Eastern Caribbean Currency Union: Staff Report for the 2009 Discussion on Common Policies of Member Countries Informational Annex

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.

Abstract

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.

Appendix I: ECCU—Relations with the Fund

(As of April 3, 2009)

I. Membership Status: Not Applicable

II. Exchange Arrangement:

The Eastern Caribbean Currency Union (ECCU) comprises six Fund members: Antigua and Barbuda, Dominica, Grenada, St. Kitts and Nevis, St. Lucia, and St. Vincent and the Grenadines; and two territories of the United Kingdom, Anguilla and Montserrat. The eight ECCU members have a common currency, monetary policy, and exchange system. The common currency, the Eastern Caribbean (EC) dollar, has been pegged to the U.S. dollar at the rate of EC$2.70 per U.S. dollar since July 1976. The common central bank, the Eastern Caribbean Central Bank (ECCB), has operated like a quasi-currency board, maintaining foreign exchange backing of its currency and demand liabilities of close to 100 percent.

III. Safeguards Assessment

Under the Fund's safeguards assessment policy, the ECCB is subject to a full safeguards assessment under a four-year cycle. The most recent assessment was completed in July 2007, and concluded that the ECCB continues to have appropriate control mechanisms in place, which have strengthened since the first safeguards assessment completed in 2003. ECCB management places emphasis on good governance and sound controls, and has enhanced the bank's transparency and accountability since the last assessment, including the publications of financial statements that comply with International Financial Reporting Standards. The assessment made some recommendations to sustain the ECCB's safeguards framework going forward.

IV. Report on the Observance of Standards and Codes

The Report on Observance of Standards and Codes—Data Module, was completed for the ECCB in August, 2007, covered monetary statistics of the ECCB, and was published as IMF Country Report No. 07/289 on August 21, 2007.

The Financial System Stability Assessment for the ECCU was completed in April 2004, and examined the adherence of the domestic banking sector to the Basel Core Principles for Effective Banking Supervision.

In domestic banking supervision, assessors noted the need to strengthen the legislative framework to enhance the powers and autonomy of the ECCB and to generally beef up the enforcement process. More frequent and comprehensive on-site examinations are required particularly in light of the high levels of nonperforming loans and perceived gaps in data integrity. Implementation of a risk-based capital framework for banks should be a priority, which adequately reflects risk of public sector loans. Supervisory practices should develop further in the direction of risk-focused supervision that also takes into consideration ongoing communication with external auditors and overseas supervisors. The need to establish a more formal information exchange mechanism with the home supervisor was also identified as a priority, especially with regard to the consolidated supervision of significant regional banking groups.

Some of these concerns have been addressed: new regulatory guidelines for risk-weighting nonperforming public sector exposures went into effect in January 2006, and amendments to the uniform Banking Act have been passed and gazetted in all ECCU jurisdictions. These amendments will give the ECCB enhanced regulatory powers, particularly in regards to implementation of additional regulation and prudential guidelines.

Appendix II. OECS: Relations with the World Bank Group

(As of March 5, 2009)

World Bank Group Strategy

The World Bank Group strategy in the OECS is focused on helping these small states meet the development challenges that face them. The guiding principles of the strategy are: (a) supporting regional integration and coordination efforts; (b) partnering and harmonization in both lending and analytical work with other development partners; and (c) active pursuit of simplification and capacity building initiatives tailored to small states. The Bank will continue to take the lead on public sector reforms with a particular focus on governance, the efficiency of public spending, social expenditures (including safety nets), disaster mitigation, and environmental management.

Bank-Fund collaboration in specific areas: The World Bank Group and the IMF will continue to collaborate on the financial sector, on the medium-term structural reform agenda and in providing technical assistance on macroeconomic management issues jointly with the Caribbean Regional Technical Assistance Center (CARTAC). The Bank and the IMF will also continue to collaborate on supporting the countries of the OECS in the preparation of their Poverty Reduction Strategies (PRS).

