Revenue intake for the second quarter of 2018 came it at BDS $746.7 million (US $373.4 million) which is up from BDS $677.8 million (US $338.9 million) in the same period last year. T<\/span>otal expenditure for fiscal year 2017\/2018 was BDS $3123 million up from BDS $3053 million. The slight increase in expenditure allowed for a decrease in fiscal deficit to BDS -$431.2 million from BDS -$524.1 million. Therefore, if the fall in earnings continue throughout the year the population of 280,000 will have to bear the pressure of more taxes and if government cannot dampen the fire that is inflation then demand for hard currency will increase which would not only erode the citizens purchasing power but also trust in the Barbadian dollar.<\/p>\n <\/p>\n
Exchange rate under threat?<\/h2>\n
Barbados has enjoyed a fix exchange rate but this is under threat by declining foreign reserves and increasing inflation. Reserves is estimated at US $336 million which covers ten weeks of imports which is far below the international benchmark of 12 weeks. To prevent another major decline the government will have to confront the idea of floating the exchange rate which will cause a devaluation. The current fix rate of 2 Barbadian dollar to 1 United States dollar is unsustainable. This is made worst by rising inflation which is a sign of increase money supply which means more Barbadian dollar will be chasing United States dollar. With a fix exchange rate this will be catastrophic. The threat of devaluation will further accelerate the decline as persons will take shelter in hard currency therefore more severe currency controls might materialise.<\/p>\n
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Selective default<\/h2>\n
Unlike other countries, majority of Barbados debt is to local creditors (about 70 %). This has lighten the impact in the demand for hard currency to pay high interest debt to foreign creditors. However, it has become clear that the remaining 30% of the country\u2019s debt which is to external creditors is significant enough to have led the country to suspend debt payments to them. As a result the country faced a series of downgrades. The administration of Prime Minister Mia Mottley discovered substantial arrears that were not included in the public debt figures which blasted up the debt to GDP figure to 175% from 157%. Caribbean Information and Credit Rating Services Limited (CariCRIS) listed the country\u2019s creditworthiness as default. Standard and Poor\u2019s downgraded the country\u2019s external bond to selective default and the local bonds to CC. In doing this suspension the government would have been fully aware of the consequences which is the rising interest rates due to the increase in risk, something the government clearly cannot afford.<\/p>\n
IMF<\/h2>\n
Hence, it is by no surprise during this same time frame the country began negotiating with the IMF after being resistant to the idea for years. The mismanagement of the economy has now lead the country to have its tail between its legs in search of an economic rescue. After experiencing what is to come from an IMF rescue in Jamaica which requires the intake of \u2018bitter medicine\u2019 to turn the economy around, the citizens of this small island will have years of turbulence ahead and many investors will remain on the fences. As such it is expected that growth will remain stagnant especially in a high interest rate environment.<\/p>\n
With all these current problems and the pains to come, the questions left to ask are what options are left to take for the country and what opportunities exist in the present crisis.<\/p>\n\n
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