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

Chapter 5: Some Notable Developments 235 from the CCFF and a portion from the Stand-by Arrangement available immediately. With the receipt of resources from the Fund, the Bank was able to erase the backlog of applications for foreign exchange and Government reduced its arrears. Attention next turned to the performance targets for the end of March 1992. During the first few weeks of the quarter, it appeared that achieving the NIR goal would be difficult. Debt-servicing was high and given the gloomy prospects for winter tourism, it appeared unlikely that net foreign exchange purchases from commercial banks would be substantial. Negotiations were in progress for the sale of Government shares in Barbados Mills, but those funds were now earmarked to repay the remaining liabilities to the Japanese bond-holders. At March 30, the NIR was still about $8 million short of the target. However, the target was achieved, thanks mainly to a private sector inflow. For a time it seemed that in order to meet the targets for the NDA and the fiscal deficit an even tougher fiscal stance would be necessary. This would have entailed running a bigger surplus on public sector operations and severe restrictions on Government borrowing from the Central Bank. However, in the final analysis the NDA turned out to be around $18 million within the target. The target for the fiscal deficit was also achieved, but only because the Ministry of Finance and Economic Affairs did not settle all of the $35 million in outstanding commitments. Meeting the June 1992 targets proved less problematic than expected. The NIR exceeded the target by nearly $60 million, resulting from the availability of the proceeds from the sale of Government's shares in Barbados Mills and a contraction in merchandise imports. Thereafter, with the rapid recovery in the foreign exchange position, the stimulation of economic activity became the major goal. Here again, monetary policy played a central role. The Bank lowered the discount rate by three percentage points in July and again in September, signalling that savings deposit rates were about to come down. The minimum interest rate on savings deposits was lowered, by one percentage point, in August and, by two percentage points, in September, to provide some incentive for the banks to give cheaper credit to business firms. In September as well, the