Central Bank of Barbados: Political Tool or Facilitator of Economic Development?

Submitted by the Mahogany Coconut Think Tank and Watchdog Group

We are not a bit surprised that former Governor of the Central Bank, Sir Courtney Blackman is blaming both the Barbados Labour Party and the Democratic Labour Party for the current financial woes. We are also not surprised, that the current Governor, Dr. DeLisle Worrell, is saying that the existing financial sector stymies or does not support innovation and creative enterprises. In layman’s terms it really means, that those citizens with startup enterprises, cannot get them financed.

These two statements show beyond a shadow of doubt that the current crisis, is not going to be abated by the noise coming from the apologists of the government and opposition. When stripped of their diplomatic sheets, they convey a bankruptcy rampant in both of these political dinosaurs (BLP and DLP). The simple truth is that both parties have paid nothing but lip service to creating a new entrepreneurial class and have bogged themselves down in economic models that are no longer relevant. We are left with ego based arguments from economists, who are merely singing for their political supper.

Both Governors have failed to admit that the Central Bank itself is a model of a decaying economic management structure that can scarcely move beyond collecting data and regularizing the commercial banks. The Central Bank itself can do little to facilitate any radical changes in the economy. Indeed, it was Dr. Blackman himself, who once stated that the Governor of the Central Bank is “a creature of the Minister of Finance”. We believe that his statement justifies our position about the relevance of the Central Bank in economic planning. The Minister of Finance is a politician first and foremost, if Dr. Blackman’s position holds true; it means that Governors of Central Banks are actually political creatures!

Recently, while addressing the Barbados Association of Insurance and Financial Advisors, the current Governor of the Central Bank, Dr. DeLisle Worrell, suggested that the Barbados financial system is “failing” innovators. Dr Worrell told his audience that he did not have the answers for filling “gap” which exists between traditional financing and that for new business in such areas as energy and culture. Such an admission from the Governor would not have been good news for the hundreds of citizens trying to get their businesses off the ground.

When we examine the two positions of the Governors, we are forced to ask: What is the real function of the Central bank. Is it merely a political tool or is it incapable of assisting with the emergence of the new economy?

We believe that a $100 million Fund should be immediately set up, to jump start small businesses. We also believe that the establishment of at least six Entrepreneurial colleges, with rolls not exceeding 200 each will assist in developing present and future business persons.

It is time for political gymnastics to end and real progressive policy changes to be made. It is also time for the role of the Central Bank to be revisited.

0 responses to “Central Bank of Barbados: Political Tool or Facilitator of Economic Development?

  1. peltdownman

    I am with you on most of what you say up to the part where you claim that the Fund needs to be private sector in origin… wah dese is the wussest when it comes to understanding risk taking. The monied class in Barbados today are the beneficiaries of service based utility type operations which are basically safe in design. Few will be courageous enough to venture into an environment that is unsettling to them. They are more likely to stick with the bricks and mortar and blue chips. Look, I will be frank with you. The model that is required is that of a Government underwritten Development Bank with APPROPRIATE STAFFING. Tax payers wealth must fund true development schemes to private funds… that is an idea that is best suited for large developed financial markets and so on.


  2. NOT private funds


  3. So Baffy you are asking for the re-establishment of a BDB type operation?


  4. Of course; every other territory in the region has one. This right of centre model that has been embarked upon by the Owen Arthur administration is imploding. The issues with original designs have every thing to do with staffing. I really do not care where the people are brought if from, as long as they are the right people with a long term ENTERPRISING view on development. One is unlikely to find such people from within the ranks of our present domestic accounting, finance, economist, legal and MBA fraternities. I say import the f#ckers …


  5. Barbados and the BLP in it is chaotic, just a mess.


  6. In the above PDC post, an inadvertence went out. We seek now to correct it now we back on the blog. It should have been “with haste”, and not “without haste”.



  7. Puerto Rico will soon be the 51st state in the United States union; this is imminent. Trinidad and Tobago will soon take over and control the Barbados island; this too is imminent.


