BDS Dollar Devaluation Near??? Is Pressure Cooker Lid About To Be Blown Skyhigh?
June 3, 2010 Leave a comment
A quick overview of the Barbadian economy with its hight debt in ratio to its GPD (gross domestic product – what a country owes & what its produces) by the blogger over at Brance Space, is a receipt for disaster unless Barbados change course and change course fast.
Philip Stahl, a writer, former astronomer, developer of the first astronomy curriculum for Caribbean secondary schools and who occasionally vacations in Bim when he can, in a post title “Will Barbados Fall To The Soverign Debt Crisis?” has written a piece comparing little Bim with Greece. Like Greece, Barbados have few resources. Like Greece, Barbados have a manufacturing base that is no help to the country for its survival. Like Greece, Barbados rely on tourism to pay its bills. Unlike Greece, whose debt is roughly 10% of GDP, Barbados is a staggering 53% of its GDP!
But atlas! Is the pressure cooker lid about to be blown sky high?
As one Bajan (“Uri”) who follows the financial pages put it: “No wonder our Prime Minister is not doing so well and is in and out of hospital!” That same astute student of Bajan finance predicted a devaluation of the Barbados dollar within the next year – about the time the country has to cut its debt to GDP ratio by half if it wishes to not end up like Greece. He predicted devaluation to the level of the EC (Eastern Caribbean ) dollar which is currently pegged at 75% of the BDS $. The BDS $ in turn is in a ratio of $2 BDS to $1 U.S.
Good grief! In a year’s time???????? What are the economists saying? As if things weren’t bad enough. Devaluation would only lead to inflation on top of the already inflated prices in a $600 million + food import country. Haven’t our leaders indicated more than once that they don’t know where the money coming from to met the next payment? Imagine the mortgage on the house. Then imagine on an economic level.
The higher the debt-to-GDP ratio, the less likely the country will pay its debt back, and the higher its risk of default.
And what did happen to Greece? Having adopted the euro over its currency, high debts to borrowing EU partners, high immigration which may lead to eroding of traditional values, principles and beliefs, few economic opportunities, high unemployment rate, in some cases working 2/3 jobs to survive, bad purchases by banks, downgraded credit rating, investors uncertainty = a bailout austerity $140m IMF package, at a price of layoffs, wage cuts, wage freeze, increase retirement age and taxes.
Some may shout from the rooftop “de BLP got we in this mess with de reckless spending & borrowing in a surplus economy”, others, “why de DLP borrowing so much money to run de economy when they could raise de VAT etc ? and others ” we are in a global recession” would continue to circulate for some time to come. Yet others,”shades of 1991 all over again.”
A perception that Bajans are living beyond their means like the Greeks, lining the pockets of oil producing nations with its high importation of vehicles on our 166sq mile rock and making a dread situation worse by wasting petrol on “car rallies”, road gridlock in four years, praedial larceny not taken serious and if all “foreign food imports were suddenly cut off most of the population (now 288,000 according to The CIA World Fact Book:2009) would starve.”
Will Barbados fall to sovereign debt crisis? The blogger hint that tourism may save the day.
A look at our closest neighbours Trinidad & Jamaica is a reminder to us all of their devalued currencies.
Let us believe the governance of a “run away” economy is not related to PM David Thompson’s recent illness.