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

75 build-up of assets with the CMCF could not be ignored; the amounts due from this facility rose from $42.1 million at the end of 1981 to $63.5 million by June 1982. A deflationary budget in April 1982 supplemented the earlier adjustment efforts, enabling discussions with the IMF to be intensified. By mid-June, the Bank was advised that as much as $15 million was available under the CFF, another $15 million from a first tranche drawing and $14.9 million in the context of a one or two-year Stand-by Arrangement. In July, the prime minister publicly mentioned the possibility of an IMF programme for the first time. During the latter part of 1982, short-term borrowing was again necessary to ease the balance of payments difficulties. The monetary authorities also had access to the proceeds from a $15 million Euro-dollar loan for the sugar industry and $10.4 million from the two oil facilities. Negotiations with the IMF commenced and culminated on October 4 with an agreement for a loan of 44.0 million Special Drawing Rights (SDRs), about US$49 million. 45 Under the terms of the agreement, the resources from the CFF and a portion of the financing available under the Stand- by Arrangement (about US$25 million) could be drawn down immediately. The remainder of the funds would be accessed over an 18-month period, subject to satisfactory performance in respect of the net domestic assets of the Central Bank, Government borrowing from the banking system and short and medium-term foreign borrowing. The inclusion of the first two criteria underscored the general feeling that much of the balance of payments problems derived from fiscal imbalances. With the loan from the IMF in place, foreign reserves picked up noticeably during the last quarter and by the end of 1982 were about $44 million higher than at December 1981. As the reserves recovered, the Bank felt that it was time to relax its monetary policy. The bank rate was lowered to 20 per cent, the minimum interest rate on savings to six per cent, the prime rate to 10 per cent and the average lending rate to 14 per cent. At the same time interest rates on residential mortgages came down to 11 per cent, and on commercial mortgages, to 13 per cent. It was the first ease in monetary policy in two and a half years. Chapter 3: Consolidation: 1976 to 1986