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

Chapter 5: Some Notable Developments 227 refinanced on average, nearly 73 per cent of the outstanding short-term credit. Additional short-term facilities were also negotiated with the Central Banks of the Bahamas, Belize, the Eastern Caribbean and Trinidad and Tobago. Another £3 million had to be taken from the BZW Retention Fund, leaving a balance of only £750,000, and sugar receipts of $18 million became available. Around this time, the Bank started to focus more narrowly on foreign exchange management. The Research Department was asked to produce statistics on foreign exchange liquidity and a committee comprising Marion Williams, Kenneth Brathwaite and Brian Greene was established to monitor the foreign exchange situation. Notes of a meeting of this committee on July 4 drew attention to “the precarious state of the foreign exchange reserves”. It also outlined the difficulty in making payments for crude oil imports and pointed out that available liquidity could be negatively affected by the repayment of the Japanese yen bonds (the so-called “bullet” loan) which would mature in December that year. 112 Net sales of foreign exchange to commercial banks totalled $14.9 million between January and March 1991 (when the Bank should have been a net purchaser) and a further $25.9 million in the second quarter. The continued deterioration in the foreign exchange situation did not leave many options open. Towards the end of June, the minister asked Governor King to make the first official contact with the IMF about a possible stabilisation programme and informed the nation about his decision. Designing the adjustment programme Late in July, the main monetary policy elements of a stabilisation programme were approved by the Bank’s Board. They included higher liquidity requirements on commercial banks, as well as an emergency discount rate, and increases in savings and mortgage interest rates accompanied by a repeal of the Rate of Interest Act or removal of the