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Eastern Caribbean Central Bank Governor Sir K. Dwight Venner (Willett’s Photo) |
BASSETERRE, ST. KITTS, JULY 7TH 2011 (CUOPM) – Economic activity in the Organisation of Eastern Caribbean States (OECS) declined by 1.8 percent last year, a slower rate compared with 5.4 percent in 2009. Governor of the St. Kitts-based Eastern Caribbean Central Bank (ECCB), Sir K. Dwight Venner, said that weak external demand and a reduction in domestic investment contributed to the decline which resulted in the continued contraction of activity in the construction and transport and communications sectors.
Construction, which is one of the main contributors to growth in the Eastern Caribbean Currency Union (ECCU), contracted by 21.8 percent due to a decline in inflows of foreign direct investment.He said that the passage of Hurricane Tomas in October last year had severely damaged the infrastructure of St. Lucia and St. Vincent and the Grenadines further weakening their economies.
He said the ongoing global financial crisis and the natural disasters have brought the vulnerabilities of the region’s economies and financial structures into sharp focus with the ECCB having to intensify its efforts to maintain financial and monetary stability and confidence in the ECCU financial system. “The size and nature of the economies of the Eastern Caribbean Currency Union render them particularly vulnerable to external shocks and natural disasters. This is the stark reality that the ECCB faces as it seeks to strengthen the region’s financial structure in response to the impact of the global economic and financial crisis.” He said the international financial downturn has impacted the Bank’s performance for the 2010/2011 financial year, resulting in a net income of EC$22.6 million (US$8.3 million) a decrease of EC$14.5 million (US$5.3 million) over the previous year’s income of EC$37.1 million (US$13.7). “As at 31 March 2011, the Bank’s total assets amounted to EC$2.8 billion (US$1.03 billion) an increase of EC$256.1 million (US$94.8 million) when compared to the previous year.
This was mainly due to inflows of grants and loans to member governments from international institutions. “Sir Dwight said that at the end of the financial year, the foreign reserve backing of the currency was 95.53 percent, well above the legal benchmark of 60.0 percent and the operational benchmark of 80.0 percent. The level of foreign exchange reserves measured in months of imports was above the International Monetary Fund (IMF) benchmark of 3 months. It said the ECCB, which serves as a Central Bank to the islands of Anguilla, Antigua and Barbuda, Dominica, Grenada, St. Lucia, St. Vincent and the Grenadines, St. Kitts and Nevis and Montserrat, had during the past year undertaken various initiatives in order to “ensure the safety and soundness of the ECCU financial system.” These initiatives included the drafting of enabling legislation for the credit union and insurance sectors for passage by member governments as well as working with the Office of the Superintendent of Financial Institutions in Canada to adopt an advanced model of financial regulation.
“Throughout the year, the Bank accelerated its efforts to mitigate the fallout from the global economic and financial crisis by restructuring and strengthening the financial sector,” Sir Dwight said, adding that with support of the World Bank and other stakeholders, it continued the efforts to establish the Resolution Trust Corporation (RTC) to restructure and recapitalise financial institutions and manage troubled assets.
He said that 2012 will be critical as the ECCU strives to consolidate its efforts to strengthen its economies and position itself to take advantage of the opportunities from the anticipated global economic recovery.
As a result, the policy priorities for the ECCB would be to strengthen the framework for the early identification of risk and resolution of problems at weak financial institutions; continue to explore appropriate monetary policy tools and the enhancement of market intelligence to influence money and credit conditions and to inform policy development as well as encourage member governments to modernise the public sector in order to enhance efficiency and provide the requisite technical and administrative capacity to achieve the region’s economic objectives.
“The challenge for the Bank in these difficult times is to continue to support the strong dollar policy as set out by the Monetary Council and to establish the environment for the future growth and development of the region,” Sir Dwight said.