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International Monetary Fund. External Relations Dept.

(www.imf.org)

Ms. Zuzana Murgasova

Over the past decade, the Polish economy has generally retained its external competitiveness, and, overall, exports have boomed. But movements in the real exchange rate have not made for a smooth path, and substantial structural changes have left the country with high and persistent unemployment. A recent IMF study took a closer look at Poland’s competitiveness and its implications for policymakers.

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.

Mr. Prakash Loungani

Grenada suffered a direct hit from Hurricane Ivan on September 7. A Category 3 hurricane with winds of nearly 200 km/hour, Ivan claimed several lives and left a trail of devastation estimated at twice the country’s annual income. Approximately 90 percent of the island’s houses were damaged or destroyed, and 30 percent of the population was rendered homeless. A wave of international support, including emergency assistance from the IMF, is helping the country recover.

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. External Relations Dept.
“In the aftermath of the terrorist attacks of September 11, a coordinated international response is needed to deal with weaknesses in the world economy and the new risks in the outlook,” IMF Managing Director Horst Köhler said in a statement issued on October 5. He added that “the IMF, its 183 member countries, and the international community more generally will need to respond with sound policies to reduce the likelihood of a sustained slowdown and make sure we are ready to deal with a deeper and longer downturn if it does emerge—thereby limiting the disruption and attendant human costs.” Excerpts from Köhler’s statement follow.
International Monetary Fund. External Relations Dept.

Industrial countries have made very different fiscal policy choices over the past 30 years, which have been manifested in differences in their budget balances, size of government (ratio of total expenditure to GDP), and composition ofrevenue and expenditure. In a recent IMF Working Paper, Politics, Government Size, and Fiscal Adjustment in Industrial Countries, Anthony Annett explores whether political and institutional factors can shed light on these differences.

Ms. Wanda S Tseng

China’s economic reforms over the past two decades have brought tremendous economic transformation, rapid growth, and closer integration with the global economy. Real income per capita has increased fivefold, raising millions of Chinese out of poverty. Despite these achievements, difficult reforms—involving the state-owned enterprises and the financial sector—must still be completed, while social pressures from rising unemployment and income inequalities need to be addressed. China’s recent accession to the World Trade Organization (WTO) will not only bring further economic transformation but could also prove to be a watershed for the reform process. Wanda Tseng, Deputy Director of the IMF’s Asia and Pacific Department, talks with Gail Berre of the External Relations Department about China’s reforms, its successes, and future challenges.