Group strategy: The World Bank Group Management presented to its Board the Eastern Caribbean Sub-Region Country Assistance Strategy (CAS), on September 13, 2005. The World Bank Group's strategy for the four years covered by this CAS (FY2006–09) supports the sub-region's development agenda through two main pillars: (1) stimulating growth and improving competitiveness; and (2) reducing vulnerability, by promoting greater social inclusion and strengthening disaster risk management. Recognizing the OECS countries' high debt ratios, Bank activities will focus on leveraging available donor grant financing. Following the recommendations of the recently completed growth and competitiveness study for the OECS, IBRD and IDA assistance would focus on providing technical and financial assistance for interventions to support the two main pillars of the CAS. The CAS proposes a total lending envelope of US$103.4 million. An indicative Base Case lending scenario consists of about US$51.3 million in IDA resources for the four OECS blend countries (Dominica, Grenada, St. Lucia and St. Vincent and the Grenadines). This envelope includes the estimated IDA country allocations for each of the four countries during FY2006–09, and an IDA Regional allocation of US$15.2 million for two regional projects: US$12 million for Catastrophe Risk Insurance and US$3.2 million for Infrastructure and Utilities Reform. The indicative high case lending scenario consists of approximately US$52.1 million in IBRD investments and development policy operation commitments for the six OECS countries, in addition to the base case lending scenarios mentioned above. The Eastern Caribbean Sub-Region Country Assistance Strategy (CAS) for FY2010–13 is expected to be presented to the Board of the World Bank in early 2010.

Increasing competitiveness and reducing vulnerability. In addition to stabilizing macroeconomic conditions and reducing fiscal deficits and public debt levels, the OECS countries are focusing on: (i) improving the investment climate by broadening the tax base, and streamlining the investment incentive regime and making it more transparent; (ii) improving public sector performance, by raising the efficiency of public investment and improving service delivery; (iii) reducing transaction costs, by strengthening regulation and efficiency of public utilities; (iv) promoting appropriate education and skills development to take advantage of new opportunities in the global environment; and (v) reducing vulnerability, by strengthening the social protection mechanisms and strengthening disaster risk management. The OECS authorities also are targeting to expand their positive experiences with sub-regional functional cooperation (e.g., common central bank, telecommunications regulation, pharmaceutical procurement) to other areas including energy sector regulation, as a way of better allocating the region's scarce human and financial resources.

The Bank is supporting these efforts through a comprehensive series of recently completed, ongoing and planned analytical and advisory activities including the following: “Towards a New Agenda for Growth”—OECS growth and competitiveness study (2005); an OECS Skills Enhancement Policy Note (2006); a Caribbean Air Transport Report (2006); a regional study on Crime, Violence, and Development: Trends, Costs, and Policy Options in the Caribbean (2007); an OECS Private Sector Financing Study (2008); the OECS Tourism Backward Linkages Study (2008); the report “Caribbean—Accelerating Trade Integration: Policy Options for Sustained Growth, Job Creation and Poverty Reduction” (2008); a CARICOM study on Managing Nurse Migration (ongoing); and a preparatory study aimed at developing a Caribbean-wide Regional Energy Strategy (ongoing).

Managing volatility: Recent analytical work on macroeconomic vulnerabilities has shown that the frequent natural disasters in the OECS are a major cause of income insecurity and high poverty rates in the sub-region, as many households cycle in and out of poverty in tandem with these events.

Disaster Management. Despite the regularity of natural disasters, the authorities in the OECS have generally pursued reactive policy responses rather than mitigation measures. Given declining aid flows and limited institutional capacity, the countries need to move to proactive responses with greater cooperation between governments, donors and civil society at both the national and the sub-regional levels. The Bank has worked to strengthen mitigation and response planning by providing rapid response assistance to the countries in the aftermath of major catastrophes such as Hurricane Ivan with the Emergency Recovery Program in Grenada. Also, the Bank has facilitated the establishment and participation of OECS countries in the regional Caribbean Catastrophe Risk Insurance Facility (CCRIF), the world's first regional catastrophe risk insurance pool.

