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By Kevon Browne
St. Kitts and Nevis (WINN): The 108th meeting of the Monetary Board of the Eastern Caribbean Central Bank (ECCB) was held on July 19, 2024 at the Aurora Anguilla Resort and Golf Club, following a ceremony to change the chairmanship of the Monetary Board.
The meeting was attended by: Dr. Ellis Webster, Prime Minister and Minister of Finance of Anguilla (Chair); Gaston Browne, Prime Minister and Minister of Finance of Antigua and Barbuda; Lennox Andrews, Minister of Economic Development, Alternate to the Grenada Board (web); Joseph Easton Farrell, Prime Minister and Minister of Finance of Montserrat; Dr. Terence Drew, Prime Minister and Minister of Finance of St. Kitts and Nevis; and Wayne Gillard, Minister of Finance, Alternate to the St. Lucia Board.
Currency stability
The Monetary Committee reviewed the report of the Governor of the Eastern Caribbean Currency Union (ECCU) on monetary, credit and financial conditions, entitled “Moving Forward Amid Heightened Global Turbulence and Uncertainty”. Highlights of the report include:
– Recovery: International and regional recovery from the pandemic remains strong.
– Economic Performance: Global economic performance is expected to remain below historical trends due to ongoing geopolitical conflicts.
– Inflation trends: Global headline inflation is expected to decline from 6.8% in 2023 to 5.8% in 2024. ECCU inflation has eased but remains vulnerable to geopolitical issues.
– Risks: ECCU is exposed to an above-average Atlantic hurricane season, revenue volatility from the Citizenship by Investment (CBI) program, inflationary pressures, and geopolitical risks.
– Foreign reserves: The ECCU has total foreign reserves of EC$5.2 billion. As of July 12, the EC currency had a support rate of 96.64%, up from 95.13% in February 2024.
The Council decides:
1. Maintain the minimum savings rate at 2.0%.
2. Maintain the current status of the short-term credit discount rate at 3.0% and the long-term credit discount rate at 4.5%.
Financial stability
The Council was briefed on the following financial sector developments:
– Banking system: The Eastern Caribbean banking system remains stable and liquidity is adequate. Monetary aggregates continue to expand, reflecting improved economic conditions.
– Interest rates and lending: Interest rates remained low and credit conditions eased, leading to an increase in commercial bank lending.
– Bank capital and deposits: Banks are well capitalized and their deposits are growing.
– Credit bureau progress: Credit bureau EveryData ECCU Ltd has signed up 22 of the 25 ECCU banks and is set to go live on September 1, 2024 in several member countries.
The Board of Directors approved:
1. Banking Amendment Act 2015.
2. The Eastern Caribbean Deposit Insurance Corporation Agreement and Act to strengthen consumer protection.
3. Establish an Office for Financial Market Conduct and Financial Inclusion within the ECB.
4. Policy considerations for revising ECCU data protection legislation.
Fiscal and debt sustainability
Fiscal performance has also improved as the economy recovers. The debt-to-GDP ratio falls from 88% in 2020 to 75.7% by the end of 2023. In the aftermath of Hurricane Beryl, the Council expressed solidarity with Grenada and St. Vincent and the Grenadines, approving EC$1 million in funding for each country’s relief efforts.
Growth and competitiveness
The region’s economic growth is expected to increase by 5.2% in 2024, up from 4.5% in 2023. Growth is mainly driven by tourism and construction, supported by low interest rates. The first quarter of 2024 saw double-digit growth in tourist arrivals, and air transport in the region is expected to further boost tourism.
Reports on BAICO, CLICO, ECAMC and ECPCGC
The Council reviewed efforts to resolve issues for ECCU policyholders of the failed Anglo-American Insurance Company and CLICO Life Insurance Company. Further efforts will be made to facilitate additional payments to eligible policyholders. The Council also noted reports on the operations of the Eastern Caribbean Partial Credit Guarantee Company (ECPCGC) and the Eastern Caribbean Asset Management Company (ECAMC).
Next meeting
The 109th Monetary Board Meeting will be held virtually on October 18, 2024 at 9:00 a.m.
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