“Wild Coot,” she said, “is the Central Bank supposed to be making payments on behalf of the Ministry of Sport and Culture, or am I giving my mouth liberty?” I know that the Central Bank is entitled to issue cheques in order to conduct its own business and maybe its business coincided with the business of the Ministry of Sports and Culture. However, what a strange coincidence. How come the business of the Central Bank and that of the ministry coalesce? One has to question apparently innocent happenings these days, as everything seems to be taking a turn for the worse. If the Central Bank is paying bills on behalf of the ministry, then that may be tantamount to printing money. It would be giving further credence to the feelings that the Government’s policies are not working and that the income of Government is seriously deficient as opposed to the immediate demands for expenditure.
Let us look at how the Central Bank earns money. If it has US dollars it can place them on an interest-bearing account in the United States at a small interest rate. If it pays 7.5 per cent in order to attract bonds from savers and lends this money to the Government, the poor Government cannot match this rate and hence that money is placed at a loss. In all likelihood, the compulsory deposits (at least 10-15 per cent of all deposits) of the commercial banks have already been given to the Government. Commercial banks and others that buy treasury bills which support Government’s shortfalls have to be paid. Then the Central Bank has to pay salaries to the governor and staff. Monthly there are utility bills, entertainment and trips abroad.
A couple of years ago the Central Bank confessed that it had made a huge loss. I am sure that the loss continues. That means that its income cannot sustain its expenditure.
“Are you saying Wild Coot that if the Central Bank is issuing cheques, then it has to print the money to honour them?”
The accusation of the old lady had me worried, as she must have got her information from somewhere. The saying is that where there is smoke, look out for fire. Look how the Central Bank has played a pivotal role in ensuring that the savings of the people end up in the hands of Government – unsecured, while the commercial banks and quasi banks fight for the financing of vehicles, overseas shopping with credit cards and 4.5 per cent mortgages for two years.
I agree with my friend Sir Frank Alleyne that any consideration of changing the parity of the Barbados dollar is not an option of any right-thinking Barbadian. If that were to happen, Mr Lewis would have an even stronger case for structure much to the disapproval of Mr Shepherd. We have ample evidence of that devaluation pitfall. Worse so, we do not have the internal mechanism to counter such a move. Sir Frank emphasised that the middle class would be destroyed. You can imagine what would happen to the poor. It is said that during the war, we were forced to feed ourselves but that was in 1939-1944.
I am only thinking about these things because the old lady frightened me with her revelations. Surely the relationship between the printing of money and the negative impact on the foreign reserves has sunken in with the Central Bank. Did not Mr Arthur say so? Now no less a person, Sir Frank, is saying so. The Wild Coot said so a long time ago. He came face to face with it in Jamaica.
The Central Bank should publish one of its rare statements giving a lie to this malicious, stinking fabrication since as the watchdog of the people, it cannot offer as an excuse that its hands are tied.
“Wild Coot, what I tell you is the gospel,” said the old lady. “You could even ask your friend from over and away.” I replied that I would seek out the information. I am sure that the Central Bank is attending to the “busyness” of seeing that the commercial banks walk the straight and narrow.
• Harry Russell is a banker. Email: quijote70@gmail.com