  8. @ Bush Tea

    “like luxury SUVs for everyone from government messengers to every statutory senior staff…

    @ Well, Well

    “I could not believe my eyes………..saw messengers driving ML or MP luxury SUVs high end and stupidly expensive”

    Bush Man & Well, Well, you guys got this thing wrong. The central guv’ment does get them SUVs duty free, while statutory departments have to apply to the Ministry of Finance to get duty free concessions; so these vehicles don’t be that expensive …….lol, lol.

    That being beside the point, the guv’ment got nuff SUVs fuh true. This administration took a woman from a bank, give her the general manager pick at the Transport Board and a blue Hyundai SUV, and the bus service has gone from worse to worst; took the man from the union, give him the Director job at UDC and a Nissan X-Trail SUV, but he can find time to go on the DLP campaign x-trail to inform supporters how many BLP representatives did not apply to the UDC on behalf on their constituents; Judy at DEMS got a Toyota SUV, but complined that the government continues to neglect that depertment; Dr. Donna got the director job at NCF along with a Nissan X-Trail SUV, but Lashley and Monique took care of that; Stanton has a SUV, but continues to be acting general manager at the SSA; Dr. Leroy must also have a SUV included in the sweet deal at BIDC [he also found the time to be on the election campaign platforms...I was wonering if the general orders don't apply to him and the union man....Caswell?]. DLP Jolla Barrow got a SUV as the director of the drainage division. Could go on and on, but you are correct, Well, Well.


  9. LOOK | April 30, 2013 at 2:48 PM |

    Puerto Rico will NOT be the 51st state in the United States union that position has already been filled by Great Britain …!


  10. Art………………I tell ya, SUV mentality.

    From what i know the head of EGFL was placed there by Arthur, so if you want your application approved by the board, you better be close to this guy……..Cabinet can approve a small grant, and the board at EGFL cannot overturn the decision, but they can make you wait, a gentleman lamented this…………they need to get the political hacks out of these jobs where people’s futures are left to their discretions………i am for bringing in broad-minded people who are in no way connected to the small minded political landscape


  11. Well Well

    There is really no way around it, both CEO’s have done sufficient to dismantle the intent of BOTH political parties. They really serve no useful purpose in a development focused environment. These posts should be like that of the NCF, renewable contracts (even with the inherent deficiencies). Is it too late? How much is it going to cost the tax payers to rid themselves of these two dinosaurs …?


  12. Baf………………i don’t know, they have succeeded only in causing everything to fall apart.


  13. Common sense is not common

    Is Timothy simmons still at Fund Acess.Tell me what does he know about business.

    So many complaints about obstacles in the way of small and micro business approaching Fund acess and the other organisation.Can’t remember who heads up that one,I think it used to be a short guy with glasses.

    Useful comments by BAFBFP.


  14. Simmons is at EGFL, isn’t Roach at Fund Access?


  15. I think they are both Timothy’s that is where the mix up comes in…..


  16. Common sense is not common

    Thanks David.Yes Roach is the short Guy.Guess I had it switched around.


  17. If memory serves Hammie Roach was at BDB which should have prepared him for the job at Fund Access. Simmons is the MBA boy who we must admit is a little puffed up. Is Terrence Thornhill still the Chairman of EGFL Board?


  18. David………..my mistake, Hammie, not Timothy……


  19. I believe i saw a recent document with that name.


  20. The boards have remained unchanged. There is nothing to be gained by dragging a Clico official into this. We are faced with two dinosaurs who are still relatively young men. There is NO retirement on the horizon … this is NOT good …! BTW the Chairmen of both boards are also even younger, but again, the boards are a collective.

    Thanks for the support


  21. @ David
    “Simmons is the MBA boy who we must admit is a little puffed up.”

    Sir, you are being a bit disingenuous about Mr. Simmons. He is not at all a little puffed up, he takes the whole cake. Became this way after entering UWI and obtaining his BSc Accounting; know him very well. However, he does have experience running a business, being a partner in TNT Barbeque Hut.