Safety Nets. Despite relatively high per capita incomes, unemployment (estimated between 5–20 percent) and poverty levels (ranging 12–38 percent) are quite high in the OECS sub-region. However, current safety nets suffer from a plethora of uncoordinated programs, which lack appropriate targeting mechanisms and adequate coverage. These will need to be improved to address the impact of eroding trade preferences on the rural sector, emerging problems with youth-at-risk, an aging population, continued vulnerability to external shocks, and new vulnerabilities arising from the HIV/AIDS epidemic. Improvements to the efficiency and targeting of social safety nets were examined under the public expenditure reviews. The Bank has provided financial support for an ongoing Poverty Reduction Fund in St. Lucia, which has piloted community procurement, a Social Protection Review for Dominica (and technical assistance to improve social protection), and an IDF grant to strengthen poverty measurement in the OECS. A Caribbean Regional HIV/AIDS program, including Grenada, St. Kitts and Nevis, St. Lucia, and St. Vincent and the Grenadines is being implemented. The current global crisis has further augmented the needs for improving social safety nets in the region. As part of its response to the global crisis, the Bank has also started new discussions with the governments in the region to strengthen the social safety nets through improved targeting, effectiveness and coverage.

Planned Operations

The Eastern Caribbean Sub-Region Country Assistance Strategy (CAS) ends on June 30, 2009. There is presently only one regional project in preparation, namely the OECS Electricity Regulator Project. It will assist the governments of the region to enhance the efficiency of electricity provision by among other things establishing a regional electricity regulator and thus promoting a regional approach and solutions to the structural challenges. There are plans to continue to roll out the OECS Skills Enhancement for Inclusive Growth Project to Dominica and St. Vincent and the Grenadines which had previously expressed interest for the project, the objective of which is to assist the governments of the region to increase the employability of youth through the establishment of a competitive training fund for financing demand-driven training and traineeships. Other operations focused on disaster vulnerability reduction and mitigating the poverty and social impacts of the global economic crisis are also planned.

Financial Relations

(In millions of U.S. dollars)

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Note: DMA denotes Dominica, GRD denotes Grenada, KNA denotes St. Kitts and Nevis; LCA denotes St. Lucia, and VCT denotes St. Vincent and the Grenadines.

Amounts may not add up to Original Principal due to changes in the SDR/US dollar exchange rate since signing.

Disbursements and Debt Service

(In millions of US dollars, fiscal year ending June 30)

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Note: Data as of March 6, 2009.

Appendix III. Caribbean Development Bank: Overview of Activities in the ECCU

The Caribbean Development Bank (CDB) has as one of its core mandates, the mobilization of resources to finance projects and programs that contribute to the development of its 18 borrowing member countries. In this regard, the CDB has played an important role in the development of the countries of the Eastern Caribbean Currency Union (ECCU). Since inception, the CDB has approved approximately US$3.3 billion to its borrowing member countries, with the OECS as a whole accounting for approximately 34.2 percent. To date, most of the CDB's interventions in the ECCU have been in infrastructural development, and is in part directly related to the incidence of natural disasters in the region, and the need to ensure adequate infrastructure support for investments in tourism and other productive sectors. Resources approved for physical and social infrastructure have, on average, accounted for 59 percent of overall lending to the sub-region, and comprised mainly of upgrading transportation and communication, educational services, power and energy, and housing. Interventions in the productive sectors account for 17.4 percent of total activity, and have focused largely on manufacturing and agriculture. Multisectoral interventions have also been an important element of the CDB's activities in the ECCU and may take the form of inter alia natural hazard management, lines of credit, improving social and living conditions through the Basic Needs Trust Fund (BNTF), and activities of the Caribbean Technological Consultancy Services (CTCS) Unit (which provides technical assistance to the private sector, institutional strengthening of government departments, feasibility studies, and the assessment and implementation of transactions-based taxes). In 2006, this category was expanded to include policy-based lending (PBL), which supports policy reforms and/or institutional changes, either at the macro-level or in a sector or sub-sector. Multisectoral interventions to date represented 23.6 percent of all interventions to the sub-region.

