|Minister of Finance and Economic Affairs, Christopher Sinckler (2nd from left) in discussion with Governor of the Central Bank, Dr. Delisle Worrell (third left). Also pictured at right is Deputy Governor, Central Bank of Barbados, Harold Codrington. (A. Miller)|
Government will do nothing in the short, medium or long-term to jeopardise the country’s financial system or undermine its long-standing commitment to a fixed exchange rate regime.
This assertion came yesterday from Minister of Finance and Economic Affairs, Chris Sinckler, as he addressed the 43rd Annual Conference of Monetary Studies at the Hilton Barbados. It was held under the theme: "Financial Architecture and economic prospects beyond the crisis in the Caribbean".
He told a gathering of regional economists that government ???s goal in the current environment was to ensure the relative stability of the domestic capital markets, while providing the current level of resources required?? to achieve stated national economic, social, environmental and cultural development objectives.
Mr. Sinckler added: "…Even as we seek to accelerate the pace of fiscal consolidation, it has and will become necessary for government to rest a little more heavily on domestic capital markets to assist in financing its deficit. This will invariably include a stepped up reliance on the National Insurance Scheme and the Central Bank."
However, he stressed that such measures would only be enforced as long as it was prudent to do so. The Finance Minister noted that government’s desire to effect fiscal consolidation and debt sustainability was "beginning to take root in the domestic economy".
"Our anticipation is that effort will continue through 2015-2016 in light of the expected revision of our medium-term fiscal targets for a balanced budget in light of the protracted recovery in the global and domestic economies. In this environment government will have to look for ways in which to satisfy its financial requirements through deficit reduction measures."
He stressed that it would cause a "seismic and debilitating dislocation in the domestic economy" if government could not continue with its plans and programmes as a result of inadequate funding. The Finance Minister contended that the extent of the failure across the board to individuals, households and businesses, all of whom are intrinsically inter-locked structurally with the state, would be unsustainable.
"And so, as we push towards building efficiencies in government and its para-statal extensions in particular; as we move assiduously to contract the size of government while still provided comparable social and economic services, we cannot afford a dramatic failure in government’s ability to finance its current operations," Mr. Sinckler stated.
He said the Central Bank’s decision to print money was only a temporary measure that would be in place through to the end of fiscal year 2013. He explained that this was done "in precautionary anticipation of the possibility that ever so infrequently, because of protracted economic downturn, government might require short interventions to maintain its funding balance".
In this case he noted that it was not expected to be a frequently used device and stressed that it would not be his policy to encourage the use of it if it could be avoided. He maintained that it "will not be a permanent feature of the financial landscape of Barbados" and disclosed that government had only relied on the facility once and only for a small sum of 25 million dollars.
Mr. Sinckler gave the assurance that in relation to the NIS’ investments in government at the varying levels at which the Fund sees it fit to invest, that government would not subjugate the financial viability and soundness of the National Insurance Fund to its own requirements for financial support.
"The approaches which we made to the NIS earlier this year for support to various state agencies and the University of the West Indies were intended as one-off temporary facilities to assist government in its overall fiscal deficit management, while helping those organisations to liquidate short-term debts predominantly to private sector entities whose own financial stability was being compromised by debts owed to them by these organisations," he explained.
The four-day conference will conclude on Friday.