kevin greenidge : the role of pension plans in a growing barbadian economy remarks by dr kevin greenidge, governor of the central bank of barbados, at the eckler investment policy review for pension plans conference, bridgetown, 19 november 2024. * * * good morning. it is my honor to address you at this year's pension investment conference. i extend my gratitude to ms. wade and her colleagues for the invitation to share insights on " the role of pension plans in a growing barbadian economy. " barbados has demonstrated resilience and strength, transitioning from a challenging period to one of sustained economic growth since the second quarter of 2022. this progress is a testament to the dedication and collaboration of our people and institutions, and it has created a solid foundation for us to discuss the critical role of pension plans - not just as instruments of financial security, but as active contributors to national development. the barbadian economy is on firm footing. over the first nine months of 2024, real gdp expanded by 3. 9 percent, led by key sectors such as tourism, business services, and construction. this growth has delivered measurable outcomes : a strengthened fiscal position, evidenced by a primary surplus of $ 581. 9 million ( 4 percent of gdp ). declining unemployment, which fell to 7. 7 percent in mid - 2024. debt - to - gdp ratio down to 105. 6 percent robust international reserves, currently standing at $ 3. 2 billion – providing over 31 weeks of import cover. our progress is underpinned by strategic investments in education, digital transformation, and infrastructure - all of which contribute to the economy's foundation and, indirectly, to the pension landscape by creating jobs and boosting long - term growth potential. in this environment of sustained growth, the pension sector plays a vital role in ensuring financial security for our ageing population while fueling national development. barbados has a proud history of leadership in pensions, from being the first british colony to introduce non - contributory old - age pensions in 1938 to the establishment of the national insurance scheme in 1967. however, modern challenges demand renewed focus : 1 / 2 bis - central bankers'speeches funding deficits : as highlighted in the 2023 financial stability report, over 28 percent of defined benefit plans remain underfunded, with an average funding ratio of 84. 1 percent. shifting demographics : an ageing population and declining birth rates pose longterm sustainability challenges. the imperative is

conditions and clearly have implications for one another. • to illustrate the implications of monetary policy for macroprudential policy, consider the example of hong kong, where the unusually low interest rates since 2009 ( as a result of their peg to the us dollar ) have fuelled sharply rising prices across a range of residential and commercial properties ( he 2014 ). attempts to attenuate the financial stability risks from this broad property price boom with targeted macroprudential measures resulted in a large number of measures being applied, even including ltv restrictions on stand - alone car parking spaces, to which the boom had spread. • if loose monetary policy can lead to a build up of financial stability risks, then the converse must also be true – tighter monetary policy can be used as a means of reducing financial stability risks. most empirical estimates show that a temporary tightening of monetary policy can be expected to reduce real debt levels – and bis central bankers ’ speeches hence the probability of crisis – by discouraging households and firms from increasing leverage in the medium term, even if the transmission ( through reduced aggregate demand and a higher interest burden ) involves a short - run move in the opposite direction ( for example, goodhart and hofman ( 2008 ) ). • this was recognised in the design of the uk monetary policy committee ’ s 2013 guidance that it intended to maintain a highly accommodative stance of monetary policy until economic slack had been substantially reduced. recognising the financial stability risks that could emanate from a commitment to maintain low interest rates, the mpc set a “ knockout ” whereby their guidance would cease to hold if the financial policy committee judged that the stance of monetary policy poses a significant threat to financial stability that could not be contained by the combination of macro and micro prudential policy tools available. • what about the more difficult question of whether monetary policy should be used to lean against the wind. the answer is a more obfuscating “ that depends. ” specifically, it depends on the efficiency and efficacy of the macroprudential tools and institutional framework available, a point eloquently made by my colleague don kohn recently ( kohn 2015 ). • take the extreme case in which there are no macroprudential tools. in such circumstances monetary policy may be the only means of tackling system - wide financial risks, but it would come at the cost of significant effects on the real economy – precisely because monetary policy “ gets in all the cracks. ”