St. Lucia has been the largest recipient of CDB financing in the ECCU, accounting for approximately 25.6 percent of approvals to the sub-group. Most of the projects currently underway in St. Lucia are in the areas of physical and social infrastructure development, with interventions to improve the water supply, road rehabilitation, natural disaster mitigation and solid waste management (which forms part of a wider OECS solid waste management programme). Within the productive sectors, CDB has been involved mainly in tourism and stimulating the recovery of banana production. In 2008, the CDB approved a US$30 million PBL to St. Lucia in support of government's reform programme. The loan was to assist the Government of St. Lucia in its preventative strategy to reinforce and strengthen fiscal performance; to insulate the country as much as possible from the inherent risk associated with its openness; and to improve its responsiveness, should the risks be realized. St. Lucia also received a US$12 million loan to enhance the provision of education services, and grants totaling US$2.8 million to aid in the preparation of the PBL, poverty reduction and technical assistance through the CTCS.

Resources approved to Grenada account for 16.5 percent of total resources allocated to the sub-region. The development of physical infrastructure has been the main focus of ongoing activities in this island, with significant emphasis being placed on bridge and road improvement, the rehabilitation of schools, waste management improvement, and natural disaster management. In 2008, loans approved to Grenada amounted to US$5.7 million comprising US$3.7 million for disaster mitigation and restoration and US$2 million for a student loan. Grants approved totalled US$2.2 million for CTCS, BNTF and institutional strengthening of the Ministry of Communications.

CDB has also played an important role in helping Dominica pursue its development objectives, with funding accounting for 15.5 percent of total approvals to the ECCU. Projects underway in Dominica are in the areas of education sector enhancement, natural disaster management, waste management and the upgrading of eco-tourism sites. In addition to the CDB's capital project-related interventions, the Bank has actively assisted Dominica in its economic reconstruction effort through the provision of stabilization/structural adjustment loans. In 2008, US$9.7 million in loans was approved to assist in the rehabilitation effort following the passage of Hurricane Omar in October. Dominica also received US$2.5 million in grants for poverty reduction, education sector enhancement, operationalisation of national parks service, and assistance from CTCS.

Approvals to St. Vincent and the Grenadines amounted to US$174.7 million over the period 1970 to 2007. In 2008 US$10.4 million in loans was approved for the student loan scheme and a study on port rationalisation and development. The country also received a further US$1.8 million from the BNTF and CTCS programmes to bring the total share of CDB activity in this country to 15.5 percent. During the year the Bank finalised a country strategy with St. Vincent and the Grenadines to guide interventions over the period 2009–11. Some of the potential areas in which CDB may get involved are economic diversification, infrastructure development, human resource development, poverty reduction, disaster risk management and strengthening public sector management.

Activity in St. Kitts and Nevis has mainly been in the areas of disaster rehabilitation and natural disaster management, with some emphasis on improving the provision of education services, enhancing waste management and developing a sound macroeconomic policy framework through policy-based lending. In 2008, a student loan amounting to US$6.2 million was approved while grant assistance totalled US$0.9 million for poverty reduction and CTCS services. At end-December 2008, approvals to St. Kitts and Nevis accounted for 15.1 percent of funding to the sub-region.

CDB approvals to Antigua and Barbuda account for only 5.9 percent of sub-regional activity. Education sector enhancement has been the main focus of recent assistance along with security improvements to the air and sea ports. Antigua and Barbuda only received grant assistance in 2008, which amounted to US$0.5 million for consultancy services for the appraisal of a policy based loan, preparation for a basic education project, and CTCS services. CDB is currently in the process of preparing a country strategy paper with Antigua and Barbuda to guide its programme of assistance over the medium term.

Activity in Anguilla is also relatively small, representing 4.4 percent of total approvals since 1970. Ongoing projects in Anguilla are predominantly in natural disaster management. The year 2008 however, saw some expansion in activity with a US$18 million loan being approved for Blowing Point Ferry port development and a US$0.3 million loan for a feasibility study for the establishment of a Hospitality and Training Institute. This study also received an additional US$0.1 million in grant funding, while CTCS funding amounted to US$0.08 million.

Approvals to Montserrat have also been minimal following the dramatic reduction in economic activity in the wake of volcanic activity and the country's subsequent dependence on UK aid. Funding to Montserrat accounts for a mere 1.5 percent of total approvals to the sub-region with most of the recent work involving improvements to the education sector. Montserrat received only CTCS and BNTF grant assistance in 2008, which totalled US$l.1 million.

CDB Operations Loans, Contingent Loans, Equity and Grants

(Net, in millions of U.S. dollars) 1/

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All figures are net of cancellations.

