A former central bank governor is calling for Caribbean countries to give up their individual currencies and adopt the United States dollar.
Dr. DeLeslie Worrell, the former governor of the Central bank of Barbados, told a conference organised by the Sir Arthur Lewis Institute of Social and Economic Studies (SALISES) earlier this week that switching to the US currency would essentially eliminate the threat of domestic currency depreciation and with it, the resulting possible disruptions to economic stability.
He said there was no time like the present to switch to US currency, noting that the process is not as difficult as some people may imagine.
Worrell suggested a two-prong process, which involves physically purchasing US notes and coins as well as digital frameworks.
“The local currencies can be entirely redeemed by the Central Bank by purchasing and importing US currency notes and coins using their existing foreign reserve balances. Central banks and monetary authorities in the Caribbean all have foreign reserves sufficient to purchase US notes and coins to replace the full issue of local currency at the prevailing exchange rate,” he said, adding that most Caribbean Community (CARICOM) countries have the requisite foreign reserves to facilitate the recommended dollarisation process.
“All deposits and other liabilities of the banking system are held in digital record and that an equal amount of credit and other assets would also be held in digital record. All that would be required for these balances, is to convert both sides of the balance sheet from local currency to US currency at the prevailing exchange rate.”
There has been widespread speculation here that the Barbados dollar could be devalued and in his presentation, Worrell addressed the situation.
“Domestic currency depreciation brings challenges that inhibit the country’s economic development prospects. It undermines investor confidence. It undermines investor confidence because prospective investors know that devaluation would be inflationary and would trigger increases in import cost as well as unease and unrest in the labour force.
“The threat of devaluation also leads to capital flight as businesses and wealthy individuals switch to the US dollar value system,” said Worrell, arguing that the recurring threat of domestic currency depreciation also widens the disparity in income distribution.