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During 2021, the Barbados economy registered a mild recovery from the sharp contraction in the previous year. The persistence of the COVID-19 virus, the disruption of global supply chains, and rising import prices, particularly for energy products, tempered the economic recovery and contributed to higher domestic prices. There were encouraging signs of a revival of activity in the tourism industry during the second half of the year, and there was also evidence of an improving labour market. The international reserves continued to grow, buoyed by Government’s policy-based borrowing to meet financing needs caused by the relaxation in fiscal policy.
The Bank is optimistic that the recovery will gain momentum this year. However, there are significant downside risks, including the potential for the emergence of new strains of the virus and for heightened geopolitical risks to dampen the recovery of the tourism sector. The expected implementation of delayed large-scale tourism projects, as well as planned upgrades to Government’s infrastructure should boost domestic economic activity.
The financial system remains profitable and well-capitalised as non-performing loans stabilised during the year. Commercial banks and credit unions offered customers financing options to adapt to the tepid economic environment, while most of the moratoria schemes were phased out. The build-up of excess liquidity at the Bank by commercial banks continued to rise despite the low interest rate environment, reflecting the continued softness in credit demand. As a result, monetary policy remained unchanged.
The Bank has reached an agreement with the Ministry of Finance, Economic Affairs, and Investment on the parameters of a gradual recapitalisation of its balance sheet. The plan takes account of its impact on the public finances and, in the short term, relies on the contribution of the Bank’s annual earnings. In 2021, the Bank realised a net income of $2.8 million, compared to $24 million the previous year. The weaker performance largely reflects adjustments for exceptional items, including foreign exchange valuation losses.
The Bank continued to adapt to the unusual circumstances occasioned by the COVID-19 pandemic, with much of our staff continuing to work either remotely or in a hybrid manner. Nevertheless, we continued to fulfil our mandate and provide our many services, including regulating the financial sector, making debt payments, maintaining a steady supply of currency in circulation, and completing timely approvals of foreign exchange applications.
At the same time, we made significant progress on several new initiatives, among them our online portal for foreign currency applications, which will allow us to better serve our publics, as well as upgrades to the real time gross settlement (RTGS) and automated clearing house (ACH) systems, both of which will assist in the modernisation of Barbados’ payment system.
The shift from the Caribbean Integrated Financial Services Incorporated (CARIFS) to the Visa and Mastercard platforms resulted in an increase in user fees for debit card transactions, leading the Bank to intervene to limit the charges to ensure these services remained accessible to all members of the public.
With the passage of the Fair Credit Reporting Act, the Bank has assumed responsibility for overseeing credit reporting activities in Barbados. This new legislation is intended to regulate the activities of credit bureaus and standardise practices in the industry with the aim of making it easier for qualified persons to access credit.
Despite the limited opportunities for in-person activities, the Bank maintained its robust public outreach programme. During the year, we hosted numerous seminars for members of the financial sector, continued to host our revamped Caribbean Economic Forum, and welcomed Nobel laureate Professor Esther Duflo as our Sir Winston Scott Memorial Lecturer. More generally, we continued to grow our presence on social media, which will allow us to reach a broader swathe of the public.
Internally, we accelerated the pace of digital transformation, while strengthening our governance and risk management frameworks. We continued to maintain and upgrade the Bank’s physical infrastructure despite the challenges and damages caused by the La Soufrière volcanic ashfall and Hurricane Elsa.
Our achievements during these trying times are a testament to the diligence and commitment of our staff.
In the coming year, we will continue this work while turning our attention to new projects. In late 2022, the Bank will introduce a redesigned series of banknotes with enhanced security features. The notes, which will be printed on a polymer substrate, are intended to make the national currency more difficult to replicate, but easier to authenticate.
Additionally, the Bank celebrates its 50th anniversary in 2022. This is a significant milestone that warrants reflection on the strong foundation that was created by our first Governor, Sir Courtney Blackman, who, sadly, passed away in 2021. It is a foundation that each successive Governor has built upon as they strove to see us fulfil our vision of becoming and maintaining an institution of world class excellence.
Our golden anniversary also serves as both an opportunity for us to celebrate our achievements over the past five decades and an inspiration to continue working to achieve our objectives while adhering to our values. It is a reminder that we must approach our work with the same steadfast resolve and commitment that have brought us this far. It is also a call to action to continue transforming and evolving so that we can better serve Barbados. It is a recognition that the Central Bank of Barbados can honour its past while looking to the future. We wish to be a beacon for excellence in public service by educating our stakeholders and strengthening communication and engagement as we continue to live the legacy.