No 'T&T-type inflation' for Barbados

Published: Monday August 11, 2008

BARBADOS' EXCHANGE CONTROLS and strong currency will save it from Trinidad and Tobago's (T&T) record-high inflation rate.

Former International Monetary Fund economist Jawala Rambarran said the twin-island republic's rising inflation rate hit 11.3 per cent at the end of June 2008, the highest in 14 years.

Rambarran said this had resulted from Trinidad's more open economy and absence of exchange controls, which allowed "faster pass-through from the external market into our market".

Speaking from his Port-of-Spain office, he told BARBADOS BUSINESS AUTHORITY: "That is why our inflation rate would rise faster than Barbados'. [And] we are importing a lot more . . . ."

Barbadians would certainly have to pay more for Trinidadian imports, "but what Barbados has going for it is that the exchange rate relative to the Trinidad and Tobago rate is three times more in terms of purchasing power," he noted.

Rambarran, a former chief economist with Caribbean Money Market Brokers, said "[Trinidad's] inflation rate has to go close to 20 per cent before it really starts to make a dent in [Barbados'] purchasing power.

"Your exchange rate level gives you a very strong cushion to deal with inflationary impact from the T&T side."

According to the local Statistical Service, Barbados imported $85.55 million worth of goods between January and May this year from its oil-rich neighbour, and this excluded petroleum products. This was $1.97 million more than in the corresponding period last year.

At the end of April Barbados' inflation rate stood at 7.5 per cent, 3.6 per cent higher than at the comparable rate at the end of 2007.

The economist who is currently managing director of CAP-M Research in Trinidad said all regional countries were facing inflationary pressures from international food and energy prices, but "in Barbados you will have a lag before you start to see the effects".


Source: Nation Newspapers
http://www.nationnews.com/story/296793499815340.php