Moontown

Nation News (Barbados)

BARBADOS’ ECONOMY contracted by three per cent in the first half of the year, and predictions are for a further three per cent decline by yearend.

“Sharp declines” in tourist arrivals and manufacturing output led to a 6.4 per cent drop in the country’s export earning sectors.

Speaking yesterday morning at the Tom Adams Financial Centre where she reviewed the performance of the economy during the first half of the year, Central Bank Governor Dr Marion Williams had little positive news to report.

She conceded the economy was in recession, and said that, given the international situation, Barbadians should not be surprised by the development.

The governor called on them, too, not to panic, as the country had $1.3 billion in foreign reserves which represented “adequate cover”.

She said “inflationary pressures began to subside during the period” and though net foreign reserves fell by $94.8 million, the banking system was still liquid and “credit and deposit levels remained stable”.

In a sector-by-sector report card, Williams said manufacturing fell by 7.6 per cent and had remained stagnant since contracting by 10.3 per cent in 2001.

Sugar production rose 1.2 per cent over last year’s crop and non-sugar agriculture was up by 3.9 per cent.

In construction, a fall-off in foreign financing inflows saw several big projects postponed or cancelled and activity contracted by 4.4 per cent.

Tourism, the main money-earning sector, was hard hit by the global economic recession.

Long-stay arrivals fell by 8.5 per cent between January and May, with the United States down 16 per cent and Britain 10.9 per cent. Arrivals from Canada were up 17.7 per cent.

In the financial sector, Barbadians did less personal borrowing and commercial banks also saw a drop in borrowing by the key sectors, including tourism, manufacturing and distribution.

Government did most of its borrowing from domestic sources to finance its fiscal deficit, which widened to $336.2 million from $265 million a year earlier, she said.

Current expenditure rose by about 6.2 per cent, due mainly to subsidies to the University of the West Indies, the Queen Elizabeth Hospital and Barbados National Oil Company Limited.

Williams said tourism was expected to be most affected by the economic downturn and the situation would be made worse by Britain’s imposition of a tourism head tax.

She expected unemployment to rise, but inflation should fall to between three and four per cent by year end. Net international reserves, she said, were expected to fall by between $100 million and $120 million. (GE)

SPLIT PEAS AND RICE; MACARONI PIE

GRILLED POTATOES; BAKED CHICKEN

BAKED LAMB CHOPS; FRIED SNAPPER

GRILLED BARRACUDA; BBQ SPARE RIBS

BBQ PIG TAILS; FISH GRAVY; BEEF STEW

STEAMED VEGS; TOSSED SALAD

THERE IS A BACKLOG OF UP TO 6 000 Caribbean nationals seeking immigrant status in Barbados.

And to clear up the backlog, up to five review panels will have to be established.

This was revealed last night by Prime Minister David Thompson during a nationally televised Press conference from his official residence, Ilaro Court.

According to Thompson, the backlog was largely the fault of the previous Owen Arthur Administration which had failed to take decisive measures to address the issue.

“Most of these applications are old . . . and no action was taken,” he said.

The Prime Minister was responding to queries concerning Government’s new immigration policy giving Caribbean nationals up to December to regularise this status.

In this regard, he acknowledged that the six-month amnesty had been criticised in some quarters, but stressed that while Government remained committed to the free movement of CARICOM nationals, that Barbados had “to redesign” the commitments previously given.

He said he had made this clear at the last Heads of Government conference in Guyana where it was announced that a new and comprehensive immigration policy would soon be ready for circulation across the region.

He explained that Barbados had no choice but to regulate its immigration policy since the social services simply could not cope with a flood of immigrants.

Thompson also touched on the issue of the treatment of non-nationals who were hustled off to the airport for deportation if it was found that they were here illegally.

To this end, he said a special committee, chaired by prominent lawyer, Keith Simmons QC, had been set up to investigate any complaints that might be made.

“But having said all of this, I just want to make it clear that the position that I previously outlined regarding our immigration policy remains the same,” he told reporters. (CG)

THE CENTRAL BANK OF BARBADOS has asked four institutional investors to return around $100 million they were allowed to invest outside of the Caribbean under what is called the second tier reserves system.

About $250 million in foreign reserves are held by several approved financial institutions in investments outside CARICOM. They include the National Insurance Scheme, pension funds, insurance companies and commercial banks.

And while the Central Bank’s move might appear to be a dire situation, governor Dr Marion Williams said the action was necessary to reduce the island’s debt burden by making use of foreign reserves it already had, rather than entering into new borrowing.

Williams said yesterday Barbados had “adequate foreign exchange cover” of $1.3 billion, but its debt ratio was “very high”.

Explaining the move that had become a political issue, the Governor said: “We are already on the Trinidad and Tobago market, but we have other debt maturing [in] 2010.

“We don’t want to be borrowing, and why should we borrow when we allowed the institutional investors to hold foreign exchange outside in excess of the permitted amount on the understanding that they should bring it back?

“The attempt to bring back the second tier reserves is really to reduce our need to borrow and to help to service our debt without having to go back to the market to refinance. I hope that that is clearly understood.”

The governor said one of the reasons Barbados was downgraded by Standard & Poor’s was because of its high debt ratio.

“When you have high debt to repay, you either have to use the foreign reserves you have, or you have to borrow. With a high debt ratio, you are not in the position to borrow much more,” she added.

Williams said when the second tier reserves system was introduced about five years ago, it was done on condition that if the country needed the foreign exchange, it would be repatriated within six months of the request.

by GERALYN EDWARD

BY MID-OCTOBER, all lending rates in Barbados will drop for new loans and those already on the books of commercial banks.

