FOREIGN RESERVES GENERATION PART OF THE PROBLEM
Friday, October 30th, 2009
DENIS KELLMAN’S COLUMN – THE DEBATE
Barbados Advocate
October 21, 2005
Recently, I have been asked if persons with whom I am associated, appreciate what I have been saying and writing over the last 11 years. I was told that institutions that accepted what I said were able to gain from such pronouncements.
These persons are now openly saying that they do not want me to make any predictions about them that are negative. They have been able to repeat many things which I have said previously that have happened and are now of the opinion that those who do not listen to what I am saying, will fail miserably.
I have been reflecting on what these persons have been saying and recognized that some institutions and the country have not developed at the required rate, because some persons do not want to acknowledge that I am capable of providing the solutions to the current problems.
Over the years, I have written that the problem facing this economy has more to do with the capacity to generate foreign reserves and not revenue. Within the last 11 years, I have witnessed a propensity to brag about revenue and foreign reserves that have not been earned by productive means. Our foreign reserves for the past 11 years have increased because of borrowing, property transfers as it relates to local properties and the relocation of returning nationals.
Some time ago, I wrote that we as a country have not appreciated the contribution of returning nationals and neither have we fully studied their financial planning. Had we fully appreciated how we could gain from them, by allowing them to enhance our reserves, we would have put instruments in place to truly measure their contributions and compensate them by encouraging them to relocate their full savings in order for us to get that needed foreign exchange.
For this suggestion to be fully appreciated, we must first understand that the costs of external borrowing are far greater than the costs of compensation for returning nationals. These persons have created new foreign reserves without any negative outflows. I am suggesting that we have to first look at how it will benefit them to fully relocate their savings, measure the benefits and look to see what it would costs us to fulfill that dream.
When this Government sought to borrow $300m, I suggested to the government to seek help from the returning nationals, in order to fulfill their foreign reserves need. The reason I was concerned was because we were about to pay out $442m in interest charges to outside sources without this initial amount generating any revenue and foreign reserves to service itself.
People must appreciate that the inflows from returning nationals are to service their current demands while their savings are still located in the country of their production, therefore these savings will not be brought to the country of residence by accident.
These persons see their savings as their investment to generate revenue and they will continue to maximize their returns. We must offer them something better than what they are receiving now, and the same way that we pay interest rates above par for loans, we must be prepared to offer them rates above the current savings rate which they are now receiving elsewhere.
In 1973, we set up our own Central Bank and created our own currency. This action caused us to increase our purchasing capacity by 25 per cent by linking our currency to the US dollar, a country that practices the Republican style of Government, even though seven years previously, we took independence from England, but refused to do it fully to make sure that we could practice a foreign policy of “friends of all, satellite of none”.
Twenty-five years later, the economy is supposed to be a lot better than in the early 1990s, yet we are now hearing that we should be adopting the EC currency. This decision will devalue our currency by about 25 per cent and will put us back to our 1973 position.
The key players are now admitting that we have not progressed over the last 11 years and that the decision not to devalue in the early ‘90s was a vote of confidence in the leadership. We are now worse off in 2005. This has occurred because we now have all our eggs in one basket. In the early ‘90s, we had our eggs in many baskets, even though they might not have been performing at the rate we expected.
I saw in another section of the press that a Special Conference will be held on November 19, 2005, and on the same day an amendment to the Constitution will be debated and voted on. This action is not as simple as the reporter would want one to believe. The importance of this amendment can create debate for a whole day.
The ballot for the constitutional change must be secret and this must be treated as a serious matter. Those persons supporting the change must be given an opportunity and this must be treated as a serious matter. Those persons supporting the change must be given an opportunity to present their case and those against must be offered the same opportunity.
After the two-thirds majority is sought, the party must be in a healing position and those persons in charge of the party must do nothing to interfere with the good name of the party. If the two-thirds majority is achieved, persons must be given an opportunity to decide whether they want to contend the position, acknowledging that the chairman will now be the Political Leader to suit the party’s constitution and will not be binding on the supreme Constitution.
The vote for Political Leader should not be on the same day, because it will be too time consuming and all candidates should know the persons eligible to vote by name and address for verification. Please note that I have always taken a stance to suit circumstances and when they change I am subject to change also.
Dr. Eric Williams once said that one from ten leaves zero, but that was in his time, because today, one from ten leaves nine equal persons. Please let us fight fairly and think party not self.
Peace, love, unity, fairness and truth.
(Denis Kellman is the Parliamentary Representative for the parish of St. Lucy, Barbados)





