By NATARIO McKENZIE
Tribune Business reporter
nmckenzie@tribunemedia.net
The Central Bank’s newly-appointed governor yesterday reassured that the Bahamian dollar faced no devaluation dangers, adding that a floating exchange rate may not boost competitiveness.
John Rolle, speaking at the College of The Bahamas’ ‘Day of Economic Discussion’, part of its ‘Business Week’ celebrations, said: “I don’t think that there is anything in the current economic fundamentals that would suggest that the currency is in danger.”
The Bahamian dollar is currently pegged one:one with its US dollar counterpart via a fixed exchange rate system. However, the rapid build-up in the $6.5 billion national debt has prompted concern that this nation may have to devalue unless it reforms its fiscal affairs.
Mr Rolle added that there had been a long-running debate on whether the Bahamas should have a flexible or floating exchange rate.
“We tend to have, from time to time, a lot of debate over whether we should have a flexible exchange rate. It doesn’t mean it would devalue, but if you have a flexible exchange rate it could up or down,” said Mr Rolle.
“If you’re not doing things right, it could go up or down. We talk about that in the context of being more competitive internationally, but that really doesn’t translate one for one into competitiveness for a country like the Bahamas, because we don’t have the right amount of local inputs that go into what we produce.
“If you devalue, the cost of those local inputs stay the same. If the cost of those local inputs are not staying the same and we devalue, when your currency moves you are not going to get any net benefit.”
Mr Rolle said that improving the Bahamas’ competitiveness requires it to become more productive.
“The competitiveness issue for us really translates into being more productive. It has nothing to do with the value of the dollar,” said Mr Rolle.
Comments
MonkeeDoo 8 years, 1 month ago
Mr. Rolle is clearly in the Governments pocket, so expect to hear good news always from him and Perry. Dead good news. I have no doubt that Jamaica was told similar fairy tales until they had no foreign exchange left and had to call the IMF for help. Then the IMF tells you what to do. Spare the riots of the civil servants if you cut their wages and perks and just devalue the money and they will take home the same pay cheque.. They just won't be able to buy as much but they are stupid anyway so go for it. The Jamaican's have hundred dollar notes like us, but they are worth less that one US copper. ( penny )
banker 8 years, 1 month ago
What Rolle said is a bunch of incoherent nonsense. Devaluation will come not from one day someone decides that monetary policy would benefit a floating dollar, as Rolle seems to suggest.
Rather devaluation would in all likelihood, come from external pressure of foreign lenders to increase the US dollar reserves in the Bahamas or face devaluation. The government has already borrowed money to buttress the reserves, and if the debt keeps rising, and they need the money for debt support and don't have it or can't borrow any more, then there will be huge pressure to devalue the Bahamian dollar.
For years the government has "borrowed domestically" from sources such as the NIB funds. If the government defaults on those notes to the NIB, then scores and scores of common folks, like the aged and retired will suffer tremendously.
The Bahamas is currently on the brink of a precipice with its deficits and national debt, and Rolle speaks as if he were running a switcher stand.
asiseeit 8 years, 1 month ago
These people are trying to manage a sinking ship. When the only positive financial news a government can give is "We raised taxes and it sort of worked, a little bit", you are sort of F#@KED!
newcitizen 8 years, 1 month ago
I like how they say it will be floating or flexible and can go up or down. Nope, it will only go down. If the central bank removes the peg, we will be extremely luck to get $0.60USD for each of our dollar, and will more likely be looking at $0.40USD to $1.00BSD. It would absolutely decimate any savings of Bahamians and cause prices to skyrocket as everything we buy is imported and almost all of those imports are purchased with USD. We will lose all of our purchasing power.
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