This is part of an agreement between the Central Bank and its commercial bank partners, as efforts intensify to keep local businesses open by reducing their debt repayment burden.

Central Bank Governor Dr Marion Williams announced yesterday that the minimum interest rate on deposits would be reduced by 0.5 per cent “with a view to obtaining a similar reduction” on the lending side.

That rate cut, which takes effect from August 17, would move the minimum interest paid on deposits to 2.5 per cent. The last rate adjustment was on February 1, when the rate was cut from four per cent to three per cent.

According to Williams, commercial banks have given a commitment that within two months of the minimum deposit rate cut, they would drop all lending rates by a similar percentage on new and existing credit.

“[The banks] understand that it is important to try to keep businesses open and that the repayment cost to businesses can be quite onerous in a situation where their income flow is slow,” she said.

“This is so particularly in the key sectors such as tourism, manufacturing and construction, as well, and even retail and wholesale businesses. The idea is to reduce the repayment costs and some are restructuring some of those loans.”

Williams, who will be retiring at the end of October, told the Press that keeping businesses open and Barbadians employed, were among the key concerns for economic planners.

“We also have to do whatever we can to provide assistance to the productive sectors particularly those that are experiencing a loss of income.

“We need to keep businesses viable and they need to be able to see through this difficulty.

“In other words, we don’t want the stress they are facing to cause them to close, so whatever we can do to keep businesses open I think that is the important thing,” Williams added.

Nation News (Barbados)

Governor of the Central Bank of Barbados, Dr Marion Williams, says unemployment will increase. (Picture by Sandy Pitt.)

by GERALYN EDWARD

BARBADOS’ ECONOMY is in recession, but there is certainly no crisis in the country.

Central Bank Governor Dr Marion Williams yesterday explained that the textbook definition of more than two successive quarters of decline had occurred and therefore she had to concede that the economy was in recession.

“The dip in growth has been sufficiently significant over the last two quarters,” she told members of the media yesterday at the Tom Adams Financial Centre where she reviewed the performance of the economy during the first half of the year.

However, the governor said there was no need to panic, stressing that the country still had a significant level of foreign reserves.

“I have not used the word crisis to describe this situation. We would concede there is a recession, whether it is a crisis is a different matter.

“Barbados is a foreign exchange-constrained economy. I would say when we don’t have foreign reserves, or are close to not having sufficient foreign reserves, that we are in a crisis and we are not in that situation.

“The level of foreign reserves is sufficiently adequate. It is $1.3 billion. In 1991/92 [we had] $6 million is foreign reserves. We are now at $1.3 billion,” the governor said.

The country’s lead economist said the Barbados’ economic situation was linked to the global recession.

“We have known the performance of the economy for many months now. We have seen the performance of neighbouring economies for many months now.

“We have seen the performance of the American and European economies, so why should people be any more afraid by hearing the word recession than they would have before?” Williams queried.

Giving predictions for the rest of the year, she said tourism was expected to be most affected by the economic downturn and the situation will be made worse by Britain’s imposition of a tourism head tax.

She expected unemployment to rise but inflation to fall between three and four per cent by year-end. Net international reserves, she said, should fall by between $100 million and $120 million.

Nation News

Prime Minister David Thompson with members of the media (from left) Michelle Arthur of CBC, Jewel Brathwaite of the Advocate, Geralyn Edward of the Nation, Emmanuel Joseph of Mix 96, Kaymar Jordan of CMC and Ryan Gilkes of Starcom. (Picture by Sandy Pitt.)

by TREVOR YEARWOOD

Barbados’ hard-hit hotel sector is in line  for more Government aid.
Consumers will also get some relief from sharply rising food prices with a state agency to intervene in the market  to import goods and cut out the middle man.
Prime Minister David Thompson made these disclosures in a near  90-minute Press conference  at Ilaro Court, his official residence, last night.
In the wide-ranging  Press conference Thompson also defended a number  of controversial decisions taken by his Government –  on immigration, the acquisition of Sam Lord’s Castle and financial support for the troubled CLICO insurance operation.
He complained about a lack of discipline and self-restraint in the public service vehicle operations and elsewhere.
Against a backdrop  of complaints about rising  food prices, Thompson said Government would have  the Barbados Agricultural Development & Marketing Corporation (BADMC), or  a new state agency, intervene to import certain foods.
Cabinet recently took  a decision on the matter after Government had failed to make headway in getting local importers to bring some relief to consumers, and some prices remained “unconscionable  by any standards”,  Thompson said.
He admitted that a decline in the economy had continued in the first six months of the year, with the tourism sector being an area “that will give us the greatest concern”.
He said it was clear that more resources were needed  by small hotels to survive the economic crunch and these would have to be provided.
He noted that Government had set up a tourism industry relief fund to help keep hotels and other businesses afloat and jobs intact.
Thompson also fielded questions from a panel of print and broadcast journalists  on layoffs planned by Dacosta Mannings Inc. (DMI) and LIME. He said that in both cases the first news of the job losses came before his party was elected.
He called the DMI situation “a blow to the Social Partnership”, saying that  the job situation should have been brought before the partners with a view  to seeking alternatives.
Thompson also said his controversial new immigration policy would stay in place.
He noted, however, that Government was moving  to clear a backlog of about  6 000 applications  for immigrant status from Caribbean nationals,  with the establishment of as many as five immigration review panels.
The Prime Minister also made it clear that he was not happy with the behaviour  of the public service vehicle (PSV) operators.
He said he had spoken  to the police about the  van-stands and some of the “nonsense” going on with schoolchildren and the transport operators.