Bar­ba­dos fi­nance min­is­ter brushes aside crit­i­cism of cen­tral bank

Jamaica Gleaner - - BUSINESS - – CMC

FI­NANCE MIN­IS­TER Chris Sinck­ler has dis­missed re­ports that the Fre­un­del Stu­art gov­ern­ment has been us­ing the Cen­tral Bank of Bar­ba­dos (CBB) to print money to meet the is­land’s fi­nan­cial re­quire­ments.

Ad­dress­ing sup­port­ers of the rul­ing Demo­cratic Labour Party (DLP) on Sun­day night, Sinck­ler said the cash flow com­mit­tee meets monthly and de­ter­mines the gov­ern­ment’s rev­enue and ex­pen­di­ture and that the CBB is used as a last re­sort to fi­nance any deficit.

He said ap­proaches are made to the pri­vate en­ti­ties, in­clud­ing banks and non-bank­ing fi­nan­cial in­sti­tu­tions such as mu­tual funds and in­surance com­pa­nies.

“So we is­sue Trea­sury bills and those kinds of things. If when you do that and you is­sue BDS$50 mil­lion but only BDS$30 mil­lion is taken up, you still have BDS$20 mil­lion dol­lars to fill.

“The cen­tral bank is the gov­ern­ment’s bank and the bank of last re­sort then comes in and says to the gov­ern­ment, ‘I will take the other BDS$20 mil­lion’,” he said.

MONEY SERVES NEEDS

Sin­clair said that the print­ing of money by the cen­tral bank is not a sus­tain­able prac­tice and that the money is used to ser­vice crit­i­cal needs of the is­land.

“Be­cause the gov­ern­ment takes care of its debts and salar­ies and wages out of its in­come stream, its rev­enue, and it has left-over ex­penses to deal with to en­sure that the coun­try re­mains sta­ble, that peo­ple can live and be pro­duc­tive in this so­ci­ety and main­tain a sta­bil­ity in the econ­omy of Bar­ba­dos, then the Cen­tral Bank comes in and does it.

“So that money is spent on the peo­ple of Bar­ba­dos. It is not frit­ted away, it is not spent wildly, it is not given away, it is spent on you, the pub­lic of Bar­ba­dos,” Sinck­ler added.

Last month, the CBB noted that the gov­ern­ment’s fi­nanc­ing needs for the pe­riod April to Septem­ber were met by tap­ping BDS$326 mil­lion from do­mes­tic sources.

It said the na­tional in­surance in­creased their in­vest­ment in se­cu­ri­ties by BDS$91 mil­lion and in­surance com­pa­nies and other non-bank in­vestors pro­vided BDS$4 mil­lion worth of fi­nanc­ing. In ad­di­tion, there was a BDS$84-mil­lion switch from for­eign to do­mes­tic fi­nanc­ing be­cause of amor­ti­sa­tion of for­eign loans.

“The re­sult­ing money cre­ation by the cen­tral bank fi­nanc­ing gov­ern­ment was BDS$114 mil­lion. The pres­sure of gov­ern­ment’s on­go­ing cash flow needs is re­flected in the fail­ure to nar­row the gap be­tween the Bar­ba­dos and US 3-month Trea­sury bill rates, which re­mains at 2.81 per­cent­age points,” the cen­tral bank said.

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