Appendix IV. CARTAC: Capacity Building in the ECCU

The Caribbean Regional Technical Assistance Center (CARTAC) was established in November 2001 as a regional resource, based in Barbados, to provide technical assistance (TA) and training to beneficiary countries, currently 2127. CARTAC's core areas of technical assistance include public financial management, which includes tax policy and administration, public expenditure management, macroeconomic management and financial programming, financial sector supervision (including capital markets) and economic and financial statistics. It is a multi-donor project with the IMF as executing agency.28 An active Steering Committee consisting of representatives from participating countries, donor agencies, CARICOM and the CDB, provides strategic guidance and ensures ownership and commitment.

The ECCU countries have been among the most active countries in requesting technical assistance and training in all of CARTAC's core areas. Again, the largest areas of CARTAC involvement in the ECCU countries have been in VAT implementation and in building capacity to undertake improved macroeconomic management. This technical assistance support has represented a significant addition to the Fund's technical assistance to the ECCU region. Highlights of CARTAC's technical assistance to the ECCU countries in the various core areas are provided below.

In the area of tax and customs policy and administration, CARTAC and FAD conducted a comprehensive review of the OECS tax systems and administrations in 2003. Most of the ECCU countries have started to implement the salient recommendations of the review. The following countries have introduced a VAT: Dominica (2006), Antigua and Barbuda (2007), St. Vincent and the Grenadines (2007), while Grenada is actively working to introduce a VAT (early 2010); St. Lucia (mid 2010); and St. Kitts and Nevis (late 2010). CARTAC is undertaking an external evaluation of its VAT program with a focus on results and outcomes of CARTAC's technical assistance. CARTAC has provided technical assistance to establish a personal income tax system in Antigua and Barbuda; significant technical assistance and training has been provided in Antigua and Barbuda, Dominica, Grenada and St. Vincent and the Grenadines, St. Kitts and Nevis and St. Lucia related to their VAT implementation. CARTAC has also undertaken full revenue assessment missions to Dominica, St. Lucia, St. Vincent and the Grenadines and St. Kitts and Nevis. In 2008, CARTAC assisted with the development of corporate strategic business plans for tax and customs departments in Grenada, St. Vincent and the Grenadines and Dominica. Training has been provided in customs valuation and risk assessment in three OECS countries in coordination with CCLEC and with support from the Canadian and U.S. Customs agencies. Oversight technical assistance has been provided to St. Vincent and the Grenadines and Grenada customs, regarding their reform programs. Antigua and Barbuda has established a customs reform program with CARTAC assistance and USAID is assisting to implement reforms including the adoption the Jamaican CASE (IT) system. CARTAC completed a significant Regional IT Study in the areas of tax, customs, treasury, expenditure and budget in ten Caribbean countries including ECCU countries at the request of the Canadian International Development Agency (CIDA) related to the development of their SEMCAR program. CARTAC will, during the remainder of 2009 and 2010: (1) continue to provide pre- and/or post-VAT technical assistance to Antigua and Barbuda, Dominica, St. Vincent and the Grenadines, Grenada, St. Lucia, and St. Kitts and Nevis; (2) undertake a full revenue administration assessment mission in Antigua and Barbuda; (3) continue to deliver targeted short-term customs oversight technical assistance to Grenada and St. Vincent and the Grenadines in their respective customs reform programs providing strategic and modernization recommendations; (4) provide customs post clearance audit training in St. Vincent and the Grenadines and St. Lucia; (5) provide customs assistance in developing new customs laws and related regulations in Grenada and Dominica; (6) provide regional training workshops with the ECCB and CARICOM on the CARICOM Tax Treaty and insurance concepts course; and (7) provide a regional workshop with ECCB on the use of a revenue authority toolkit. Further, CARTAC will continue to assist five OECS countries build their capacity in the area of collections enforcement and audit through formal training, on the job coaching, and enhanced operational manuals.

