delisle worrell : four pillars of a forward - looking forex - driven growth strategy for barbados address by dr delisle worrell, governor of the central bank of barbados, to the barbados international business association ’ s monthly luncheon, bridgetown, 24 january 2012. * * * the average barbadian fully understands that the immediate priority for economic policy is stability. if you are out fishing and you get caught in the midst of a sudden storm you batten down the hatches and keep things shipshape until the storm passes. by analogy, it is reasonable to expect renewed growth in the barbadian economy only when we have found a way out of the present international economic tempest. the actions of the social partners in barbados have so far succeeded in stabilising our economy. the evidence is that we lost only 1 percent of foreign exchange reserves last year, and the value of the barbados dollar is as well protected now as it was a year ago. barbados has been able to stabilise the economy and still maintain a good quality of life because we have a very high level of human development, as measured by the united nations development programme ( undp ). we have also contained job losses, thanks largely to the strength of our acclaimed social partnership. the second element of economic policy is to make use of the current period to cement the foundations of future economic growth. those foundations, which are the subject of my lecture today, are : a. tourism ; b. international business and financial services ( ibfs ) ; c. alternative energy ; and d. integrated agriculture. in each of these barbados is internationally competitive, or can be. investment should be concentrated in these areas, for the medium term. in the short term the balance of payments should be kept stable ; that is the best we can do. but the investments we are doing and need to do in 2012 can secure us a future of modest but steady growth, which is exactly what barbados needs to further improve the already superior quality of life our citizens enjoy. tourism barbados aims to be the lexus of the tourism market. we are known in north america and much of europe as a high - end destination, because of the availability of luxury accommodation, the quality of our infrastructure, our ideal climate and the authenticity of the barbadian experience. the company that makes the lexus also makes toyotas, and barbados does have accommodation to suit all pocketbooks. however, just as toyota makes its highest margins on its

abundance of attractive issues and options coming on stream on a regular basis. in this connection, it has been suggested that the development of a secondary mortgage market could attract the attention of domestic and foreign investors. the bank intends to proceed with implementation of the secondary mortgage market as soon as the legislation is completed. there is also a view that the market for government securities needs more dynamism. government securities are structured to cater to the needs of both individuals and institutional investors. since there is a zero risk associated with holding government paper, these instruments are, in the overwhelming number of cases, held to maturity even when holders experience cash flow problems. what is required are dealers in government securities who would perform the role of market makers, thereby bringing more participants and liquidity to the market. the central bank is also currently considering a number of matters touching on open market operations and is developing operational modalities in this regard. we expect shortly to be able to open dialogue with the parties involved in the hope of getting buy - in from commercial banks. it will be important in the changing environment that conditions are created to attract capital to barbados. commercial banks should not expect immediately to see any radical change in the way modifications to the minimum deposit rate are determined and indeed there may well continue to be some floor for its savings rate, this time as a protective mechanism rather than a monetary policy tool. the central bank will continue for the time being to be guided by the differential between local and foreign interest rates, but given the somewhat freer movement of funds within caricom, post december 2007 more diligence will be required and more rapid market responses will be necessary. further exchange control liberalisation and greater flexibility in the interest rate regime are part of an overall move toward greater reliance on market forces in the financial sector. for sometime now, the central bank has been reducing the reserve requirements for commercial banks and the total requirement, net of the recently - introduced foreign reserve component, now stands at 17 % of deposits, the lowest in three decades. it is expected that in time this requirement will be further reduced. in terms of other developments, the legislation relating to the much - discussed deposit insurance corporation ( dic ) has now been proclaimed, the board has been appointed and the chairman honourable justice leroy inniss has called his first meeting next week, so commercial banks can expect to hear from the dic very soon. the establishment of this entity is occurring in the context of a healthy banking system. this is unusual for the