  22. @ Baffy

    For sake of preventive embarrassment, you should know facts BEFORE uttering and publishing information. Puerto Rico, following the Spanish American War (1898) became United States territory; its residents, since 1917 are United States citizens. Puerto Rico is yet United States territory, unincorporated but still United States territory. Unincorporated, this means, the area (Puerto Rico) is controlled by the United States government but not part of the United States union of fifty states. Guam also is United States territory, unincorporated but still United States territory.

    Puerto Rico is United States property NOT Great Britain


  23. Some people can’ see the humor in t’ings … hah… Awight, awihgt … what ever …!


  24. A story of interest:

    Justice Dept. targets U.S. accounts at CIBC’s Caribbean wing

    The U.S. Justice Department said on Tuesday that a federal court has authorized the Internal Revenue Service to seek information on U.S. taxpayers who may have accounts at Canadian Imperial Bank of Commerce FirstCaribbean International Bank (FCIB).

    In a move resembling a recent IRS inquiry into Americans with Swiss bank accounts, the department said a court order will let the IRS serve a ‘John Doe’ summons seeking records of FCIB’s U.S. correspondent account at Wells Fargo & Co.



  25. So much is happening so fast, it’s getting hard to keep up.


  26. @ Baffy

    Nothing humorous about you, not anymore. . . . The joke is on who. . . . dumb jackass!!!!!


  27. Look

    You sound like a sissy and pun this blog the last thing that I is do is get in a pissing match wid de women … so ga long hear, unless you feel a need to defend two dinosaurs …


  28. @ Baffy

    Seriously, you don’t want to rumble in the jungle with this lady LOOK. I will verbally hurt you, much more than I have already.


  29. See wah I tell yah … Look is a woman … Not my concern wah ever it is that you feel you could do… Women and me is luv … not fight


  30. I found this New York Times article interesting reading,

    Economists Agree: Solutions Are Elusive


    Published: April 23, 2013

    Last week the International Monetary Fund hosted a conference of some of the world’s top macroeconomists to assess how the most intense crisis to have shaken the industrialized economies since the Great Depression has changed the profession’s collective understanding of how the world economy works.

    Shawn Thew/European Pressphoto Agency

    Olivier Blanchard, chief economist of the I.M.F. He said economists don’t know “what financial stability actually means.”

    Two things struck me about the conclave. The first was hearing George Akerlof, a Nobel-winning economist from Berkeley, take to the lectern to compare the crisis to a cat stuck in a tree, afraid to move.

    The second was realizing how, after five years of coping with the consequences of the disaster, there is still so much uncertainty about what policies are needed to prevent another financial shock from tipping the world economy into the abyss again a few years down the road.

    “We don’t have a sense of the final destination,” said Olivier Blanchard, chief economist of the monetary fund. “Where we end I really don’t have much of a clue.”

    In determining what is a sustainable level of government debt, or whether central banks should focus on anything other than inflation, or what should be done to prevent further bubbles from destabilizing economies, he argued “we are still very much navigating by sight.”

    If you are one of the nearly five million American workers who have been unemployed for over six months, or one of the six million Spaniards, three million Italians or 1.3 million Greeks without a job or a clear prospect of finding one, this amounts to a tragedy.

    Considering that the large and complicated financial institutions that set off the crisis five years ago have only gotten larger and more complex, the gap in knowledge is downright scary.

    It is scarier to consider how politicians have chosen to ignore much of what the profession has learned from the experience.

    Berkeley’s David Romer counted six shocks that hit the United States in the last three decades alone. The economy dodged the bullet in two — the Latin American debt crisis of the 1980s and the Russian default in the 1990s, which led to the bailout of a hedge fund, Long-Term Capital Management.

    It took a hit in three — the collapse of much of the savings and loan industry in the late 1980s, the 1987 stock market crash and the dot.com implosion. But it got hammered in the last one.

    Economists used to think it was obvious how to contain such shocks. No point trying to stop a bubble from inflating, they thought; it would be impossible to identify in the first place. The best a central bank like the Federal Reserve could do is stand ready to cut interest rates after the bubble burst, patch up the financial system and set the economy back on track. In terms of budgets, governments should aim for a prudent level of debt to retain space to borrow and spend when it was needed.