In public finance management, CARTAC and the ECCB assisted ECCU countries in diagnostic exercises as part of the Fiscal Machinery Project to draw up action plans to address public expenditure management weaknesses. Following up on these diagnostic assessments, CARTAC has focused on improving cash management, budgeting procedures and debt management in the ECCU countries, with both seminars and short-term missions. A review of the Treasury function in 2006 and of the Budget function in 2007, has been conducted in Antigua and Barbuda and reports presented to the Minister of Finance. Three months of technical assistance were provided to the Antigua treasury following the report in 2007 and 2008. Treasury reviews were also performed in Dominica (2007) and St. Kitts and Nevis (2008). CARTAC has funded the attachment of a budget officer from Grenada to the ECCB for the purpose of addressing Grenada's consolidated public sector accounts. Technical assistance was provided to Anguilla (2007) for the development of an annual cash management forecast model.

An analysis of St. Lucia's budget system was undertaken in 2006 and recommendations submitted to the authorities. A follow up mission was done in January 2009 with focus on program/performance budgeting. A review of St. Vincent's budget system is scheduled for mid-March 2009. Revenue forecasting and modeling workshops were held in St. Kitts and Nevis with participation from Anguilla (2007), St. Lucia (2007), Dominica (2007), St. Vincent (2008), Grenada (2008), and Montserrat (2008). A review of the internal and external audit functions was performed in Anguilla in 2007. A debt sustainability workshop was held in St. Vincent in 2008.

Pension reviews were done in Montserrat (2008) and St. Kitts and Nevis (2008). A follow-up mission to Montserrat was completed in 2008 to assist the authorities in their selection of the options for reform. CARTAC will be providing further technical assistance to implement the selected options.

CARTAC has funded Smartstream User Group meetings in 2007 and 2008 to discuss issues and problems with the software with the software company in attendance. All ECCU countries are users with the exception of Antigua which utilizes Free Balance software, Funding for IT attachments from Anguilla and Grenada to Barbados was provided to improve their financial reporting capacities.

CARTAC has also been helping in establishing an internal audit unit in St. Lucia. A training manual and a training program have been developed and were delivered in 2006 with participation from Dominica. Introduction to internal audit workshops were delivered to St. Lucia and Dominica (2006), St. Vincent and Grenada (2007) and St. Kitts and Nevis and Anguilla (2007). Advanced internal audit workshops were delivered to St. Lucia and Dominica (2007), St. Vincent and Grenada (2008) and St. Kitts and Nevis and Anguilla (2008). In order to support a coordinated regional approach to public finance reform, CARTAC has supported the establishment of the Caribbean Public Finance Management Association (CAPFA), in which the ECCU countries have been active.

At the request of the ECCB, CARTAC has provided technical assistance to the ECCU member countries in developing and implementing their own home-grown programs aimed at achieving a set of fiscal/debt targets.29

Over the last year, CARTAC successfully reinvented the work in the MAC area to focus on building capacity within the ministries of finance and the ECCB in macroeconomic analysis, forecasting and performance monitoring. This was a priority in light of the apparent weakening of local macro/fiscal teams in a number of countries. In 2008, CARTAC continued to organize missions across the ECCU to work with small teams to prepare macroeconomic projections under a baseline scenario; identify imbalances and formulate policy measures to address them; and prepare a framework to monitor key quarterly targets of the programme.

