Eastern Caribbean Central Bank- Debt, Growth and Development Task Force

Communique - 72nd Meeting of the Monetary Council, St Kitts and Nevis, 10 February 2012

Regional Governments Build Capacity in Developing Debt Management Strategies

Fiscal Targets for ECCU Member Countries

Update on the Public Expenditure Review Commission

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The Debt, Growth and Development Task Force

Background

Terms of Reference

Task Force Membership

Links to Related Research Work

Contact Us

Background

The long-term real growth rate of the ECCU has been on a downward trajectory over the past three decades, largely reflecting attrition in the terms of trade. The bases of the region’s economies, exports of bananas and tourism services, have come under severe stress in recent times, exacerbated by the loss of preferential market-access arrangements, declining productivity, and high production costs. The generalised downward trend in the growth was briefly interrupted between 2005 and 2007, attributable to preparations for the ICC Cricket World Cup 2007; growth has since resumed its long-run path. However, domestic investment has remained robust. The member countries of the Eastern Caribbean Currency Union continue to develop strategies aimed at effecting economic transformation that would facilitate the achievement of higher and sustainable rates of growth. The long-term goal is an average annual real growth rate in the order of 6-7 per cent, coupled with a reduction in the volatility of economic growth.

Public sector deficits and debt have surged in tandem with the collapse of real growth rates, increasing vulnerability to external shocks and reducing the policy options available to address the relatively high rates of poverty and unemployment. The importance of sound and sustainable fiscal positions came to the fore during the recent global economic downturn. A strong fiscal position permits the exercise of counter-cyclical fiscal policy and

income/expenditure-smoothing, particularly important in times of economic contraction. The limited fiscal space of ECCU member governments imposed major constraints on their ability to respond to the recent adverse developments, resulting in the largest economic contraction on record and a reversal of significant social gains secured over the past decade. The issues mainly revolve around the high debt levels and the structure of government revenues and expenditure.

The establishment of an OECS Economic Union and the ECCU Eight Point Stabilisation and Growth Programme provide a clear policy framework towards the restoration of stability and the creation of an enabling environment in support of this objective.

Recognising the challenge that increasing public sector deficits pose to the further development of these economies, the Monetary Council of the Eastern Caribbean Central Bank at its 68 th meeting held on 22 October 2010 endorsed the establishment of a task force to examine the nexus of growth and debt, explore concrete growth opportunities in the region that would involve reputable private partners and study the scope for further developing the financial markets in the region to facilitate financial flows between savers and investors. This task force will formally bring together a critical group of regional and international institutions and beneficiary countries to urgently address the growth dilemma in the region.

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Terms of Reference
Composition
The ECCU Task Force on Debt Growth and Development in the context of the Currency Union (The Task Force) is a collaborative effort among the member countries of the ECCU, the Caribbean Development Bank, the OECS Secretariat, the World Bank, the International Financial Corporation (IFC), the International Monetary Fund (IMF) and the Eastern Caribbean Central Bank.

Objective
The objective of the Task Force is to examine the prospects for economic growth in the Eastern Caribbean Currency Union and to recommend a path for stimulating and sustaining growth in a high debt situation and for transforming the economies.

Scope of Work
The Task Force is mandated to address the growth dilemma and examine the growth/debt nexus in the Eastern Caribbean region by :

Investigating the causal relationship between public debt (central government and wider public sector) and real GDP growth in the ECCU;
Identifying effective modalities for debt restructuring and reduction;
Presenting options/mechanisms for managing debt in a manner likely to avert unsustainable accumulation;
Investigating the extent to which large debt is likely to reduce potential growth;
Recommending mechanisms for achieving and sustaining growth in the context of high debt;
Studying the scope for further development of financial markets in the ECCU region to facilitate intermediation ;
Exploring growth opportunities for the OECS that would allow for the development of the economies;
Recommending support mechanisms for implementing the programmes for achieving and sustaining growth in the Currency Union;
Identifying productive development policies.

Deliverables/Output
The Task Force will produce a detailed report for presentation to the Monetary Council in October 2011 and at the next round of consultations between the member governments and the IMF and World Bank Group. The report will include:

The relationship between growth and debt;
Recommended mechanisms/opportunities for achieving and sustaining growth in the context of high debt;
The scope for further development of financial markets in the ECCU region to facilitate intermediation;
Supporting mechanisms for implementing the programmes for achieving and sustaining growth in the Currency Union;
Action plan for increasing growth, reducing debt levels and building resilience; and
Recommendations for going forward.

Conduct of meetings
The Task Force will meet via video conference on a monthly basis. A Chairperson for the Task Force would be determined by members of the Task Force. The ECCB would be the Secretariat to the Task Force.

Reporting
The Chairperson of the Task Force shall report to the Monetary Council.

Term of t he Task Force
The Task Force will remain in force until December 2011.

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Task Force Membership

INSTITUTION/COUNTRY	REPRESENTATIVE
INTERNATIONAL MONETARY FUND	Mr Alfred Schipke – Division Chief, Caribbean 1 Division, WHD
THE WORLD BANK	Mr Auguste Kouame – Lead Economist – Latin America and the Caribbean/Sector Leader
INTERNATIONAL FINANCE CORPORATION	Mr Jun Zhang –Regional Manager for the Caribbean
CARIBBEAN DEVELOPMENT BANK	Dr Denny Lewis-Bynoe – Director of Economics
OECS SECRETARIAT	Mr Rodinald Soomer – Head of Unit, Economic Affairs
ANGUILLA	Dr Wycliffe Fahie - Principal Assistant Secretary, Ministry of Finance
ANTIGUA AND BARBUDA	Mr Kevin Silston – Deputy Financial Secretary
DOMINICA	Mr Colin Bully - former Executive Director of OECS-EDU
GRENADA	Mr Timothy Antoine – Permanent Secretary, Ministry of Finance
MONTSERRAT	Mr Courtney Crump – Deputy Accountant General, Accountant’s General Office
ST KITTS AND NEVIS	Ms Versilie Francis – Senior Economist, Ministry of Finance
SAINT LUCIA	Mr Isaac Anthony – Permanent Secretary, Ministry of Finance
ST VINCENT AND THE GRENADINES	Mr Edmond Jackson – Budget Director, Ministry of Finance
EASTERN CARIBBEAN CENTRAL BANK	Sir K Dwight Venner – Governor

Links to related research work
www.imf.org/eccu
http://web.worldbank.org/oecs
http://www.eccb-centralbank.org/PublicAwareness/pencom.asp
http://www.eccb-centralbank.org/About/leg-agreement.asp
http://www.growthcommission.org/
http://www.oecs.org/

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Contact Us
For further information and inquiries, please email the Task Force at:

info@eccb-centralbank.org

Sir K Dwight Venner
Chairman
Debt, Growth and Development Task Force
Eastern Caribbean Central Bank
P O Box 89
Basseterre
St Kitts
West Indies

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