    Now, interest rates have been near zero for years, and growth has not been restored to acceptable levels. And few if any of the economists gathered at the International Monetary Fund’s headquarters in Washington would venture a guess about what level of debt would be prudent these days.

    On the eve of the financial crisis, Spain’s net debt was just over 25 percent of its economic output. The ratio of net debt to gross domestic product in Ireland hovered around 11 percent. Martin Wolf, chief economic commentator of The Financial Times, said that Britain’s debt ratio was close to a 300-year low, way below its level during the Industrial Revolution.

    It wasn’t low enough, apparently. Five years later, Ireland’s bailout of its banks took its net debt to 102 percent of its economic output. Spain’s debt hit 80 percent of G.D.P. And Britain’s reached 86 percent — the highest since the 1960s.

    This is of enormous consequence. One lesson from the crisis — first learned in the 1930s and corroborated in several contemporary analyses — is that when interest rates lose their power to stimulate the economy, additional government spending can help generate real growth. Still, the fear of “excessive” debt has led many governments to cut spending even in the face of economic stagnation.

    Countries like Ireland and Spain have pretty much lost their ability to raise money in financial markets. They are now struggling to reduce debt with little success: cutting public spending in the midst of severe downturns only makes economic performance worse, adding to the debt burden.

    Yet even in Britain or the United States, which can still borrow at near-record-low interest rates, governments have taken to cutting public spending at the expense of growth and jobs.

    Perhaps this is natural. After all, the crisis upended a consensus. Economists and policy makers bred to think that all that was needed to run a prosperous economy was to keep inflation low, strive for fiscal balance and deregulate have found themselves in a more complex world. In this world, financial bubbles matter, capital flows are of dubious merit, low interest rates fail to stimulate growth and government spending becomes the only tool with real traction to spur economic activity.

    And there is reason to be cautious. With total government debt in the rich world stuck at around 100 percent of its combined economic output, there is a legitimate fear that a rise in interest rates could tip off a financial death spiral. Moreover, if countries with debt levels well under 50 percent of G.D.P. were so devastated by the crisis, it is hard to imagine what might happen to them if another were to hit them.

    Still, the argument against debt is often overstated. Disagreement and uncertainty among economists have given the political systems in Europe and the United States ample license to engage in austerity policies that frankly are proving counterproductive — making recovery more difficult and painful.

    In his assessment at the end of the conference, Mr. Akerlof argued that the response in the United States had been reasonable. From the bank bailout to the fiscal stimulus to zero short-term interest rates, “the economic policies postrecovery have been close to what a good, sensible economist doctor would have ordered” for the stranded cat.

    But other economists were not quite as sanguine. Indeed, one take-away from the economic conclave is that it may be a fantasy to think that the world’s economies can be steeled to withstand a shock like those the financial system can provide. If so, the urgent task is what kind of limits should be imposed on banking and the rest of finance to temper its propensity to careen toward disaster.

    Financial regulation is being tightened around the world. Banks are being required to raise more capital than before. Bigger banks face tougher rules. Still, there is no consensus on which new institutions might be needed to monitor and temper finance, or how tough the rules should be.

    What good does the modern financial system do, for the rest of us? What determines financial fluctuations and shocks? How do they affect the broader economy? What can governments do to make them less disruptive? Economists have few answers.

    “We don’t have a clue of what financial stability actually means,” Mr. Blanchard confessed.

    Mr. Romer said, “Five years into a crisis of this magnitude, we should be, ‘Oh my God, the cat has been in the tree for five years, it’s time to get the cat down out of the tree and figure out how to make sure the cat doesn’t go up the tree again.’”

    E-mail: eporter@nytimes.com;

    Twitter: @portereduardo


  31. The study of economics is a scam and a sham.
    …think snake oil….


  32. Bushy…………………….you have some explaining to do about the ILO debacle now exploding………….i thought you told me they were a fly by night operation with no teeth, well that world wide body with no teeth are about to put the bite on the government of Barbados.

