Both Sides of The Coin: The Story of The Central Bank of Barbados 1972-2017

Chapter 1: Background to Establishment 11 As an example of the point he was making, Barrow noted that ever since he had gone public with the plans for the central bank, credit had been frozen by the commercial banks because of alleged uncertainty over the quantum of reserves that would be required by the bank. He contended that if the whole structure of the economy was going to be determined by the activities of the head offices of commercial banks, it would be a situation equivalent to economic imperialism, not real independence. He also called for freely convertible currencies in the Caribbean region. The editorial in The Advocate-News the following day (June 11, 1971) was generally supportive of Barrow’s remarks and raised questions about the usefulness of the banking system and its impact on the economy. It noted that in the past the commercial banks had been instruments of social backwardness “and did not provide any great economic hope for the majority of the populace.” While admitting that positive changes had occurred recently, the editor agreed that the freezing of bank credit was not helpful to Government’s development policies. Despite Barrow's zeal, the planning for the central bank lost some momentum in 1971. During the Financial Statement and Budgetary Proposals delivered on July 27, 1971, the prime minister revealed that progress had been hampered by the inability of a friendly government to provide the necessary technical assistance in a timely manner. However, since two experts from the IMF had recently visited Barbados, he was confident that the planning would now proceed without undue delay. The official Opposition political party was still not fully convinced of the need for a central bank. Tom Adams’ reply to the Budget on the following day drew attention, inter alia, to the limited usefulness of a central bank in Barbadian-type economies. He was of the view that there were alternatives available and at “We here in the West Indies have the last vestiges of economic imperialism in the banking structure. Until we can get our central banks firmly established and get them staffed by people who are well-versed in the vagaries of international finances, we will still be at the whims and fancies of the head offices, whether in the United Kingdom, in Toronto or in New York, as the case may be.” 9