Tuesday 22 August, 2017

Foreign reserves outlook not good, says Central Bank Governor

Acting Governor of the Central Bank of Barbados, Cleviston Haynes, during this afternoon's press briefing.

Acting Governor of the Central Bank of Barbados, Cleviston Haynes, during this afternoon's press briefing.

The first half of 2017 saw the foreign reserves dip well below the standard 12 weeks of imports and the outlook for the rest of year does not indicate that any improvement is on the cards.

This was disclosed by the Acting Governor of the Central Bank, Cleviston Haynes during a press conference on Friday, after making a presentation on the half-year performance of the Barbados economy to a meeting of the full Social Partnership at the Hilton Barbados Resort.

During his presentation to the Social Partners in the morning session, Haynes said at the end of June reserves stood at $635 million, equivalent to 9.7 weeks of imports.

Haynes gave a negative outlook for where the reserve levels are expected to be by the end of the fiscal year.   

“My current estimate is that we will still be below. I believe that where we want to be at the end of the fiscal year, with the proceeds from the BNTCL and from the Hilton, that we will still be around the levels that we were at at the end of March this year.”

He explained the court-delayed construction of the Hyatt Hotel, as a private sector project, does not directly affect the level of foreign reserves so there is no real rush to see it come to fruition. However, he noted, the sale of the Barbados National Oil Company Limited (BNOCL), which is yet to be approved by the Fair Trading Commission (FTC), is critical to boosting the country’s reserve levels.

Haynes said he is hopeful that the sale will be approved by the end of the fiscal year but added it is too soon to discuss what government’s backup plan would entail.   

“As I understand it, work is still being pursued to effect the transaction of the BNOCL and I am hopeful that during the course of this fiscal year those transactions will come to fruition. In the event that they do not, of course, government will have to look at alternative financing. At this point it is too early to discuss such contingency.”

He also said, although there has been much backlash regards the National Social Responsibility Levy (NSRL), it may prove beneficial to the foreign reserve levels as it can result in a reduced need for foreign currency.

“One is not totally sure of the impact of the taxes like the NSRL and what that will do for overall spending. The greater contraction in spending, then the potential for larger buildup of reserves; the smaller the impact on spending, then the smaller the impact on the reserves.”

Haynes added it was critical that government receive the proceeds from the sale of the BNOCL by the end of the fiscal year.