    Observe………………..i like the cat stuck in the tree that can’t move description, that cat may be stuck up there for another 50 years, having outlived all it’s nine lives while there before dying, is there anyway you can get this current administration to read this article, as i said those boys do not keep up on foreign news.


  33. And local economists (soothsayers) will have us believe they know what the hell they are doing, and what will happen in the future………….they must be psychic hotlines.


  34. @Observer

    It appears from the article you posted the government of Barbados is in deep doo doo and by extension Barbadians. If we read his position correctly he is saying that if reduced interest rates is not acting as a stimulant to the economy the way it has in the past then we have to spend to stimulate economic activity. The problem we have is that we have been fixated on guarding forex which is important BUT as important is not allowing the economy to stall. As Bush Tea would say ‘we goose seems to be cooked’.


  35. As a member of the public following these issues in the local and international media I have concluded that Barbados and the western world are in uncharted waters in terms of economic policy and answers are elusive. The much maligned Central Bank governor seems willing to use his brain, think through issues and articulate a view based on his own thinking.

    Now from where i sit how do things look.

    What are your key macroeconomic performance indicators again:

    From listening and reading I think they are:

    Growth In real GDP;
    Debt to GDP and Fiscal deficit to GDP;
    The state of the currency;

    1. As I understand the current Central Bank governor, the state of the currency as measured by the foreign exchange reserves is the most important measure in BIM.

    Dr. Worrell seems to have been arguing that in the weak global economic environment and the structure of the barbados economy, growth in real gdp that is compatible with maintaining adequate reserves is challenging at best. Mr. Arthur , Mr. Mascoll, Mr. Hoyos and others seem to differ and appear to be suggesting that we can find growth from domestic sources and still maintain adequate reserves. For me, the burden of proof lies with Mr. Arthur, Mr. Mascoll and Mr. Hoyos on this one. The trend in the reserves is a downward one so i am with the guy who says be careful with the reserves.

    2. The government remains committed to maintaining levels of employment and social services. As I understand it weak growth has impacted revenues and that combined with maintaining employment and social services has led to higher deficits and an increase in debt levels. Mr. Mascoll, Mr. Hoyos, Mr. Straughn and a number of others have been calling for an urgent if not immediate program to reduce the deficits. I may be wrong but Mr. Mascoll seems to be calling for more of a switch in spending from the current to capital account rather than a reduction in spending per se. The government and the Central bank leadership seem to be arguing that if you have enough reserves, if foreign exchange led growth is unlikely and the commercial banks and the NIS have adequate liquidity, there is no need for a crash austerity program such as 1991, due to the likely negative impact on growth and social stability.

    To my simple mind they seem to be saying that in the current global economic environment fixing the deficit in the near term may lead to the mother of all recessions because there is unlikely to be adequate private spend to replace the reduction in government expenditure. This in turn could actually lead to lower revenues and bigger deficits as seems to have been the experience in the UK, Spain and Greece for example.

    For me this is a tough one, there seem to be some complex tradeoffs involved, but I think its unfair to paint the CBB as a political tool because there is a strong economic case against austerity and rapid budget balancing in a weak economy. its not clear to me that the deficit hawks are outlining the tradeoffs at all.


  36. @Observer

    That is some heady analysis there BUT we always come back to the unsettling question – how long can government sustain current strategy given the current trajectory.


  37. David, stimulus spending will increase the deficit and debt in the near to medium term. Also the amount you can spend as a government is determined by how much financing you can raise. The local consensus seems to be that we must balance the budget now. My previous post was way too long but my simple mind is trying to say that I find that the tradeoffs are absent from the arguments locally.

    What I take from the NY Times article is that we are in uncharted waters and old rules may not apply. The Credit rating Agencies and the financial institutions that use ratings as god given guidelines have effectively forced many governments into austerity programs. We got downgraded because we did not cut expenditure fast enough and we could not grow fast enough in this weak global environment. As a result of the downgrade the lack of access to financing or higher cost of it could force us to cut expenditure even more and grow even slower.

    Dr. Worrell seems to be saying to us lets think for ourselves and not be bound by rules and guidelines for a normal economic environment. He may be wrong on a number of things but at least he is thinking.


