Foreign reserve levels to dip again, says economist
(File Photo) Central Bank of Barbados (CBB)
Economist, Jeremy Stephen is predicting that come the end of January, when the Central Bank of Barbados (CBB) releases its last quarter economic review, the foreign exchange levels will be at precarious levels.
The third quarter review conducted by the CBB in September revealed the levels of reserves stood at $549.7 million - equivalent to 8.6 weeks of import cover, well below the 12-week benchmark.
Stephen told Loop News government could expect to have a "foreign reserve crisis" on their hands considering that they were obligated to pay a semi-annual installment of the Swiss Bank Credit Suisses loan last month.
"We could expect that the reserves would've taken a bit of a beating at the year end. So even though tourism is performing well as an industry, this year especially... it will be below that [8.6 weeks of import cover] for sure. At the end of the day, for the last three months it is not going to be a pretty sight."
Further to that, Stephen noted, that government has had its hopes of improving the foreign reserve position dashed in light of the fact that the bid by SOL for the sale of the Barbados National Terminal Company Limited (BNTCL) was rejected by the Fair Trading Commission (FTC) back in November. In addition, government's divestment of the Hilton Hotel, for $80 million, has not yet been finalized.
"The catch would be how soon this [Hilton] money can be in and whether we can do something useful with this money and if government can put the right fiscal programs in place to maintain a sustainable fiscal deficit. And that should be begin to correct certain issues."
Stephen also said the likelihood of the foreign reserve position improving depends heavily on whether the private sector regains confidence in government and are willing to push for foreign investments.