In the past year, the financial sector supervision and capital markets advisors have focused on upgrading the legislative framework for the nonbank sector. On the financial sector side, an inventory of capacity building needs was completed in late 2007 and elaborated a work plan to address the technical assistance needs over the next three years for the Caribbean region in the areas of banking, insurance, credit union, and nonbank supervision as well as the development of single regulatory units. For the banking sector, CARTAC works closely with the Caribbean Group of Banking Supervisors (CGBS) to fulfill the training needs of the region through workshops. Workshops in progress are IT Examinations for Banking Supervisors, Crisis Preparedness, and Market Risk Assessments. For country-specific banking supervision technical needs, CARTAC arranges for a consultant to work with the banking authorities on the areas of need. Most recently, the country-specific capacity building projects are implementation of the market risk capital charge under the Basel I capital adequacy requirements, implementation of Basel II, and stress-testing. For insurance supervisors, CARTAC convened an Insurance Supervision Advisory Group to identify the insurance supervisory training needs of the region as well as programs to implement those needs. As a result of the activities of the CARTAC Insurance Advisory Group, the Caribbean Association of Insurance Regulators (CAIR) was rejuvenated and instituted a number of training programs based on the IAIS Core Curriculum for Insurance Supervisors. Work is also underway in several countries to revise insurance laws and to design regulatory insurance reporting forms. Work is ongoing with the Off-shore Group of Insurance Supervisors on building capacity in the off-shore insurance supervision sector. For credit union supervisors, a model Credit Union Law has been developed and changes in the legal framework for the supervision of credit unions is well underway in several key countries. Regulatory reporting forms for credit unions are now in place for the ECCU, and specific on-site and off-site supervisory training is being conducted in various countries. In addition to these key areas of supervision, CARTAC serves the capacity building needs for the Caribbean Financial Action Task Force (CFATF) and the off-shore supervisors in the region. The development of single regulatory units in the ECCU is also a major on-going technical assistance project. Work has also begun in enhancing pension fund supervision in the region. Two other recent projects recently undertaken are the development of credit bureaus in the region and the launching of a financial literacy web site (www.financialliteracycaribbean.com). Work conducted throughout the region as well as the output is provided to all supervisory authorities through the CARTAC web site under Financial Sector Resources.

On the capital markets side, a CARTAC-sponsored attachment of ECSRC regulators to Jamaica to observe and participate in an on-site examination of a securities dealer; and CARTAC-sponsored attendance by ECSE and ECSRC staff at securities training courses in Washington, DC took place in 2008. CARTAC also sponsored the attendance of senior ECSRC regulators at a regional conference in Jamaica on unregulated investment schemes and at the annual conference of the CGSR in Barbados. CARTAC sponsored the participation of an experienced regional securities regulator from Trinidad & Tobago at a retreat for the induction of new ECSRC commissioners. A draft Financial Services Commission Act in Montserrat, sponsored by CARTAC, has been submitted to the authorities. CARTAC is currently assisting Grenada with the setting up of the Grenada Authority for the Regulation of Financial Institutions (GARFIN). CARTAC has assisted with the development of prudential reports for nonbanks in the ECCU and recently conducted training on the supervision of offshore mutual funds for St. Kitts and Nevis and St. Lucia and on the supervision of securities firms for the ECSRC.

During 2008, the CARTAC program to improve economic and financial statistics in the ECCU concentrated on national accounts and prices. Anguilla, Dominica, Grenada, St. Kitts and Nevis, and St. Vincent and the Grenadines were the main beneficiaries of technical assistance for strengthening national accounts statistics. Supply and use tables were completed for Dominica and St. Vincent and the Grenadines in the first quarter of the year, and progress was also made in developing supply and use tables for Grenada. At the same time, the project launched in the last quarter of 2007 to improve the measurement of tourism in the national accounts was extended to Anguilla, bringing the number of countries benefiting under the project to seven. In response to a request from the authorities, CARTAC assisted St. Kitts and Nevis in compiling separate production-based measures of GDP for the islands of St. Kitts and Nevis, and CARTAC assisted the Nevis Department of Statistics and Economic Development in building up a capability in compiling national accounts. In the areas of prices, CARTAC gave assistance to Anguilla, Antigua and Barbuda, St. Kitts and Nevis, St. Lucia and the ECCB in improving CPI compilation. Work on the development of export-import price indices (XMPIs) was initiated in St. Kitts and Nevis and continued in Anguilla. With respect to training, Grenada benefited from professional attachments for training in XMPI compilation and dissemination. In other areas of training, CARTAC mounted three regional courses between July and September, 2008. CARTAC sponsored and conducted workshops on national accounts statistics and XMPIs, while a seminar on the Coordinated Direct Investment Survey and Balance of Payments was hosted by CARTAC and conducted by the IMF. Participants from the ECCB and the eight ECCU territories attended each of the three training courses.

27

Bermuda joined CARTAC in November, 2007 bringing the total number of members to 21.

28

CIDA provides over 50 percent of CARTAC's total funding, with CDB, EU, Ireland, IMF, UNDP, the World Bank, and CARTAC member countries contributing the remainder.

29

The original targets were replaced in 2006 by a ceiling on the public sector debt/GDP ratio of 60 percent by 2020.