by Kevon Browne
St. Kitts and Nevis (WINN): While rising interest rates and inflation still plague the global financial situation, the strength of the EC dollar remains strong, and the economic situation in the Eastern Caribbean Currency Union (ECCU) is in a continuing recovery mode with the ECCU boasting a $5.04 billion in foreign assets at the end of 2022.
The Monetary Council of the Easter Caribbean Central Bank (ECCB) met on February 24 at the ECCB headquarters in St. Kitts.
Heads of government were apprised of the Monetary and Credit conditions of the Eastern Caribbean Currency Union (ECCU) from January to December 2022.
The meeting was held under the chairmanship of the Prime Minister of St. Lucia, Hon. Phillip J Pierre, who presented the Communique of the 104th Meeting of the Monetary Council of the ECCB.
“The Report subtitled “A BIG Push…For Resilience, Innovation, Inclusion and Transformation” focused on the ongoing economic recovery, both globally and within the ECCU, as well as on the impact that the increased uncertainty in the global environment is having on this recovery. It indicated that:
a. The global growth forecast by the International Monetary Fund for 2023 has been revised marginally upward by o.2 of a percentage point to 2.9 percent; in October 2022, the IMF had projected 2.7 percent global growth for this year. This is below the historical (2000-2019) average of 3.8 percent.
b. Global headline inflation peaked in 2022 while monetary policy tightened. However, close to 84 percent of countries are expected to have reduced headline (consumer price index) inflation in 2023 relative to 2022.
c. Although the recovery is proceeding apace in the ECCU, consumer prices have not yet stabilised. Elevated consumer inflation continues to cast a shadow over positive economic activity by reducing people’s purchasing power. In the ECCU, fuel costs drove up headline inflation in 2022, and the average gasoline price in the region edged upward from the end of December 2022. Food price shocks also remain a challenge for the ECCU.
d. Monetary and credit conditions in the ECCU remain stable and accommodative, and the EC Dollar – the only legal tender in the ECCU – remains stable.
e. The foreign reserve backing for the EC dollar remains strong the average weekly backing ratio stood at 92.2 percent in 2022, above the statutory minimum requirement of 60.0 percent. The weekly ratio ranged from 89.4 percent to 95.30 percent in 2022. Since January 2023, the backing ratio (the ratio of foreign assets to demand liabilities at the ECCB) has averaged 91 percent.
f. ECCB’s foreign assets at the end of 2022 stood at $5.04 billion; the pre-pandemic (2019) level was $4.58 billion.
g. The ECCU had an Import Cover Ratio (ICR) of 6.8 months at the end of 2022, relative to the 3-month benchmark.
Having considered the state of monetary, financial and credit conditions in the ECCU, the Monetary Council decided to:
a. Maintain the minimum savings deposit rate at 2.0 percent; and
b. Maintain the Central Bank’s discount rate at 2.0 percent for short-term credit and 3.5 percent for long-term credit to governments.
The Minimum Savings Rate (MS) is the lowest rate that commercial banks can offer on savings deposits. The Central Bank’s Discount Rate is the rate at which the ECCB lends to governments and commercial banks.”
The Chair of the Monetary Council also spoke of the ECCU’s financial stability, fiscal and debt sustainability, and growth and competitiveness.
The Monetary Council approved the appointment of Lucille Livingston-Andall as the Eastern Caribbean Securities Regulatory Commission (ECSRC) Chairman. Dr Vincent Richards was appointed the new Deputy Chairman of the ECSRC.
Attending the meeting were:
The Hon. Philip J Pierre, Prime Minister and Minister for Finance, St. Lucia
The Hon. Dr Ellis L Webster, Premier and Minister for Finance, Anguilla
The Hon. Gaston Browne, Prime Minister and Minister for Finance, Antigua and Barbuda
The Hon. Dr Irving McIntrye, Deputy Prime Minister and Minister for Finance for the Commonwealth of Dominica
The Hon. Dickon Mitchell, Prime Minister and Minister for Finance, Grenada
The Honourable Joseph Easton Farrell, Premier and Minister for Finance, Montserrat
The Hon. Dr Terrance Drew, Prime Minister and Minister for Finance, Saint Christopher (St Kitts) and Nevis
The Hon. Camillo Gonsalves, Minister for Finance, Saint Vincent and the Grenadines
Gonsalves will assume the chairmanship of the 105th Meeting of the Monetary Council of the ECCB, to be held in St. Vincent and the Grenadines on July 21, 2023.
