BARBADIAN Economist, Bernard Codrington, believes that a devaluation of the dollar is not a solution to the current problems facing this country.
Furthermore, he said it is not clear to him why this talk of the International Monetary Fund (IMF) arrangement is surfacing.
Codrington, who is also a retired Banker having previously worked with the Barbados National Bank and Republic Bank, spoke to The Barbados Advocate amid raging debate about the status of the island’s economy and with some people suggesting that the country enter an agreement with the IMF, which could insist on changing the existing parity of the local currency.
Codrington said that given the structure of the economy, devaluation in the foreseeable future, is not a solution. “The economic function of a devaluation of the domestic currency is to expand exports and to reduce imports by making local production for export cheaper and the cost of imports more expensive,” he explained.
According to him, “The exported goods must be price elastic. Foreign consumers will buy because it is cheaper. The imported goods must also be elastic. We will import less because it is more expensive.”
He reasoned that the staff costs of inputs to the tourist industry is unlikely to decline, all of the inputs have large imported factors and “this will bring us back to where we were before devaluation”.
On the IMF, Codrington noted that the institution is a “last resort” lender. Querying why this talk about the Fund is surfacing, he wondered whether it means “we cannot take responsibility for our own affairs and need some external body to tell us what to do”.
According to him, “They are no more knowledgeable than we are. We have access to the same analytical and implementation tools.”
He also noted that it may be a crisis in our leadership, but concluded that if the IMF is resorted to “we still have to do the work”. (JB)
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