The Ninety-Seventh Meeting of the Monetary Council of the Eastern Caribbean Central Bank (ECCB) was held on 23 October 2020, via videoconference, under the Chairmanship of Dr the Honourable Timothy Harris, Prime Minister and Minister for Finance, Saint Christopher (St Kitts) and Nevis.
The Council welcomed the new member for Grenada, the Honourable Gregory Bowen, Minister for Finance.
The Council offered expression of thanks for Dr the Right Honourable Prime Minister Keith Mitchell’s long and distinguished contribution to the Monetary Council and extended best wishes to him.
- Monetary Stability
The Monetary Council received the Governor’s Report on Monetary and Credit Conditions in the Eastern Caribbean Currency Union (ECCU) for the period January to September 2020.
The Council was apprised of the following:
- According to the World Economic Outlook recently published by the International Monetary Fund (IMF), the global economy is now expected to shrink by
4 per cent before rebounding by 5.2 per cent in 2021. Although the outlook appears to be favourable, the principal downside risk is uncertainty regarding the Coronavirus pandemic. The IMF predicts a gradual, long and uneven recovery for the global economy.
- The COVID-19 pandemic has had extremely damaging impact on the ECCB member countries through disruptions in the Travel and Tourism sector and Foreign Direct Investment.
- In September, the ECCB revised its growth projection for the ECCU to a decline of 16.2 per cent in 2020. A rebound of 5.1 per cent is estimated for the ECCU in 2021.
- The recovery of the ECCU economies is largely contingent on the continued resilience of health systems; the effectiveness of reopening protocols for virus containment; the availability of and access to a vaccine for COVID-19; and fiscal and financial support for the economies.
- Monetary and credit conditions in the ECCU have deteriorated during the period January to September 2020, on account of the sharp downturn in economic activity due to the pandemic.
Having received the Governor’s Report and recommendations, the Council decided to:
- Maintain the Discount Rate at 2.0 per cent (was reduced from 6.5 per cent in April 2020); and
- Maintain the Minimum Savings Rate at 2.0 per cent.
The Council reiterated the key demands of ECCU and CARICOM Governments presented during the recently concluded IMF/World Bank 2020 Annual Meetings. These demands are:
- Adoption of Vulnerability Index (first developed by the Commonwealth Secretariat in 1989);
- Debt Relief and Liquidity Support;
- Ring-fencing and Refinancing of COVID-19 Debt;
- Adjustment of Fiscal Anchor (Debt to GDP Ratio target was 60.0 per cent pre-COVID);
- Resilience Fund (for financing resilience including: digital infrastructure, renewable energy and food security); and
- Support for private sector recovery (to minimise job losses and financial instability).
- Financial Sector Stability
The Monetary Council received the Financial Stability Report for the ECCU for the period January to September 2020. The key highlights of the Report were:
- The ECCU’s financial system remained stable during the first nine months of 2020. However, vulnerabilities exist including an elevated level of non-performing loans, which is likely to increase following the expiration of the COVID-19 Loan Repayment Deferral Programme (loan moratorium).
- As at 31 August 2020, Licensed Financial Institutions (LFIs) reported moratoria on 26,194 loans with a total outstanding balance of $5.2 billion, which represents
39.3 per cent of total loans. Figures 1 and 2 below show the results of the Loan Repayment Deferral Programme granted in ECCB member countries.
Figure 1 – Uptake of Commercial Banks’ Loan Repayment Deferral Programme
Figure 2 – Uptake of Commercial Banks’ Loan Repayment Deferral Programme
Regulatory Guidance During the Pandemic
The Monetary Council was apprised that the ECCB continues to provide regulatory guidance to licensees and is cooperating with national regulators on appropriate guidance for the entire financial system. Additionally, national regulators in the ECCB member countries are continuing their work with the insurance and credit union sectors to mitigate emerging risks.
- Fiscal and Debt Sustainability
The Council was informed that estimates show elevated levels of current expenditure and lower revenues resulting in rising deficits. Consequently, the Debt to GDP ratio will remain well above the 60.0 per cent target during 2020-2022. Figure 3 below shows the overall fiscal position to GDP.
Figure 3 - Overall Fiscal Position to GDP (ECCU)
- Growth and Competitiveness
The Council was advised that the sharp contraction in economic activity for the ECCU is projected to be uneven across member countries, ranging from 5.5 per cent to 30.0 per cent for 2020. Countries that rely heavily on tourism and have limited fiscal space are likely to have slower recoveries.
- EC Digital Currency Pilot Project – DCash
The Council was apprised of the progress of the DCash project as the Bank prepares for its launch. The pilot will start in four of the ECCB member countries and extend to the other four countries during the pilot phase.
- Programme of Action for Recovery, Resilience and Transformation of the ECCU Economies
The Council approved the Programme of Action for Recovery, Resilience and Transformation of the ECCU Economies subject to a further discussion on the fiscal anchor, that is the Debt to GDP Ratio target of 60.0 per cent, which would need to be adjusted in light of the current circumstances presented by the COVID-19 pandemic.
The proposed Programme of Action for Recovery, Resilience and Transformation seeks to focus on actions that are fundamental for the recovery, resilience and transformation of the ECCU and is guided by the key principles of regional integration and solidarity; sustainable and innovative financing; inclusivity; and innovation and competitiveness. The Programme is constructed on four pillars:
- Financial Stability;
- Fiscal and Debt Sustainability;
- Resilient and Inclusive Growth; and
- Payments Modernisation and Digital Transformation.
The Council agreed that collective action among member governments, citizens and residents, regional institutions and development partners, is crucial for the successful execution of the Programme of Action for Recovery, Resilience and Transformation.
- Date and Venue of 98th Meeting of the Monetary Council
The Council agreed that the 98th Meeting of the Monetary Council will convene on Friday, 12 February 2021 at 9:00 a.m. via videoconference.
The following Council Members participated in the meeting:
- Dr the Honourable Timothy Harris, Prime Minister and Minister for Finance, Saint Christopher (St Kitts) and Nevis - (Chairman)
- The Honourable Dr Ellis Lorenzo Webster, Premier and Minister for Finance, Anguilla
- The Honourable Gaston Browne, Prime Minister and Minister for Finance, Antigua and Barbuda
- The Honourable Roosevelt Skerrit, Prime Minister and Minister for Finance, the Commonwealth of Dominica
- The Honourable Gregory Bowen, Minister for Finance, Grenada
- The Honourable Easton Taylor-Farrell, Premier and Minister for Finance, Montserrat
- The Honourable Allen Chastanet, Prime Minister and Minister for Finance, Saint Lucia