An interesting debate happened in the house of assembly this week with the passage of the Central Bank of Barbados (Ammenment) Bill 2007. At issue is whether liberalisation of the capital account is a good or bad thing for Barbados. (In layman’s terms, the Capital account deals primarily with large sums of foreign exchange such as for investment in projects or in real estate, etc.) Two contributions to the debate stood out. (at least in the media)
The first was that of Clyde Mascoll:
The second was by Opposition spokesman Dr. David Estwick:
“The more liberalised the capital account becomes, the greater is your flexibility needed on the exchange rate,” he warned, noting that when studies were done by Mona Campus’ Professor Wint they showed that the regional economies with liberalised capital accounts had done worse than those without such liberalisation.
…He advised that to make capital account liberalisation work in Barbados, Government must correct its problems in the non-banking sector and allow for less collusion and restriction in the stock market.
Most of the concerns that we on the margin have heard about the liberalisation of the Capital Account tend to centre on the ability of the Government to conduct the level of policing and regulation that a liberalised environment will require. It is important that the government move to address the level of confidence that the public has in its abilities over the coming weeks.
From reading the debate two things become clear, first – no one REALLY knows what will happen when the controls come off. It seems to be boiling down to a “the glass is half full or half empty” type of arguments. It seems that the good times can be very very good and the bad times will be very very bad, and the pundits are split on whether there will be good or bad times.
The second thing that has become clear is that Governments of Barbados from here on out will have to manage the economy far more prudently than before.
Because last week what really happened, is that we very deliberatly removed one of the main safety nets under the tightrope that government must walk on from here on out.
We can only hope that they are up to the task.