Barbados fighting off devaluation

Posted: Saturday, January 7, 2017. 10:46 a.m. CST.

By BBN Staff: The Central Bank of Barbados, currently facing its own economic uncertainties, recently issued a warning to its government that “painful” fiscal measures are now necessary to avoid a catastrophic devaluation of its currency.Barbados, like Belize, uses a 2:1 exchange rate peg with the US dollar.  In his January economic letter released on the bank’s website Wednesday, Barbados Centrabl Bank Governor Dr. Delisle Worrell said Barbados had repeatedly failed to achieve the balance between its foreign exchange outflows and inflows, necessary for a stable economy.

He has recommended restrictions on spending to protect the country’s foreign exchange reserves, an issue Belize’s own Central Bank has had to grapple with. “The reserves are what protect us against the devaluation of our currency,” he stressed. He repeated a previous caution that the road to a promising future would be a painful one.

“The future is exceptionally promising, but it will not happen unless we make it happen, and like all worthwhile objectives, realizing the vision will not be painless,” he added.

In an effort to strike a note of reassurance, however, Worrell said the Central Bank remained in a position to provide US dollars at the current exchange rate of BDS$2 to the US dollar to meet all “legitimate” needs, if no other source was sufficient.

He suggested that the country has had to draw from the Central Bank’s reserves of foreign currency, simply because of a failure to strike the right fiscal balance over the years.