The Monetary Council of the Eastern Caribbean Bank met in its 6th special meeting at the Eastern Caribbean Central Bank (ECCB) Headquarters in St Kitts and Nevis on September 18, under the chairmanship of the Honourable Roosevelt Skerritt, Prime Minister and Minister of Finance of Dominica.

Anguilla’s Minister of Finance, the Honourable Victor F. Banks, attended the meeting along with Finance Ministers from Antigua and Barbuda, Grenada, Montserrat, St. Kitts and Nevis, St. Lucia and St. Vincent and the Grenadines.

This 6th special meeting of the Monetary Council was the climatic conclusion of the “Boot Camp” on Economic and Financial adjustments in the Eastern Caribbean Currency Union which took place over the period 07 to 16 September 2009. During the “Boot Camp” officials from the member states of the ECCB examined the first five components of the region’s strategic policy response to the global economic and financial crisis known as the ECCU Eight Point Stabilisation and Growth Programme.

A communiqué from the special meeting advised that the programme consists of eight points:

1. Suitably adapted Financial Programmes for each country
2. Fiscal Reform Programmes
3. Debt Management Programmes
4. Public Sector Investment Programmes
5. Social Safety Net Programmes
6. Financial Safety Net Programmes
7. Amalgamation of the Indigenous Commercial Banks
8. Rationalisation, Development and Regulation of the Insurance Sector

This strategic response of member governments of the ECCU is aimed at stabilising and transforming the economies with three main objectives, namely: stabilisation, stimulus and structural reform. In addition, the plan outlines the critical role that partnership with the private sector would play in achieving the stated objectives of the programme.

The “Boot Camp” represents a high point in the efforts which began on 15-16 January 2009 with the first joint meeting of the OECS Authority and ECCB Monetary Council where an action plan was developed to respond to the crisis. The main objective of the “Boot Camp” was to develop a coherent and internally consistent strategy, through the financial programming exercise, to implement the ECCU Eight-Point Stabilisation and Growth Programme.

At the end of the “Boot Camp” the ECCB Board of Directors, Financial Secretaries of the Eastern Caribbean Currency Union and the Monetary Council were presented with the financial programmes of each member country. As part of the presentation, the Financial Secretaries presented the country strategies for economic and financial stabilisation and adjustment which are expected to place the respective countries on a growth path.

Member States engaged in dialogue with development partners and regional and international financial institutions on accessing funding and other forms of external support.

The Monetary Council acknowledged the support of the OECS Business Council, the trade unions of the ECCU and the private sector in its strategic response to the crisis. Council agreed to work with these bodies in establishing tripartite committees at the national level and to hold a regional meeting with the tripartite committees in the ECCU in October 2009.

Council noted the proposal put forward by the indigenous banks of the ECCU for greater cooperation and consolidation.

Council reiterated its view on the amalgamation of the indigenous banks as laid out in the ECCU Eight Point Stabilisation and Growth Programme. It noted the common challenges being faced by member states as a result of the international financial crisis including contraction in the real GDP in the medium term as a result of declines in tourism receipts and foreign direct investment. A second challenge is the debt to GDP ratios which are resulting in limitations on governments’ ability to adopt counter cyclical policies to mitigate the impact of the crisis.

The Monetary Council noted that while the focus of the “Boot Camp” was primarily stability, there was an urgent need to position our economies to achieve and maintain growth rates of 6 percent in order to achieve broader economic objectives of less than 6 percent unemployment levels, poverty levels not exceeding 6 percent, maintaining high human development indices and transforming the ECCU economies.

The Monetary Council received the main issues and recommendations arising from the financial programmes of member countries during the “Boot Camp” and agreed on a Policy Making Framework and the first five points of the Eight Point Stabilisation and Growth Programme.

