IMF Executive Board Concludes 2024 Article IV Consultation on Common Policies of Member Countries of the Eastern Caribbean Currency Union
IMF News, April 25, 2024
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- Published: April 25, 2024
Key Findings and Recent Developments
- On April 12, 2024, the Executive Board of the International Monetary Fund concluded the Article IV consultation with member countries on common policies of the Eastern Caribbean Currency Union (ECCU). The Board considered and endorsed the staff appraisal without a meeting.
- The ECCU economies registered a strong recovery after successive external shocks: the pandemic and higher commodity prices following Russia’s invasion of Ukraine.
- Real GDP is estimated to have grown by 4.8 percent in 2023, with output surpassing pre-pandemic levels.
- Inflation moderated to around 4 percent in 2023 from its recent commodity price driven peak.
- Fiscal and external balances have improved, but public debt and current account deficits remain high.
- The financial system has been stable and liquid, while facing asset quality weaknesses and rising risks in the non-bank financial sector (NBFI).
Outlook, Risks, and Projections
- Economic growth is projected to moderate to 4.8 percent in 2024 and decelerate further toward pre-pandemic averages over the medium-term.
- Inflation is projected to moderate gradually in line with international trends and stabilize at around 2 percent in 2026.
- High current account deficits are projected to gradually narrow to pre-pandemic levels as pressures from import-intensive capital investment abate and slower tourism-recovery countries catch up.
- The region’s outlook is heavily dependent on uncertain Citizenship-by-Investment (CBI) inflows.
- Key downside risks: volatility in commodity prices, a slowdown in major tourism source countries, rising vulnerabilities in the ECCU non-bank financial system, and the recurrent threat of natural disasters.
Executive Board Assessment (summary)
- The ECCU experienced a strong recovery driven by tourism rebound and investment, lifting real GDP above pre-pandemic levels.
- External and fiscal balances improved in a more benign environment, but public debt remains high in many members and the ECCU’s overall external position is weaker than levels implied by fundamentals and desirable policies.
- Growth and fiscal outlooks are heavily dependent on uncertain CBI inflows, which are under close international scrutiny.
- Policy priorities: address structural constraints to sustainable, inclusive, and resilient growth; reduce fiscal and external imbalances; preserve macro-financial stability and fiscal space for growth-enhancing investment; strengthen financial sector balance sheets and oversight; foster local private sector development and investment; and improve the labor market.
Policy Recommendations and Priorities
- Fiscal policy and buffers:
- Continue rebuilding fiscal buffers while ensuring space for growth-supporting investment.
- Withdraw temporary measures responding to the cost-of-living crisis.
- Adopt fuel price pass-through frameworks.
- Strengthen targeting and coverage of transfers to the most vulnerable.
- Revive a regional initiative to streamline tax exemptions under common benchmarks to lift fiscal revenue.
- Maintain recent pension reform momentum to address large long-term contingent fiscal liabilities and improve pension fairness and equity.
- Fiscal rules and regional governance:
- ECCU-wide adoption of national fiscal responsibility frameworks (FRFs) to underpin a consistent decline in public debt and enhance credibility of the regional public debt ceiling.
- Tailor operational rules to each member with calibration and escape clauses to ensure fiscal cushions for shocks.
- Operationalize regular ECCB Monetary Council peer reviews of member efforts toward the regional debt target.
- Strengthen fiscal institutions to support effective FRF implementation.
- Citizenship-by-Investment (CBI) programs:
- Deepen regional cooperation on CBI programs with common due diligence, transparency, and disclosure standards.
- Consider minimum pricing benchmarks to mitigate revenue-erosive competition.
- Adopt common principles on CBI revenue allocation to contain undue fiscal reliance and support rebuilding of fiscal buffers.
- Financial sector and NBFI oversight:
- Enforce bank provisioning regulations and adopt similar standards for credit unions.
- Reform frameworks to facilitate disposal of impaired assets.
- Step up oversight of the NBFI sector; ensure national supervisors have adequate powers, staffing, and data for corrective actions.
- Pursue the planned introduction of common minimum regulatory standards under the RSSB expeditiously.
- Aim for eventual centralization of NBFI oversight leveraging national supervisors’ local presence.
- Prepare early for potential mitigating actions addressing rising insurance premia and affordability challenges; strengthen insurance sector data collection and regional supervisory cooperation.
- Consider a regional bank deposit insurance system aligned with progress in reducing legacy bank vulnerabilities; extension to credit unions only under a more unified oversight framework.
- Private sector development and labor markets:
- Coordinate efforts to foster private investment, credit, and local enterprise development.
- Advance the credit reporting bureau, the partial credit guarantee program, and movable collateral frameworks.
- Complement financial reforms with programs supporting small businesses, insolvency reform, creditor rights strengthening, and regional capital market development.
- Recalibrate labor market institutions to balance efficiency and equity, supported by targeted active labor market policies to reduce informality, address skills mismatches, raise participation rates, and ease gender and youth gaps.
- Data and statistical capacity:
- Strengthen region-wide data collection, processing, and transparency to improve policy calibration.
- ECCB-compiled data are broadly adequate for surveillance but addressing data gaps and improving transparency is essential.
- Strengthen resources at national statistics offices to improve accuracy, timeliness, and frequency of key economic data.
