IMF Executive Board Concludes 2022 Article IV Consultation on Common Policies of Member Countries of the Eastern Caribbean Currency Union


On July 27, 2022 the Executive Board of the International Monetary Fund (IMF) concluded the 2022 Article IV consultation on common policies of member countries of the Eastern Caribbean Currency Union (ECCU). [1]

With ECCU economies slowly emerging from the pandemic with scars, the impact of the war in Ukraine is a setback to the nascent recovery. Higher food and energy prices, amid ongoing supply disruptions and intra-regional transportation bottlenecks, are raising inflation, eroding income, lowering output growth, worsening fiscal and external positions, and threatening food and energy security. As a result, inflation is expected to hover over 5½ percent in 2022. Real GDP is projected to grow by 7½ percent in 2022, leaving output still well below the pre-pandemic level. Fiscal deficits are projected to remain sizable, given continued pandemic- and disaster-related spending and temporary support to address rising living costs, thereby keeping gross financing needs and public debt at elevated levels in the near term. The financial system has remained broadly stable so far, with adequate capital and liquidity buffers, but nonperforming loans remain high and could rise further following the expiration of the ECCB’s loan moratoria program. The outlook is subject to large downside risks, primarily from further increases in commodity prices and new COVID variants amid vaccine hesitancy, in addition to the ever-present threat of natural disasters.

Executive Board Assessment [2]

Executive Directors welcomed the Eastern Caribbean Currency Union (ECCU) and national authorities’ response to the pandemic that contributed to a nascent economic recovery in 2021. Directors noted that ECCU economies have been scarred by the COVID-19 pandemic and that spillovers from the war in Ukraine have compounded supply disruptions and transportation bottlenecks, fueling inflationary pressures. They recognized that the recovery will be gradual and uneven and that downside risks to the outlook remain significant. In that context, Directors stressed the need to focus policies on ensuring a resilient and inclusive recovery. They also highlighted the role that Fund engagement, including capacity development, and the international community could play in supporting these objectives.

Directors stressed the importance of maintaining fiscal prudence, while protecting the vulnerable, given the lingering pandemic, heightening inflation pressures, and the tightening of global financial conditions. They agreed on the need for temporary targeted transfers and called for efforts to improve the coverage and targeting of social safety nets. Directors saw merit in allowing a gradual pass-through of international energy and food prices to the domestic economy and phasing out generalized subsidies.

Directors underscored the importance of medium-term fiscal consolidation, supported by revenue mobilization, expenditure rationalization, fiscal structural reforms, and reliance on concessional financing. While noting the recent progress, Directors emphasized the need to accelerate the adoption of well-designed rule-based fiscal frameworks to support consolidation efforts and preserve the credibility of the regional debt target. They agreed that the impact of natural disasters should be internalized in these frameworks to enhance their effectiveness and credibility.

Directors noted that the financial sector remains broadly stable so far. However, they underscored the need to closely monitor asset quality and provisioning buffers, given elevated nonperforming loans, following the exit from loan moratoria. To support private sector credit growth, Directors recommended accelerating reforms to address long-standing lending and credit constraints. They noted that risks to correspondent banking relationships can be mitigated by strengthening the region’s financial integrity, AML/CFT, governance, and offshore taxation frameworks. Directors called for efforts to reduce fragmentation in the non-bank supervision framework and expedite legislation to govern digitalized financial services. They welcomed recent steps by the ECCB to integrate climate risks in supervisory and regulatory frameworks and recommended that they also be integrated in crisis management plans. Noting the potential benefits and risks related to DCash, Directors urged the ECCB to raise public awareness and improve communication with end-users, reinforce capacity, and fully implement safeguard measures.

Directors encouraged further progress on structural policies to build climate resilience, strengthen competitiveness, and ensure food and energy security. They highlighted the importance of further investing in resilient infrastructure and insurance for natural disasters and accelerating the shift to renewables. Directors recommended upgrading intra-regional transportation infrastructure, enhancing regional integration, and investing in skills development.

