marion williams : the development of money and capital markets in barbados welcome remarks by dr marion williams, governor of the central bank of barbados, at the 5th biennial capital markets conference, bridgetown, 25 october 2007. * * * mr. chairman, distinguished speakers, members of the board of the central bank of barbados, deputy governors, members of management and staff of the bank, managers of financial institutions, specially invited guests, distinguished ladies and gentlemen : welcome to the central bank and to the latest in the series of the bank ’ s capital markets seminars. the bank is heartened by the attendance here this morning and takes that as an indication of the high degree of interest which is now attached to capital market developments. we recognize that recent happenings on the local market have played their part. however, we would like to think that the bank ’ s public education programme has contributed to that growing interest. the central bank has been in the forefront of the efforts to develop and deepen the local capital market. indeed, the development of money and capital markets in barbados is an explicit objective as set out in the act which established the bank. secondly, the bank ’ s responsibility to manage this country ’ s international resources and to facilitate its economic development behoves it to work towards the extension of the capital market. this is why the central bank played an active part in the establishment of the barbados stock exchange during the 1980s has constantly supported capital market development and is now partnering with the commercial banks in introducing a secondary mortgage market in barbados. over the years governments in barbados have provided fiscal concessions for the purchase of mutual funds, registered retirement savings plans and stock purchases. commercial banks and other financial entities like insurance companies and credit unions have devised additional products and even the technology which drives financial transactions has been substantially enhanced, so creating an environment for the more rapid growth of capital markets. other developments include the imminent liberalization of capital transactions by barbados with caricom countries and the intended move to greater reliance on open market operations. one of the major challenges is to provide opportunities for investors. this essentially means bringing on stream a number of attractive products tailored for every known level. the bank ’ s seminar a few years ago on reverse mortgages was an attempt to introduce this concept to a wider cross section of interested parties. we are now actively looking to see how we can develop a secondary mortgage market. the legislation is in process for its establishment. i am hopeful that financial institutions will put their backs to the plough in this

liquid assets as the global financial crisis deepened, regional equity markets, which normally appear to be unrelated to developments in advanced markets, began to mirror the declines on the new york stock exchange ( nyse ). the jamaican stock exchange ( jse ) 1 composite index was most responsive among the regional exchanges as its swings mirrored that of the nyse. the composite index on the barbados stock exchange fell by approximately 14. 5 % during 2009, while the trinidad and tobago, composite index contracted by approximately 9. 2 %. these declines translated into wealth losses of bds $ 1. 4 billion and tt $ 6. 5 billion, respectively. thousands oct - 09 jul - 09 apr - 09 jan - 09 oct - 08 jul - 08 apr - 08 jan - 08 oct - 07 jul - 07 apr - 07 jan - 07 hundreds figure 11 : stock market activity trinidad & tobago ( lef t axis ) jamaica ( lef t axis ) barbados ( lef t axis ) nyse ( right axis ) fiscal performance following a significant worsening of the fiscal position in 2008, there was a further widening of the fiscal deficit to an estimated $ 564. 6 million ( 8. 4 % of gdp ) in 2009. this reflected a marked slowdown in revenue intake on account of the weakened domestic economy and increased government expenditure. revenues from the vat, which had increased at an annual average rate of 6. 5 % between 2001 and 2008, slumped by an estimated 18. 1 % in 2009. the vat accounted for an average of 31. 8 % of government revenues in the past five years, and the fall in vat receipts in 2009 was equivalent to a loss of 5. 8 % of total revenue. despite a shrinking tax base, personal tax receipts rose significantly, on account of increases in wages and salaries in both the public and private sectors. corporate taxes had been consistently increasing since 2003 at an annual average rate of 21. 1 % up to 2007, doubling over this period from $ 250. 1 million to $ 499. 8 million. however, intake from this category fell over the crisis - related period ( 2007 / 2009 ) by a two - year average of 3. 6 % or $ 42 million 2. revenues from the import tax fell by 15. 5 % in 2009. the jamaican composite index was scaled down ( by 100 ). the increase in corporate income tax in 2009 was in fact tax payments deferred from 2008. figure 12 : government fiscal balance ‐ 100 ‐