Eastern Caribbean Central Bank Governor Issues Warning To ECCU Member States

Photo above is of Sir Dwight Venner.

BASSETERRE, St. Kitts, CMC – Governor of the Eastern Caribbean Central Bank (ECCB), Sir Dwight Venner, says while the performance of the economy of St. Kitts and Nevis since 2013 has been “very encouraging”, member countries of the Organization of Eastern Caribbean States (OECS) need to implement policies that would improve their chances of survival “in this very challenging environment”.

Addressing the National Consultation on the Economy here on Thursday, Sir Dwight said economic performance of the twin island Federation “has been the bright spot in the ECCU (Eastern Caribbean Currency Union) as we continue to be affected by the global crisis”.

He told the consultation that this performance has been due to an effective implementation of a robust adjustment program conceived by the government within the guidelines of the ECCB’s Eight Point Stabilization and Growth Program and assisted by the International Monetary Fund (IMF) with financing and monitoring.

“This performance by St. Kitts and Nevis is indicative of what is possible if the conduct of our economic policies is carried out within the conceptual framework of a broad macroeconomic framework, which addresses not only adjustment but also a growth stimulus and social safety nets which address those who are least capable of defending themselves in difficult circumstances, and preparing them where possible for gainful employment in the economy.”

The ECCB serves as a central bank for Antigua and Barbuda, Dominica, Grenada, St. Lucia, St. Vincent and the Grenadines, St. Kitts-Nevis, Montserrat, Anguilla and the British Virgin Islands.

Sir Dwight said that the first five points of the Eight Point Program can, in the case of St. Kitts-Nevis, be said to have been successfully executed, namely, financial programming, fiscal reform, debt management, public sector investment programming and social safety nets.

The Central Bank Governor said the other element which has made the recovery positive, has been the Citizens by Investment Program, which has brought in much needed foreign exchange from which the government could embark on an effective stimulus program and finance the social safety nets.

“This program is now being emulated by other members of the Currency Union and we hope that it can bring them similar benefits,” Sir Dwight added.

He said that the economic growth in the Federation turned positive in 2013 after a contraction which started in 2009 and is projected to be about three percent and possibly over this up to 2017 in the first instance.

“The challenge facing the country now would be the sustainability of this performance in the current environment of an increasing competitive international economy, in which no quarter is given and none is asked for.”

Sir Dwight said that the evolving environment is evidenced by several factors including the removal of concessional trade arrangements which have affected and caused the demise of the two major agricultural export commodities in the ECCU – sugar and bananas – as well as the difficulties the countries have had in trying to create viable international financial sectors.

He said the experience of Antigua and Barbuda with their online gambling industry in which they won their case at the World Trade Organization (WTO) but could not get the judgement against the United States implemented and the current challenges to the Citizens by Investment Program which is coming from several quarters even from countries which had these programs for years, were also factors that could impede future economic growth.

Sir Dwight said there is also the issue of the need “to urgently improve our productivity and international competitiveness in the areas that we intend to make a living from.

“This crisis and its aftermath gives us the opportunity to chart a new course which will ensure an increased standard of living and quality of life for our citizens if we chart a strategic and focused path to our goals.”

He said the fundamental issue would be achieving sustainable growth over an extended period of time to achieve a doubling of per capita incomes by the year 2030; the reduction of unemployment to below four percent; substantial reduction and possible eradication of poverty; improvement in the Human Development Indices of the United Nations; attaining and surpassing the Millennium Development Goals and a diversified and competitive economy.

“This will require a growth rate of three percent consequent upon a phase of adjustment which the Federation has already achieved, moving to 5  to 7 percent from about 2017 and onwards,” he said, adding, “to be realistic about achieving these goals we must be realistic about our circumstances and the external environment”.

In his address, Sir Dwight said the private sector in the ECCU has the very important task of changing its structure and orientation to compete in the international environment, if we are to achieve sustainable rates of growth.

“The financial sector in the ECCU also has to be restructured to be an effective instrument for the mobilization of savings and their allocation to production instead of the overwhelming portion going to consumption activities.”

He recalled that during his New Year’s Address to the Nation, Prime Minister Douglas captured the essence of the fundamentals necessary to propel the sub-region forward both as a collective association of states united in an economic union.

“He highlighted the domestic actions which were taken and which still have to be taken to address the fundamental problems. However, he clearly outlined the external environment of globalization in which we exist and will have to cope with as this process is clearly not reversible.

“He also struck a critical note with respect to the OECS Economic Union, namely, the need to reduce the cost of government and to increase its efficiency and effectiveness through close collaboration. The cost of providing public goods and services is extraordinarily high for very small states and constrains our ability to compete both regionally and internationally.”

Sir Dwight said that St. Kitts and Nevis is now in a position to supply the leadership that is necessary to overcome the present difficulties and to assist in the development of the broader arrangement.

“The collective arrangements in the economic union, with a legislature in addition to the other organs and institutions of the OECS, allow each country to lead in different areas which will benefit the whole. It is a unique experiment in state and nation building, which calls for these varied contributions to make us all stronger and more resilient to external shocks,” Sir Dwight said.