Lessons from Central Bank of Barbados fiasco: Central Bank chief is a goalkeeper?

Finally after much deliberations and total chaos, Dr DeLisle Worrell the governor of Central Bank of Barbados got fired. One of the Deputy Gvernors has been named as the new Governor.

Dr Worrell got fired just a day after the Court intervened that he could keep his position:

Governor of the Central Bank of Barbados, Dr DeLisle Worrell, has been fired less than 24 hours after the Appeal Court lifted an injunction against his removal from office. His attorney Gregory Nicholls confirmed that his client had received correspondence on Friday terminating his services. Worrell was appointed for a second five-year term in October 2014 after he was initially appointed on November 1, 2009.

However, Nicholls has warned that the matter is far from over since Worrell intends to challenge the minister’s right to dismiss him at the Trinidad-based Caribbean Court of Justice (CCJ) the island’s highest court.  The 72-year-old Worrell is expected to issue a statement later on Friday.

On Thursday, the acting Chief Justice Sandra Mason, who along with Justices Andrew Burgess and Kaye Greenidge presided over the four-hour long hearing, dismissed a case in which he challenged the right of Finance Minister Chris Sinckler to force him out of office.

The Court of Appeal lifted a six-day injunction that was preventing the Minister of Finance from removing Worrell from his post as one of the leading decision-makers on economic policies in the country.

In an interesting article, a Barbados based economist Ryan Straughn writes on the lessons from the crisis:

How does a country face a crisis of confidence involving the Minister of Finance and the Governor of the Central Bank, and the Prime Minister sees it fit to leave the country to attend a CARICOM Summit?

I admitted to you that last week’s article was easily the hardest I’ve had to write thus far because of the deep level of introspection required to see things for what they are. These are the classical signs of a banana republic.

You might not have totally agreed with my assessment last week and perhaps you might have felt I was a bit harsh.  However, this week’s debacle involving Dr Delisle Worrell, Governor of the Central Bank of Barbados, and Chris Sinckler, Minister of Finance, ought to make Barbadians pay serious attention to what is taking place.

I am on record for expressing the view that Dr Worrell has embarassed himself professionally and, by so doing, he has allowed himself now to be embarassed personally by the Minister of Finance. Sections 47, 48 and 49 of the Central Bank Act outline clearly the conditions under which the Governor should act to maintain the 2:1 currency peg or what we economists call monetary stability.

What took so long for the govt to fire? Well the Governor was helping the government finance its deficits:

It is absolutely preposterous that the Minister of Finance can seek to fire the Governor for administrative concerns when the Central Bank has been making huge financial losses over the last three years. It also is absolutely preposterous that the Minister of Finance can seek to fire the Governor for when the Governor has not held a public press conference in over three years.

 It is again absolutely preposterous that the Minister of Finance can seek to fire the Governor for administrative concerns when he has overseen the printing of money to support government expenditures which has clearly now put the 2:1 currency peg in jeopardy. All of these actions were sanctioned by both Stuart and Sinckler by virtue of their reappointing Dr Worrell in 2014.

The existing senior management at the Central Bank also must take full and collective responsibility for allowing the internal management of the institution to fall apart. It seems the Board of Directors is now scrambling to seek absolution for this sad state of affairs.

The Prime Minister appointed the Minister of Finance who then appointed the Governor and the Board of Directors. Since the Prime Minister is responsible for this current situation, he should dismiss both the Minister and the Governor. He also should throw himself at the mercy of the people for presiding over the worst economic management of this country that has caused his predecessor to ask “how did we get back here?”

He says central bank chief is a goalkeeper but was allowed to be a midfielder. Only over a period government realised its mistake of allowing the goalkeeper to venture out of the box:

I have said long ago that if Barbados were a football team, the Central Bank — not its Governor but the institution itself — is our goalkeeper and is the one player that cannot be substituted. Therefore, it must be relied upon to do what it has to do to achieve its objective.

In that vein, the goal keeper does not leave the 18 yard box. However, the management of the bank has allowed the Governor to play the game as if the bank is a midfielder or striker through the printing of money, leaving us, Barbadians, exposed at the back to devaluation.

In our current situation, our goal keeper should be on the goal line and not even venture anywhere near the six year line because of the seriousness of our economic crisis. However, our goal keeper is in the centre circle arguing with our last man – defender (Minister of Finance) whilst the game is still in play. In the meantime, the captain has left the field and has said not a word to anyone.

For the avoidance of doubt, Mr Stuart must be reminded that he is the captain and the ship is sinking. He is the current captain of the football team called Barbados. Examining his approach, it seems to us watching the game that he is neither interested nor cares. In the circumstances, the only honourable thing to do is call for a substitution.

What is perhaps most alarming is we all seem to be going through the motions waiting for someone else to take charge of the situation when, clearly, the captain and his crew have signalled to all and sundry, that they have prepared their life vests and rafts (10 per cent increase in salary, pensions) and are preparing to launch to try and reach the safety of the nearest shore. Meanwhile, the rest of us are left to sink or swim

Interesting analogy..

There is a reason history tells us that central banks should not really get excited and join hands with government. As things go wrong, the wrath falls on them. This was seen recently in India as well..

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