Sunday, June 8, 2014

Barbados: Commonwealth Fights Devaluation of Bajan Dollar

According to The Associated Press, Barbados' government does not support devaluing the Caribbean island's currency and says it is determined to maintain its fixed exchange rate with the US dollar.

The Barbados dollar has been pegged 2-to-1 to the US dollar since the 1970s, yet some  analysts believe the currency of the economically struggling country should be devalued.

COMMENT: Moody's Investors Service has downgraded the island's government bond rating by two notches from Ba3 to B3, citing "anemic economic growth" and "limited prospects for improvement."

The Barbados Ministry of Finance conceded that "a number of experts, including some in the ratings agencies," believe devaluation is needed. Yet, in a Saturday (June 7) statement, the Ministry said it is committed to the current exchange rate and "and will do what is needed to be done to protect" the Barbados dollar.

It says the rating agency's downgrade decision ignored cuts in government spending and improvements in external accounts.

This report will be updated as new information becomes available.