  38. islandgal246

    The underground economy is thriving, many trades people are working. I have been trying to get someone to repair a gutter and do some carpentry and several of them are busy. The recession is hitting the retailers, my suggestion is to those clerks and sales associates is to get a skill. Plumbers, electricians, masons carpenters are in demand as well as agricultural workers and gardeners. Survival is for the skilled and the fittest.


  39. David boy when the wicket bad sometimes all you can do is occupy the crease and eke out some ugly runs.


  40. but Islandgal the Elites screamed bloody hell and continue to scream as the government tries to build a case for scaling back the spend on university education and a shift to the polytechnic and bcc.

    read the 2012 budget


  41. Islandgal what I would like to see is some of the artisans link up with the uwi graduates and take the services they offer to a higher level.


  42. a 24 hour plumbing and other services with an online infrastructure, payments being made online or via cell phones maybe too much to dream of


  43. @Observer

    Maybe so but there must still be a sound tactical plan even on a bad wicket with all the playings doing their damnest to execute.

    Has government been exercising optimal fiscal discipline?

    Has the leadership from public and private sector synchronised on the plan which we need to execute to go the full five days?

    Is there the opportunity to execute transformational strategies even in these conditions ie. Match winning innings. Bad wicket or not we have to play to win.


  44. David, to me the answer is clearly no. Large parts of the society are wedded to their current business models and practices, and have not even begun to envisage a new normal. The various interest groups are dug in and are defending their traditional interests.

    Lets see the response to the revised strategy and the budget.


  45. @Observer

    Agree with your last comment AND this is where an effective communication strategy should help. Prime Minister Stuart needs to watch the movie The Kings Speech.



  46. Dr. Worrel, Mr. Sinckler and Mr. Inniss are showing leadership, the push back from the elites and interest groups is most interesting to watch.

    The private sector leadership seems fixated on stimulus and deficit reduction. Not sure both are compatible in the medium term.

    Lots of properties are on the market for sale, but offer prices still seem high, how will the market clear at these prices? Maybe a change of government or some policy initiative will bring back the building boom.

    These are complex and unpleasant tradeoffs and the administration itself may be quite divided on the way forward, while the opposition is not articulating a clear position either. If we take the lead from their chief economic spokesperson and switch to capital spending do we build highways to nowhere like Japan did. will the banking sector locked into investment guidelines based on credit ratings offer the financing? If we go full austerity as per Mr. Straughn what is the channel for private led growth to replace the lost public spend?


  47. In this scenario leadership as a KPI can only be measured if government gets buyin from the private sector. It is not leadership because you or the next person opines. In the final analysis the Prime Minister must exude the leadership to which we speak.


  48. We are up the creek, what sources of paddling do we have:

    1. Adequate reserves (don’t lose that);
    2. Surpluses in the banking sector and NIS (how are these best utlized):
    3. A good brand name in the high end tourism, hospitality and real estate market (how do we leverage: Four seasons maybe, support apes hill, almond restart, energy efficiency drive in sector)
    4. Good name in international business (improved business facilitation)

    what sources of paddling do we need to develop:
    1. means testing for some social services;
    2. Revamping and/or elimination of statutory bodies
    3. Reduce energy costs across the economy;

    maybe some statutory corporations should be brought back into the civil service where their spending can be better monitored or be foreced to operate with a maximum subsidy which could for e them to be more commercial in orientation.

    None of this is even nearly easy to do


  49. the government deserves it share of the blame, but I think we miss the point that in an economy and democracy like ours institutions and organizations outside the state are major actors. I think we have focused so much on government and not asked enough questions of the other key actors.

    For example, companies and organizations have a hard time changing and adjusting to new environments. take LIME for example, the change will have to come from FLOW. has the private sector really come under scrutiny?


  50. @Observer

    The government needs to do a better job bring partners together in the national interest. While you have focussed on economic/monetary issues there is the justice and law and order systems which must be managed in parallel. It is a bad situation which demand that leaders must lead.


Post a comment and join in the discussion, you never know how expressing your view may make a difference.

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s