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

73 The economic difficulties persisted and worsened noticeably during 1981. Foreign exchange earnings grew by very little in the first quarter of the year, as tourist arrivals fell by eight per cent, the largest decline on record for those three months. In addition, the sugar industry was beset by a late start, labour shortages, a large number of cane fires and unusually wet weather. In April, discussions started with the IMF about the possibility of obtaining financial assistance. The Bank was informed that, although access to resources from the CFF was unlikely, $14 million was available from the Reserve Tranche and a Stand-by Arrangement was possible, but with some conditionality. At this stage, the majority opinion in official circles did not support a Stand-by Arrangement because of the associated negative public perception. However, the foreign reserves situation showed no sign of improving; indeed, holdings fell by $36.8 million between January and June - the first decline during these six months since the Bank had been established. This outcome appeared to soften the opposition to an IMF programme. Pressure was coming from another source as well - the worsening fiscal deficit. Owing to extensive capital works, burgeoning current expenditure and weak revenues, the fiscal deficit had expanded significantly. In September, Government introduced a revenue-raising package (the so- called mini-Budget) in an effort to rebuild the public finances. There was also further significant monetary tightening, including a 10 per cent Chapter 3: Consolidation: 1976 to 1986 500 400 300 200 100 0 FIGURE 3 TOURIST ARRIVALS, 1978 - 1983 (000) 1980 1981 1982 1983 369.9 352.6 303.8 328.3 200 100 0 FIGURE 4 SUGAR PRODUCTION, 1978 - 1983 (000 tonnes) 1980 1981 1982 1983 136.6 97.5 85.5 82.8 Source (Figures 3 and 4): Central Bank of Barbados, Annual Statistical Digest, 2007