(Press Unit in the Office of the Prime Minister) – The Monetary Council of the Eastern Caribbean Central Bank (ECCB) is reporting improved economic activity in the Eastern Caribbean Currency Union (ECCU) in the first nine months of 2016, compared to that of the same period in 2015.
At the conclusion of the 87th Meeting of the Monetary Council at the ECCB Headquarters on Thursday, March 3, it was noted by council Chairman, the Honourable Gaston Browne that “the recent improvements in fiscal performance are encouraging. However, it is necessary for those gains to be protected.”
Governor of the ECCB, Timothy Antoine, said one such means of protecting those gains is the lowering of Debt to Gross Domestic Product (GDP) ratio throughout the ECCU.
He said the private sector, for example, is interested in seeing member countries reach the ultimate goal of 60 per cent Debt to GDP ratio by 2030.
“There would be an interest in the private sector to see us get to the target of 60 per cent and at the moment we’re averaging around 75-76 per cent in the currency union—some countries are lower than that like St. Kitts and Nevis for example—and the reason why the private sector has an interest in this is because when debt levels are too high, when that ratio is too high they often worry that taxes would come as a means of servicing debt. So if you’re investing, you potentially could be concerned that if this debt keeps mounting then the government may be forced to import additional taxes to raise revenue to service debt,” Governor Antoine explained.
In the case of St. Kitts and Nevis, Prime Minister Dr. the Honourable Timothy Harris said having surpluses and having balanced budgets are important parts of a good fiscal management framework.
“Over the last two years, we have ensured that the government of St. Kitts and Nevis pursues a fiscal policy that has resulted in surplus on the three principle accounts in the economic classification: the recurrent account, the overall account and the primary account, which is basically significant as far as you give a measure of resources which is available to fulfill debt obligation and to make the point that St. Kitts and Nevis at this point in time has a Debt to GDP ratio hovering around perhaps 64 per cent—well below the regional average—and so we want to continue on that trajectory,” Prime Minister Harris stated.
St. Kitts and Nevis’ Debt to GDP ratio currently stands at 64.3 per cent.
In explaining the significance of surpluses, Dr. Harris said, “They are what we must have to provide the fiscal cushion to be able to do those things that would arise inevitably, as you say countries will go up and down in terms of their performance…and so those are the normal results but when adversity comes you have to be able to look within as a first response because coordinating responses say from the IMF and World Bank and countries within and outside the region will take time.”
In keeping with its thrust towards attaining 60.0 per cent Debt to GDP ratio by 2030, the Monetary Council agreed to recommend that member governments submit fiscal targets for the approval of the Council at its July 2017 Meeting.
It was also agreed that the ECCB would provide support to the member countries in the preparation of these fiscal targets.