ECCU States: Economies Growing, Fiscal Deficit Narrowing
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ECCU States: Economies Growing, Fiscal Deficit Narrowing |
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Contact: George Jude
Wednesday, March 17, 2004 - The 50th Meeting of the ECCB Monetary Council held on 26 February 2004, was full of good news, with the Governor reporting growth of 2.4 per cent last year, a narrowing of the consolidated fiscal deficit, and a projected growth of 3.3 per cent this year. Under the Chairmanship of the Honourable Margaret Annie Dyer Howe, Minister of Agriculture, Housing, Land and Environment, and Council Member for Montserrat, the Council received the Governor’s report on conditions in the Eastern Caribbean Currency Union (ECCU).
In reviewing the economic developments and prospects in the ECCU, the Council noted that the positive influence of the economic recovery in North America and a number of European countries on growth in the ECCU was reflected in the improvement in the tourism sector. Accordingly, growth in real output experienced in the ECCU in 2003, was 2.4 per cent, up from 0.2 per cent, in 2002, with projected growth of 3.3 per cent for 2004. Council was heartened by the increasing trend projected. The pound sterling and the euro, two currencies in which the ECCU transacted significant business, had strengthened against the US dollar, and in tandem, against the EC dollar in 2003. These currency movements had both positive and negative effects. Tourism and export commodities were positively affected, while debt service payments denominated in pound sterling and the euro increased as more EC dollars were required to meet those obligations.
Improvements in the fiscal performance of the ECCU member governments as
demonstrated by the narrowing of the consolidated fiscal deficit, was noted by
the Council. This narrowing reflected the efforts made under the structural
adjustment programmes being pursued by the ECCU member governments. Council
encouraged member governments to maintain fiscal discipline. FINANCIAL STABILITY The Council received the report on the results of the Financial Sector Assessment Programme (FSAP), which was conducted by the IME and The World Bank. The Council agreed to the Bank’s recommendations to strengthen the regulation and supervision of financial institutions in order to guard against potential sources of financial instability. The early implementation of the Integrated Regulatory Framework, which would provide for the establishment of a Single Regulatory Unit in each member territory to regulate and supervise financial institutions not licensed under the Banking Act, was recommended to ECCU member governments by the council.
MONEY AND CAPITAL MARKET DEVELOPMENT The Regional Government Securities Market (RGSM) was noted to have been instrumental in reducing the interest rates for ECCU member governments thereby lowering the cost of borrowing. Council noted that ECCU member countries were taking steps to implement the procedures to ensure the operational efficiency of the RGSM. The Council agreed that the member governments should be encouraged to review their practices, so as to ensure that the RGSM became fully operational The Council discussed and agreed to pursue efforts to position the Eastern Caribbean Securities Exchange as a CARlCOM-exchange and called upon the members to facilitate the necessary legislative changes in support of this arrangement.
INTEREST RATES The liquidity in the banking system was discussed by the Council. It noted the decline in the Inter Bank and Treasury bill interest rates, but agreed that no change be made to the regulated minimum rate of interest on saving deposits, currently 3.0 percent; and the Central Bank’s discount rate, currently 6.5 percent. Other Council Members attending the meeting were: Honourable Victor Banks, Minister of Finance, Economic Development, Investment and Commerce, Anguilla; Mr Whitfield Harris Jr., Financial Secretary, Alternate Member, Antigua and Barbuda; Honourable Roosevelt Skerrit, Prime Minister and Minister for Finance, Planning and Caribbean Affairs, Dominica; Honourable Anthony Boatswain, Minister of Finance and Planning, Grenada; Dr. the Honourable Denzil L Douglas, Prime Minister and Minister of Finance, Development, Planning and National Security, St Kitts and Nevis; Dr the Honourable Kenny D. Anthony, Prime Minister and Minister of Finance and Economic Affairs, St Lucia; and Honourable Conrad Sayers, Minister of State, Ministry of Finance and Planning, Temporary Alternate Member, St Vincent and the Grenadines. A minute of silence in respect of the passing of the late Prime Minister of Dominica, Pierre Charles was observed by the Council and paid tribute was paid to him for his unwavering commitment and sterling service to the people of Dominica and the region. The Council applauded the determination of the Prime Minister, Honourable Roosevelt Skerrit to continue the adjustment and reform process under the structural adjustment programme, and pledged to continue to give support to the efforts of the Government and people of Dominica. |
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