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| Photo by Erasmus Williams. |
BASSETERRE, ST. KITTS, JULY 26TH 2005: The Monetary Council of the Eastern Caribbean Central Bank says economic activity in the Eastern Caribbean Currency Union (ECCU) including St. Kitts and Nevis, continued to expand in 2005, despite the adverse impact of Hurricane Ivan on some of the member countries in September 2004 and the sharp rise in oil prices.
The Authority in its communiqué following its 53rd meeting at the Bay Gardens Hotel in St. Lucia last Friday said increases in economic activity were recorded in all member countries with the exception of Montserrat.
Growth of 3.6 percent was driven by expansions in the construction, hotel and restaurant, wholesale and retail trade and transport sectors, said the Statement, which noted however, that output in the agricultural and manufacturing sectors declined primarily as a result of damage done by Hurricane Ivan.
Monetary Council members, who included St. Kitts and Nevis Prime Minister and Minister of Finance, Dr. the Hon. Denzil L. Douglas, attended the meeting, also welcomed the continuing expansion in economic activity in the ECCU in the first quarter of 2005, which was in line with the expansion in the global economy.
It however cautioned that while the short-term outlook continued to be favourable, growth in the ECCU was subject to the risks and uncertainties in the global economy, including the rising oil prices.
The Council also noted that monetary conditions in the ECCU were generally favourable during the first four months of 2005, with growth in the money supply and an increase in the net foreign assets of the banking system. It said that the liquidity of the banking sector remained strong and interest rates remained stable.
The Council decided to maintain the officially administered rates with the regulated minimum rate of interest on savings deposits, at 3.0 percent; but agreed to review this rate at the October meeting of the Monetary Council and the Central Banks discount rate, at 6.5 percent.
It said it reviewed the factors that affect the stability of the exchange rate, including the adequacy of the ECCUs external reserves, inflation, increases in oil prices and the levels of public debt.
Council m members noted that the ECCBs external reserves, which represented 96.6 percent of its demand and other liabilities, were adequate to ensure maintenance in the value of the currency and the foreign exchange reserves held by the Bank of $1,708 million, being the equivalent of 4.6 months of imports, were in excess of the accepted standard of a minimum of three months. The international reserves of the ECCU (the ECCB and the commercial banks combined) of $3,925 million were equivalent to 10.6 months of imports.
It was also noted that inflation for most of the member countries was moderately higher in 2005 than in 2004, as a result of higher fuel prices and the recent depreciation of the US dollar in relation to other major currencies. However, inflation at the end of March 2005 was comparable, for the most part, with those in trading partner countries.
It was also noted that the movement of the US dollar against international currencies continued to make the servicing of sterling and euro debt onerous for the member governments. Council agreed to encourage member governments to review their currency composition and debt management strategies, in order to reduce the burden of debt service payments.
The Members decided that at the next meeting of the Council, a full-scale review and discussion on the debt portfolio of member states of the ECCU would take place.
It was also agreed that a comprehensive study of the implications of the oil prices on the regional economies would be done and a discussion would take place at the October meeting of the Monetary Council.
The members further agreed that the fiscal shocks resulting from the escalating price of oil would result in the need for some governments to allow the price of gas to increase, said the Communiqué.
The Monetary Council reviewed the measures being taken by the Eastern Caribbean Central Bank to achieve financial sector stability and agreed to facilitate the passage of the outstanding financial legislation and regulation.
Council affirmed the position that financial legislation in the currency union would be drafted and made on a uniform basis, said the communiqué.
The Monetary Council, which is comprised of Ministers of Finance, mostly of whom are Prime Ministers, discussed the improvement in activity in the Eastern Caribbean Securities Market and noted that regional companies had started to list on the Eastern Caribbean Securities Exchange.
The Council agreed to recommend to member governments the finalisation of the outstanding legislation required to facilitate the operation of the Eastern Caribbean Securities Market, both within the ECCU and CARICOM.
It was also agreed that every opportunity should be used to promote the readiness of the ECSE to operate as the CARICOM Exchange.