Directors agreed that the views they expressed today will form part of the Article IV consultation discussions with individual ECCU members.

[1] Under Article IV of the IMF’s Articles of Agreement, the IMF holds bilateral discussions with members, usually every year. In the context of these bilateral Article IV consultation discussion, staff hold separate annual discussions with the regional institutions responsible for common policies in four currency unions—the Euro Area, the Eastern Caribbean Currency Union, the Central African Economic and Monetary Union, and the West African Economic and Monetary Union. For each of the currency unions, staff teams visit the regional institutions responsible for common policies in the currency union, collects economic and financial information, and discusses with officials the currency union’s economic developments and policies. On return to headquarters, the staff prepares a report, which forms the basis of discussion by the Executive Board. Both staff’s discussions with the regional institutions and the Board discussion of the annual staff report will be considered an integral part of the Article IV consultation with each member.

[2] At the conclusion of the discussion, the Managing Director, as Chairman of the Board, summarizes the views of Executive Directors, and this summary is transmitted to the country’s authorities. An explanation of any qualifiers used in summings up can be found here:

ECCU: Selected Economic and Financial Indicators, 2019–23 1/
Est. Proj.
2019 2020 2021 2022 2023
(Annual percentage change)
Output and Prices
Real GDP 2.3 -17.5 4.9 7.4 5.5
GDP deflator 2.7 -0.9 0.6 5.2 3.3
Consumer prices, average 0.7 -0.6 1.7 5.6 3.3
Monetary Sector 2/
Net foreign assets 5.1 6.1 16.5
Central bank -2.8 3.6 11.6
Commercial banks (net) 14.1 8.5 21.1
Net domestic assets 1.0 -20.1 1.0
Of which : private sector credit 0.5 -0.9 1.5
Broad money (M2) 3.1 -6.4 10.2
(In percent of GDP, unless otherwise indicated)
Public Finances
Central government
Total revenue and grants 26.1 29.1 31.0 29.1 28.6
Total expenditure and net lending 28.1 34.7 34.3 33.2 30.5
Overall balance 3/ -2.1 -5.6 -3.3 -4.1 -1.8
Of which : expected fiscal cost of natural disasters 0.7 0.7
Excl. Citizenship-by-Investment Programs -5.4 -10.9 -9.4 -8.0 -5.5
Primary balance 3/ 0.3 -3.1 -0.9 -1.8 0.6
Total public sector debt 65.9 84.9 85.2 80.8 77.7
External Sector
Current account balance -6.6 -16.0 -16.7 -17.0 -13.4
Trade balance -30.3 -28.5 -30.9 -36.7 -35.9
Exports, f.o.b. (annual percentage change) 38.2 -22.3 -0.2 13.7 8.8
Imports, f.o.b. (annual percentage change) -2.8 -22.8 12.9 32.6 6.7
Services, incomes and transfers 23.7 12.5 14.2 19.7 22.5
Of which : travel 38.5 15.1 19.2 30.0 33.5
External public debt 34.0 44.8 47.8 47.6 47.7
External debt service (percent of goods and nonfactor services) 9.9 21.7 15.9 13.3 12.5
International reserves
In millions of U.S. dollars 1,698 1,747 1,952 1,838 2,015
In months of prospective year imports of goods and services 6.5 5.8 4.9 4.3 4.6
In percent of broad money 26.0 28.6 29.0 25.7 26.5
REER (average annual percentage change)
Trade-weighted 4/ 1.3 -2.2 -4.9
Sources: Country authorities; and IMF staff estimates and projections.

1/ Includes all eight ECCU members unless otherwise noted. ECCU consumer price aggregates are calculated as weighted averages of individual country data. Other ECCU aggregates are calculated by adding individual country data.

2/ Growth rates of data for 2020 and 2021 also reflect the impact of methodological changes.

3/ Projections include expected fiscal costs of natural disasters.

4/ Excludes Anguilla and Montserrat.

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