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

Chapter 5: Some Notable Developments 233 October 24, 1991, carried by courier to New York for signature by the minister of finance the following day and then sent to the IMF’s managing director. Dealing with the foreign exchange shortage With the Letter of Intent out of the way, attention focused squarely on how to maintain adequate supplies of foreign exchange for the rest of 1991. Here again the Bank’s short-term lines played a vital role. As foreign exchange levels fell, it had become increasingly more difficult to refinance these short-term loans which were largely with foreign commercial banks. Intensified efforts to find new non-commercial bank credit lines resulted in credit being extended by business firms, both domestic and foreign. For some time, consideration had been given to selling Government’s shares in Barbados Telephone Company and Barbados External Telecommunications for US$20 million to help pay the yen bond liability of US$32 million. By October an agreement was reached with the bond-holders whereby half of the bond was to be repaid by month-end and the remainder in six months, with the bond-holders insisting that any sales of assets be used to defray some of the remaining obligations. In order to repay a loan from NatWest Bank, it was suggested that Government’s shares in Barbados Mills be sold as well. Some of the initiatives in respect of raising foreign reserves reflected the extent of public support for efforts to maintain the value of the currency. In August, a loan of US$12 million had been secured from the Royal Bank of Scotland with a number of local businesses putting up part of their employees’ pension funds as security. Financing from another UK bank was also provided on the understanding that it would be repaid with proceeds from the next sugar crop. It was discovered late in the year that the Fund’s technical staff required tougher fiscal measures before the proposed programme could be presented to the Executive Board. This necessitated changes to the Letter of Intent and raised concerns about the foreign reserves situation since it