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

Chapter 5: Some Notable Developments 223 meetings of technical and operational staff, gatherings of Research Department economists and meetings of the Economic Policy Committee. It was mainly through these channels that management and, eventually, the Board of Directors were informed of economic developments. The external sector had been under pressure for much of the 1980s. 107 The NIR rose, on average, by only about $18 million per annum between 1983 and 1988 but the foreign situation could have been worse, were it not for foreign borrowing. The weakness in the balance of payments and its possible ramifications were highlighted by the Bank from sometime in the late 1980s. The Annual Report of 1987 cautioned that there was a “... need to contain the fiscal deficit sufficiently to dampen national spending and ease the demand for imports”. It also pointed out that large wage increases could exacerbate the macroeconomic problems. In the following year, the Report noted that it was necessary “... to achieve further improvement in the fiscal balance to allow for a build-up of foreign exchange reserves”. The situation deteriorated during the first half of 1989. The seasonal upturn in foreign reserves during the first quarter of the year was modest ($25 million) and, between April and June, reserves fell by nearly $63 million. The Bank implemented a number of measures to halt the loss in reserves. On September 20, the discount rate charged on short-term loans to commercial banks was raised from eight per cent to 11.5 per cent. Selective credit controls, which had been removed in June 1987, were reintroduced on October 16 108 and on November 6, the Bank raised the 350 300 250 200 150 100 50 0 FIGURE 5 QUARTERLY NET INTERNATIONAL RESERVES, 1989-1991 ($ MIL) 89 Q1 89 Q2 89 Q3 89 Q4 90 Q1 90 Q2 90 Q3 90 Q4 91 Q1 91 Q2 91 Q3 91 Q4 QUARTERLY NIR ($ MIL) Source: Central Bank of Barbados, Annual Statistical Digest , various issues.