BRIDGETOWN, Barbados – Barbados’ foreign reserves are dangerously low – lower than they have been in over two decades, Central Bank Governor
Days after regional economist Marla Dukharan reported that the reserves had dipped to BDS $482 million (US$241 million) or just under eight weeks of import cover, as at November last year, Haynes revealed they had dipped even further.
In his 2017 economic review, he said that as of the end of December last year, the reserves stood at a 22-year low of BDS$410 million (US$205 million), or 6.6 weeks of import cover – almost half the recommended 12 weeks.
Haynes pointed to weak private sector capital flows, net public sector outflows and the delay in the sale of some state assets as contributors to the low levels of reserves.
And he reported that because of the foreign exchange crunch, commercial banks were no longer selling as much surplus funds to the Central Bank.
“In some cases they have actually come to us to buy foreign exchange,” Haynes told journalists.
However, the Central Bank Governor urged Barbadians not to panic about the situation.
“We have challenges which we have to face, but it does not require panic. It requires us to address the issues which confront us, to do so frontally and do so quickly. I think that is what is within our powers to do. Panic won’t get us anywhere,” he said, adding that he was optimistic there would be adequate levels of reserves to meet payments during the year.
Haynes added that significant public and private capital inflows are needed to restore the reserves to “at least in line with the 12-week benchmark”.
In her monthly Caribbean economic report for January, Dukharan had reported that Barbados’ international reserves registered the “lowest level of reserves and the fastest year-on-year pace of decline in this century”.
She identified the main drivers of that precipitous drop in reserves as the extent of the Government deficit and the way in which it is financed – partly by Central Bank financing or printing of Barbados dollars.