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Mrs. Ruby Randall, Mr. Jorge Shepherd, Mr. Frits Van Beek, Mr. J. R. Rosales, and Ms. Mayra Rebecca Zermeno

Abstract

The Eastern Caribbean Central Bank is one of just a few regional central banks in the world and the only one where the member countries have pooled all their foreign reserves, the convertability of the common currency is fully self-supported, and the parity of the exchange rate has not changed. This occasional paper reviews recent developments, policy issues, and institutional arrangements in the member countries of the Eastern Caribbean Currency Union, and looks at the regional financial system, its supervision, and the central bank's initiatives to establish a single financial space. The paper includes a large amount of statistical information that is not readily available elsewhere from a single source.

Mrs. Ruby Randall, Mr. Jorge Shepherd, Mr. Frits Van Beek, Mr. J. R. Rosales, and Ms. Mayra Rebecca Zermeno

Abstract

Eastern Caribbean countries institutionalized political and economic cooperation through the establishment of the Organization of Eastern Caribbean States (OECS) with the Treaty of Basseterre in 1981. Two years later they set up the Eastern Caribbean Central Bank (ECCB), which replaced the Eastern Caribbean Currency Authority. The eight member countries and territories of the ECCB are Antigua and Barbuda, Dominica, Grenada, St. Kitts and Nevis, St. Lucia, and St. Vincent and the Grenadines, which are independent states and members of the IMF, and Anguilla and Montserrat, which are territories of the United Kingdom,1 The six independent OECS states and Montserrat are also members of the Caribbean Common Market, CARICOM, established in 1973.

Mrs. Ruby Randall, Mr. Jorge Shepherd, Mr. Frits Van Beek, Mr. J. R. Rosales, and Ms. Mayra Rebecca Zermeno

Abstract

The establishment of the Eastern Caribbean Central Bank (ECCB) in 1983 was the culmination of a long period of monetary cooperation dating back to 1950 when the British Caribbean Currency Board (BCCB) was created (Box 2). The BCCB, which functioned as a currency board proper and maintained a foreign exchange cover of 100 percent of the currency issue, was replaced by the Eastern Caribbean Currency Authority (ECCA) in 1965, when the Eastern Caribbean dollar (EC$) was introduced and pegged to the pound sterling at a rate of EC$4.80 = £1. Under the ECCA, the foreign exchange backing was set at 70 percent and then reduced to 60 percent in 1975. Following a series of depreciations of the pound, the Eastern Caribbean dollar was pegged to the U.S. dollar in July 1976 at the then prevailing market cross-rate of EC$2.70 per U.S. dollar. The parity has remained fixed at that level.

Mrs. Ruby Randall, Mr. Jorge Shepherd, Mr. Frits Van Beek, Mr. J. R. Rosales, and Ms. Mayra Rebecca Zermeno

Abstract

The goal of the money and capital markets development initiatives being sponsored by the ECCB is to create a “single financial space” within the Eastern Caribbean region. This is seen as the fulfillment of the objective set in Article 4. Section 3 of the ECCB Agreement requiring the Bank to “promote credit and exchange conditions and a sound financial structure conducive to … balanced growth and development.” The program seeks to achieve greater economies of scale in the region’s financial operations by integrating the regions’ financial markets. It also aims to broaden and deepen the financial markets and to enhance the effectiveness and efficiency of the mobilization of domestic and foreign savings to foster economic growth.

International Monetary Fund
As a reflection of the vulnerability to external shocks and the importance of large projects, gross domestic product growth has showed significant variations in the second half of the 1990s. The large public sector investments that have started in 1997 included the Leeward Highway, a new ferry and cruise ship berth, a banana irrigation project, and investments in health and education. During the second half of the 1990s, agriculture output declined—with output in 1999 about 20 percent lower than in 1995.
International Monetary Fund
In recent years, the IMF has released a growing number of reports and other documents covering economic and financial developments and trends in member countries. Each report, prepared by a staff team after discussions with government officials, is published at the option of the member country.
International Monetary Fund
Over the last decade, the Eastern Caribbean Currency Union (ECCU) macroeconomic performance has deteriorated relative to the rest of the Caribbean. Tourism accounts for three-fifths of exports, and the import content of consumption and investment is high. The ECCB-operated quasi-currency board arrangement (CBA) has continued to deliver price and exchange rate stability. The region has strong social indicators, but poverty, health, and crime remain concerns. Despite the implementation of ambitious revenue reforms, limited progress has been made toward fiscal consolidation. Credit has continued to expand rapidly.
International Monetary Fund
The Eastern Caribbean Currency Union (ECCU) countries financial system has increasingly come under stress particularly through weakly supervised nonbank and offshore financial sectors with knock-on effects to domestic banks. The staff report focuses on ECCU’s 2009 discussion on common policies of member countries on economic development and policies. In response, ECCU authorities have accelerated the establishment of national Single Regulatory Units and the passage of harmonized legislation to strengthen then regulation and supervision of nonbanks and offshore institutions.
International Monetary Fund. Western Hemisphere Dept.
This 2015 Article IV Consultation highlights that the economic situation of St. Kitts and Nevis has continued to improve since the completion of the IMF-supported home-grown economic program in July 2014. Continued rapid inflows under the Citizenship-By Investment program have led to a surge in construction activity, and supported a large increase in government and Sugar Industry Diversification Fund investments and spending, including on the People Employment Program. These factors, together with the ongoing recovery in tourist arrivals fueled rapid GDP growth of about 6 percent in 2013 and 2014. The near-term outlook remains strong, but there are risks on the horizon.
Mrs. Ruby Randall, Mr. Jorge Shepherd, Mr. Frits Van Beek, Mr. J. R. Rosales, and Ms. Mayra Rebecca Zermeno

Abstract

The growth of real GDP in the OECS region declined from 3 percent in 1997 to a little more than 2 percent in 1998, with real GDP per capita growing at just over 1 percent (Table 9). The utilities and construction sectors registered strong gains (Table 10), supported by substantial public sector investment and private residential construction in most countries in the region. Tourism activity in 1995–96 suffered from the damage caused by hurricanes in the fall of 1995, but the number of stayover visitors and cruise ship passengers increased markedly in 1997–98, aided by improvements in port facilities, visits by larger cruise ships, and greater marketing efforts.