Exporters yesterday declared that the time had come to reduce dependance on commercial banks for US currency, stating that increasing export volumes was now a priority.
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Barbados is open to labour talks with T&T
With T&T has over 13,000 vacancies in its public service, and Barbados is letting go about 3,500 public sector employees, Barbados Finance Minister Christopher Sinckler has said his government is open to mutually beneficial cooperation in this area.
After he addressed investors gathered at the Port-of-Spain Marriott for an ANSA Merchant Bank event Wednesday, Sinckler said: "Indeed, there are a lot of very skilled people in Barbados. Of course, we have our campus of the University West Indies, and we churn out social scientists of all sizes and shapes."
He said: "We're encouraging people to look for opportunities beyond Barbados and there are Caribbean territories that require that skilled labour. A lot of skilled labour from Barbados come here (to T&T). They go back and forth, and we are encouraging them to look for those opportunities."
Earlier he had told investors that while the Barbados central government employs about 21,000 the overall public service is about 25,000 strong. "Our goal is to bring the overall public service down to about 20-21,000, which is really where it should be," he said.
Asked if the island nation plans to issue any more bonds to boost its reserves and refinance some of its debt, he said: "Not at this stage, certainly not on the wider international market because we feel the forex situation has settled down. The reserves are slowly building back and so there is not an immediate requirement to get to the market."
He added that in June, the Barbados government will be going "on a fairly extensive non-deal road show to meet with international investors in London, Boston, Chicago, New York, and then later in the year, we will be going further west." He said the Barbados government will be doing this "so that investors understand what is really happening, and our efforts to return stability to the economy, and of course, to bring economic growth."
Turning to ANSA Merchant Bank Managing Director Gregory Hill, he added, "Of course, the T&T market is always there. There are projects that we are doing with ANSA and with others." Hill hailed the present as an ideal time to invest in Barbados. He said: "If you believe Barbados is a strong economy in the medium to long term, you would see that the global markets clearly over-reacted to some of the changes in the Barbados economy."
He said global investors have a unique opportunity "to buy (into) Barbados now at the right price" and increase their returns on their investment because Barbados is a long-term viable economy. On Barbados' target for foreign reserves, Sinckler said: "Our target for 2014 is roughly around 16 weeks of import cover. Anywhere between BD$1.1 billion (US$550 million) and BD$1.5 billion."
When reminded this is already where Barbados reserves are at, he said: "Sure we're almost there. The issue is to just keep it there. Our outflows (of forex) match our inflows, so that we don't have to tap into the reserves. We can do all of our transactions, and there is no reason to tap in, and that's where we want to be," he said.
Having mentioned talks with the International Monetary Fund (IMF) during his presentation, he answered the question of whether Barbados was looking to implement an IMF programme like debt-burdened Jamaica: "Not a formal programme but we have a very good collaborative working relationship with the fund through the Article IV consultation process, but also technically.
“There are a number of things which they are doing with us over the next couple of years, including the monitoring of the reforms of the state institutions for greater efficiency particularly in fiscal affairs." He said that from June, through a regional technical assistance fund, the IMF will be conducting a comprehensive review of all taxes and duties in Barbados, including value added tax and personal income tax.
Sinckler said he expects to have a report in a few months and that would determine what changes are required to make the system more efficient. To arrest declining tax income, he said, "We've now moved to consolidate the tax administration functions of the four major tax institutions in Barbados, under a single umbrella, the Barbados Revenue Authority."
That is part of Barbados fiscal reform process as well, he said, because the Barbados government knows that on average between 20-30 per cent of the loss of tax revenue comes through inefficient administration. He said: "If we can improve administration we will be able to increase the returns."
Forex critical for island
In a separate interview, Central Bank of Barbados Governor, Delisle Worrell, said that in an economy like Barbados, the key element is the critical importance of foreign exchange. “Small, open economies like ours are engines that run on foreign exchange and that’s the crucial difference between a small economy and a large economy like Brazil. A large economy like Brazil can grow on its own resources because everything that it needs it can produce domestically.
“If you are small, the world is ruled by economies of scale. So if you look at any small economy, even the most diversified one is only going to have five or six activities that they are able to produce at internationally competitive prices.”
The central banker said the range of consumption that a small country needs to support modern lifestyles is vast compared with what the small country produces. So that economy always has to be run through the foreign exchange engine, which is the essential difference between large and small countries.
Asked if he would aggree that there are more ways in which the economies of Barbados and T&T are similar than there are differences, Worrell said the main difference is that the Barbados is a service economy while T&T produces physical goods.
Worrell said: “This makes your economy easier to manage in certain respects. For example, it is easier to trace the inflows of foreign exchange in the T&T economy. When Barbados was a sugar economy, it was easier for us to do that as well. We exported a certain amount of sugar and there was a certain amount of foreign exchange that came in.”
While stating that tourism is difference as the foreign exchange inflows are more difficult to trace, the central banker said: “Effectively the way the two economies works is exactly the same. We have more in common in terms of the challenges of dealing with an economy where you do not have the diversified production structure, which limits options in terms of how the economy is expanded and stabilised.”
Worrell was asked this question: If there are more ways in which the economies of Barbados and T&T are similar, is there a lesson that Barbados can learn from T&T with regard to the flotation of the TT dollar in April 1993? He said: “Not really because the gain that T&T gets from its devaluation is the fiscal gain. Because T&T exports physical goods—such as oil, natural gas and petrochemicals—it knows how much foreign exchange it is getting and most of the foreign exchange comes to the Central Bank.”
He agreed that this means that T&T gets more TT dollars from its exports when there is a devaluation. Asked if the situation was not the same for Barbados, Worrell said: “No, no no because we do not actually know or see the physical dollars from tourism. They come into the economy but you can’t say how much is due.” He said that if Barbados were to devalue, it could get less Barbados dollars from it because the apprehension about devaluation, even before you devalue, causes people to take defensive positions.
Worrell said that happened last year which was one of the reasons the Barbados authorities has been at pains to reassure people that “there is no prospect of a devaluation in Barbados.”