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

Chapter 5: Some Notable Developments 225 strengthen public finances included placing on special deposit with the Bank the proceeds of any new foreign borrowing, reducing Government expenditure for the remainder of the fiscal year by six per cent below the budgeted amount and limiting Government’s borrowing from the Bank, in whatever form, to $118 million for the remainder of the fiscal year. This last measure was reflective of a significant increase in the Bank’s accommodation of Government between 1989 and 1990. The stimulus for growth would entail efforts to intensify the promotion of exports of goods and services (information services were highlighted) and replacing quantitative restrictions with surcharges (in order to remove the anti-export bias). The indebted sugar estates and the Barbados Sugar Industry Limited would be restructured and the alienation of agricultural land halted. 109 As foreign reserves declined during the fourth quarter of 1990 the Bank intensified its efforts to help Government secure a loan from Barclays de Zoete Wedd (BZW), the investment banking arm of Barclays Bank in London, UK. Agreement for a facility of £30 million (or Bds$120 million) was reached in December and $35 million was drawn down immediately. 110 The large decline in foreign reserves ($41.6 million), during the last quarter of 1990, which brought the cumulative fall for the year to $88.5 million, may have dampened the idea of managing the adjustment without outside assistance. The possibility of a Fund-supported programme was discussed at the Board meeting of January 31, 1991, but opinions were divided and a decision was deferred until the February Board meeting. Nonetheless, when a team from the IMF visited Barbados during that same month for the normal Article 4 Consultation, 111 the Government took the opportunity to have preliminary discussions about a programme. The Bank was heavily involved in these meetings as its technicians provided much of the statistical information, particularly in respect of real economic activity, the financial sector, the balance of payments and foreign debt. The IMF Mission recommended many of the measures that had been suggested by local experts. They underscored the need for a tight fiscal stance that would reduce the deficit to 2.5 per cent of GDP during the coming fiscal year. This should be achieved mainly through a wage freeze,