Blackman looks at dollarisation in region

The Barbadian economist and diplomat is known as one of region’s most knowledgeable central bankers. Sir Courtney Blackman has been in Belize since Monday and this evening he gave a talk to business people sponsored by the Chamber of Commerce. Ann-Marie spoke to Blackman just prior to his engagement and while he declined to comment on the state of Belize’s economy, he did have a few words to say about a move being considered by a number of hemispheric nations–that is the dollarisation of their monetary systems.

Sir Courtney Blackman, Economist

“Dollarisation is the official adoption of the U.S. dollar as the legal tender in the country.”

Ann-Marie Williams

“If we should adopt that, what are some of the pros and cons?”

Sir Courtney Blackman

“The first thing that would happen, is that the Belizean dollars will disappear and you will have the U.S. dollar circulating in the country. As a corollary of that, the essential bank will disappear, you won’t need essential bank any longer. So the power monetary policy, the monetary policy decision making, will be transferred to Washington, and you will just follow suit. So changes will be determined in Washington, because if you all put the interest rate higher or lower, nobody would take it.

The costs are quite high actually in actual dollar terms, because you would have to obtain an initial stock of U.S. dollars to replace the Belizean dollars you now have in circulation. Which is hard to come by anyhow, because it is a very large sum of money. The total Belizean dollars in circulation or the value of them, is about over three hundred million Belize dollars, which is roughly equivalent to one hundred and fifty million U.S. dollars. So if you dollarise and maintain the same parity, you would have to find fifty million U.S. dollars up front. The other factors too, because now you get, for U.S. dollars, you have banking your Belizean dollar you get interest on it. However, you would not get any interest on the fifty million dollars you have circulating. So that fifty million dollars worth of U.S. currency, would be the equivalent of an interest free perpetual loan to the United States.”

Ecuador and Panama have already dollarised their economies and several more countries are strongly considering it. It is not believed that dollarisation would be suitable for Belize.