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

228 interest rate ceilings. Suggested targets for a programme were also discussed and it was discovered that meeting the targets proposed for end- September would provide access to US$60 million - US$40 million at the start of the programme and another US$20 million over the next six quarters. The IMF wanted a stronger interest-rate package, but was willing to accept the current proposals as long as the recommended fiscal measures were implemented speedily. As a result, during mid-1991, much effort went into designing the fiscal package. There was general agreement on the need for a reduction in public sector expenditure but both the extent and method of that cut were yet to be decided. Apart from lay-offs, there were suggestions for a cut in salaries and wages ranging between five per cent and 10 per cent, or for a lump-sum reduction in Government expenditure. Public interest in the economic situation was very high and the Bank played its part in clarifying the issues and preparing the populace for the challenges of stabilisation. It was to this end that, on July 20, 1991 Governor King’s speech, We Must Adjust... Now, was delivered to the Graduation Ceremony of the NUPW. He explained the meaning of adjustment, and explored the pros and cons of a high fiscal deficit, trade and financial liberalisation and devaluation. The Bank’s economists were also invited to address community groups to help the public to understand the various issues. None of the fiscal measures under consideration was an easy option. For example, the retrenchment of 3,000 public workers would place additional burdens on the Unemployment Benefit Scheme. Since a public sector wage cut required a constitutional amendment, there was a proposal for issuing a ten-year bond in lieu of salary. By end-August it was clear that the idea of a bond was not supported by the trade unions; they were particularly opposed to suggestions that the bonds should yield no interest for, at least, the first five years. An alternative option called for interest at two per cent for the first five years and five per cent for the second five years. However, this proposal implied higher outlays by Government and an increased level of retrenchment in the public service in order to meet the fiscal target contemplated for fiscal year 1991/92.