estimated net inflow of foreign finance of $132 million, 256 million lower than in 2015. Inflows by private sector entities were $379 million, $90 million lower than in 2015,” Worrell said.
“Foreign financing for the public sector was also lower because select project inflows did not materialize due to administrative delays. Government’s repayments were higher than in the previous year, exceeding the amount of inflows by $170 million,” he added.
Even in the face of an economy which was estimated to have grown by 1.6 per cent, along with a fall in unemployment to ten per cent for the four quarters ending in September 2016 and a rise in receipts from Value Added Tax (VAT), Government continued to struggle to earn revenue, Worrell disclosed.
The current account deficit for April to December fell by $31 million to an estimated $510 million, while revenue declined by $6 million, mainly due to a $17 million decrease in earnings from personal income.
Current expenditure increased by $25 million, while transfers to state-owned enterprises fell by $17 million, although interest payments rose by $53 million. Capital expenditure fell by $36 million and the overall fiscal deficit, estimated at $665 million, was $5 million smaller, he said.
Still, the Freundel Stuart administration continued to rely on Central Bank funding to drive down the debt owed to private individuals and companies, with Worrell blaming the fact that Government had spent more on the current account than it had received in taxes and other current receipts.
“Government’s dependence on the Central Bank to finance its deficit limits the Bank’s ability to influence interest rates appropriate for Barbados’ circumstances, as is the standard practice used by central banks everywhere,” Worrell said.
The Governor’s report revealed that the country’s debt to private individuals, companies and public entities stood at $4.9 billion, or 53 per cent of gross domestic product as at the end of December last year.
The economist did not give an estimated growth rate for this year, but said the prognosis “for the next five years continues to be about two per cent”, driven by $2.6 billion in tourism, infrastructure, energy and housing projects. (Barbados Today)