Global Economic Crisis Continues To Affect OECS Countries

BASSETERRE, St. Kitts, CMC – The economies of the Eastern Caribbean continue to struggle from the global economic and financial crisis with 2012 being described as “a very challenging year”.

Governor of the Eastern Caribbean Central Bank (ECCB), Sir Dwight Venner, in his annual report on the performance of Antigua and Barbuda, Dominica, Grenada, St. Lucia, St. Vincent and the Grenadines, St. Lucia, St. Kitts-Nevis and Montserrat, said effects of the crisis on growth, employment, government revenues and debt “have been marked and have dramatically illustrated the openness and vulnerability of our very small economies”.

But he said the Eastern Caribbean Monetary Council, in collaboration with the governments of the sub-region, responded to the situation through the formation of the Organisation of Eastern Caribbean States (OECS) Economic Union, as well as the Eastern Caribbean Currency Union (ECCU) Eight Point Stabilisation and Growth Program.

“Our success within the near and medium term will depend on the urgent completion of the OECS Economic Union project and the collective and collaborative approach to our challenges by all of our citizens.”

Sir Dwight said the introduction of a work program coordination initiative formed part of the “critical responses to the structural factors of very small size, openness and extreme vulnerability of the ECCU economy.

“The Monetary Council has recognized that the long term trends of the economies towards low growth, which has been exacerbated by the global crisis, must be arrested and a new broader based economy must be constructed within the single economic and financial space, created by the OECS Economic Union Treaty,” he told radio and television audiences throughout the sub-region on Thursday night.

He said that within that context, the ECCB concentrated on several strategies including financial and monetary stability as well as the development of money and capital markets and the provision of technical assistance and support in the areas of fiscal and debt management to the countries.

Sir Dwight said that in the area of financial stability, the ECCB paid particular attention to the safety and soundness of the banking system which had been seriously affected by the global crisis.

“There was a significant increase in non-performing loans and a reduction in the earnings of the banking system. In response, the ECCB has increased the number of bank supervisors and intensified the supervision and regulation of the banking sector,” he said, noting that the objective has been to stabilize and consolidate the sector in keeping with the ECCU Eight Point Stabilisation and Growth Program.

He said a Task Force, which included the Barbados-based Caribbean Development Bank (CDB), the International Monetary Fund (IMF) and the World Bank, assisted tremendously in implementing the strategy.

He said following a comprehensive diagnosis of the entire financial system, the Monetary Council approved a resolution strategy, which is now being implemented with technical assistance from the IMF and the World Bank.

The initiative is being funded by the Canadian International Development Agency (CIDA) and the United Kingdom’s Department for International Development (DFID) and Sir Dwight said “the objectives of the resolution strategy are to stabilize and to consolidate the financial sector through: the creation of a single financial space and the consolidation of the regulatory authorities, the banking sector, and the insurance sector in the space”.

In his report, Sir Dwight said that the systemic task of resolving the CLICO/BAICO collapse is continuing and that “substantial progress has been made with respect to restoring the value of the traditional insurance policies and policy holders have received substantial pay-outs over the year”.

In the area of money and capital market development, the highlight has been the performance of the Regional Governments Securities Market (RGSM) on which six of the eight ECCU member governments are issuing regularly at favourable rates, Sir Dwight said.

He said with respect to debt management, the ECCB continues to provide technical assistance to member governments through funding from CIDA.

Over the past fiscal year, the St. Kitts-based ECCB said it had realized a profit of EC$5.2 million (One EC dollar = US$0.37 cents) compared with EC$11.7 million in the previous year.

The bank has assets in excess of EC$3.7 billion, an increase of EC$395.6 million, when compared to the position last year.