Macroeconomic Policy Making Framework
The Council agreed that the Macroeconomic Policy Making Framework and Architecture in the ECCU needed to be further strengthened through the following measures:

(a) Institutionalising the policy making framework and architecture through the urgent establishment or strengthening of policy units, debt units, statistical departments and planning units;
(b) The full articulation of financial programmes as a basic tool for macroeconomic management at the country level;
(c) Greater collaboration, coordination and reporting requirements across ministries within countries and across the ECCU.
(d) The improvement of communication with the general population and greater use of information technology to inform society on governments policies.

Statistics Development
Recognising that good statistics was a prerequisite to sound policy making, Council agreed that an increased focus on statistical improvement was urgently required. In this regard, Council agreed to recommend the following measures to member states:

(a) A deliberate plan for the removal of the statistical gaps that exist in the ECCU statistical system in the provision of timely, relevant and accurate data;
(b) The adoption of technologies that would facilitate improved data collection and analysis;
(c) Focused attention on equipping the relevant statistical offices across the region with professional staff and instituting continued training and development;
(d) Upgrading the national statistics offices to autonomous bodies.

Fiscal Reform
Council agreed that fiscal prudence was critical and agreed that the following measures were necessary:

(a) Increased efforts to improve revenue collection;
(b) Continued implementation of the recommendations of the Tax Commission including the implementation of Value Added Tax in those countries that have not already done so;
(c) The establishment of an Expenditure Commission and the introduction of expenditure reduction programmes with a view to reduce discretionary current and capital expenditure;
(d) Increased efforts to access concessional financing from development partners and regional and international financial institutions;
(e) Improved procurement procedures aimed at effecting cost savings;
(f) Establishing fiscal targets as recommended by the ECCB Monetary Council.

Debt Management
Council agreed that greater focus on Debt Management in the ECCU was critical in assisting member states in coping with the crisis. Accordingly, Council supported debt reduction measures including the following:

(a) The development of medium term debt management strategies with greater emphasis on debt reduction;
(b) Increasing the capacity of debt units to effectively manage the countries’ debt portfolios and identify debt reduction measures;
(c) Greater use of the Regional Government Securities Market (RGSM) in order to provide governments with additional avenue to finance their short and long-term expenditure, thereby reducing their direct reliance on short-term bank lending and lower debt service costs over the medium to long-term.

Public Sector Investment Programmes

Council agreed that the development of well structured Public Sector Investment Programmes (PSIPs) was critical in stimulating the economies of the ECCU and agreed to recommend the following measures to member states:

(a) The articulation of the PSIP within the framework of a medium term development strategy;
(b) Enhanced institutional arrangements with line ministries and the establishment of oversight committees;
(c) The recruitment of well trained staff with good project management skills.

Having reflected on the debt to GDP levels and fiscal positions of member states, Council agreed to recommend that member states align their PSIPs based on available financing and the economic impact.

Social Safety Nets

Council noted the need for social mechanisms to mitigate the impact of the crisis on the poor and most vulnerable in our region. Accordingly, Council agreed to support the following measures:

(a) Greater coordination and collaboration within and among countries in the implementation of social protection systems;
(b) Improved targeting of social protection programmes;
(c) Rationalisation and consolidation of social protection programmes to improve efficiency and to establish priorities;
(d) Initiatives geared towards moving persons out of poverty including education enhancement, training and retraining, temporary work programmes and small business development programmes.

Cognisant of the consequential impact of the cost of social protection mechanisms on member states’ expenditure, Council agreed that further work was required to ensure that social safety nets in the ECCU were streamlined and targeted.

Private Sector Development

Council noted the importance of private sector development in achieving the desired objective of 6 per cent growth and agreed that the development of a private sector development strategy and enhanced entrepreneurship initiatives should be pursued.

Contribution of Development Partners and Regional and International Financial Institutions

Council discussed the role of development partners and regional and international financial institutions in the macroeconomic adjustment process and the need to have more targeted and coordinated programmes which are consistent with the financial programmes and public sector investment programmes. Additionally, the Council agreed that greater coordination among these institutions was desirable.

Council received the country reports on the financial programmes and agreed to the constant updating of the financial programme for presentation to the Monetary Council on an ongoing basis.

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