ECCU: Selected Economic and Financial Indicators, 2019–25 (Est./Proj.)
- Output and Prices (Annual percentage change)
- Real GDP: 2019: 2.1; 2020: -16.9; 2021: 6.0; 2022: 10.0; 2023: 4.8; 2024: 4.3; 2025: 3.3
- GDP deflator: 2019: 2.2; 2020: -2.0; 2021: 3.4; 2022: 2.4; 2023: (not listed)
- Consumer prices, average: 2019: 0.7; 2020: -0.6; 2021: 1.7; 2022: 5.6; 2023: 3.9; 2024: 2.3; 2025: 2.0
- Monetary Sector
- Net foreign assets: 2019: 5.1; 2020: 6.1; 2021: 16.5; 2022: 0.9; 2023: 3.7; 2024: 5.9; 2025: 1.9
- Central bank: 2019: -2.8; 2020: 3.6; 2021: 11.6; 2022: -4.8; 2023: 8.3; 2024: 9.3
- Commercial banks (net): 2019: 14.1; 2020: 8.5; 2021: 21.1; 2022: 0.1; 2023: 3.2; 2024: -1.7
- Net domestic assets: 2019: 1.0; 2020: -16.5; 2021: 1.2; 2022: 10.4; 2023: 14.3; 2024: 3.1; 2025: 10.5
- Of which: private sector credit: 2019: 0.5; 2020: -0.9; 2021: 1.5; 2022: 1.6; 2023: 4.0; 2024: 4.1
- Broad money (M2): 2019: -4.7; 2020: 10.1; 2021: 4.6; 2022: 8.0; 2023: 4.7; 2024: 5.5
- Public Finances (In percent of GDP, unless otherwise indicated)
- Central government total revenue and grants: 2019: 26.1; 2020: 29.0; 2021: 30.6; 2022: 30.5; 2023: 28.8; 2024: 27.1
- Total expenditure and net lending: 2019: 28.3; 2020: 35.6; 2021: 33.9; 2022: 33.6; 2023: 30.9; 2024: 29.1
- Overall balance 2/: 2019: -2.2; 2020: -6.6; 2021: -3.4; 2022: -3.1; 2023: -2.1; 2024: -1.5
- Of which: expected fiscal cost of natural disasters: 0.4 (year not specified)
- Excl. Citizenship-by-Investment Programs: 2019: -5.8; 2020: -12.0; 2021: -9.3; 2022: -7.3; 2023: -6.7; 2024: -4.2; 2025: -4.3
- Primary balance 2/: 2019: 0.2; 2020: -4.1; 2021: -1.0; 2022: -0.8
- Total public sector debt: 2019: 67.1; 2020: 86.1; 2021: 82.9; 2022: 75.3; 2023: 72.2; 2024: 71.8; 2025: 70.5
- External Sector
- Current account balance: 2019: -8.5; 2020: -19.1; 2021: -13.2; 2022: -12.3; 2023: -11.2; 2024: -9.9
- Trade balance: 2019: -30.9; 2020: -29.4; 2021: -30.6; 2022: -34.1; 2023: -35.3; 2024: -35.4; 2025: -34.2
- Exports, f.o.b. (annual percentage change): 2019: 35.8; 2020: -29.3; 2021: 26.2; 2022: 48.1; 2023: 8.8; 2024: 10.3
- Imports, f.o.b. (annual percentage change): 2019: -1.4; 2020: -23.2; 2021: 15.2; 2022: 29.6; 2023: 12.8; 2024: 6.5; 2025: 2.7
- Services, incomes and transfers: 2019: 22.4; 2020: 10.2; 2021: 11.5; 2022: 20.9; 2023: 23.0; 2024: 24.2; 2025: 24.3
- Of which: travel: 2019: 38.9; 2020: 17.0; 2021: 20.7; 2022: 34.8; 2023: 37.3; 2024: 38.6; 2025: 38.8
- External public debt: 2019: 45.4; 2020: 46.1; 2021: 41.7; 2022: 41.8; 2023: 44.1; 2024: 44.7
- External debt service (percent of goods and nonfactor services): 2019: 21.3; 2020: 14.9; 2021: 9.5; 2022: 9.1; 2023: 8.6
- International reserves
- In millions of U.S. dollars: 2019: 1,698; 2020: 1,747; 2021: 1,952; 2022: 1,869; 2023: 2,015; 2024: 2,202; 2025: 2,332
- In months of prospective year imports of goods and services: 2019: 6.3; 2020: 5.7; 2021: 4.2; 2022: 4.4; 2023: 4.5
- In percent of broad money: 2019: 26.0; 2020: 28.1; 2021: 28.5; 2022: 27.2; 2023: 27.3
- REER (average annual percentage change), Trade-weighted 3/: 2019: -1.8; 2020: -4.4; 2021: 0.6
Operational and Surveillance Notes
- The discussion with the ECCU authorities will be on the 12-month cycle in accordance with Decision No. 13655-(06/1), as amended.
- Staff’s surveillance includes visits to the regional institutions responsible for common policies in the currency union, data collection, and discussions that form the basis of the Executive Board discussion and staff report.
IMF Communications Department, April 25, 2024 — Press Release No. 24/128
