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

That agreement, which was due to expire on March 3, 1974, stipulated that 90 per cent of each country’s reserves had to be held in guaranteed sterling, non-sterling or gold, the so-called Minimum Sterling Proportion (MSP) of its foreign reserves. In the event of a devaluation of sterling against the US dollar, the UK Government would make a payment in sterling to each country to restore the dollar value of the guaranteed portion of its sterling reserves. However, during the early 1970s, this arrangement became a cause for concern. At the Board meeting of August 3, 1972, it was revealed that the UK Government was proposing changes in the Sterling Guarantee Agreement. That government was now discouraging the West Indian territories from holding additional foreign reserves in sterling because of the declining role of sterling as a reserve asset. Moreover, it was proposing that, notwithstanding any increases in the countries’ sterling reserves, the level of the guarantee should remain fixed. The exchange rate debate During December 1973, Blackman got an opportunity to publicise his own feelings on exchange rate and foreign reserves management. In a supplement published by the Advocate-News the day 50 Bank of England Building.