## Fiscal Sustainability and Policy Issues in the Eastern Caribbean Currency Union

_IMF Working Papers, August 1, 2003_

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**Canonical URL:** [Fiscal Sustainability and Policy Issues in the Eastern Caribbean Currency Union](https://www.imf.org/en/publications/wp/issues/2016/12/30/fiscal-sustainability-and-policy-issues-in-the-eastern-caribbean-currency-union-16603)

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## Bibliographic details
- Authors: Anthony J. Pellechio, Saqib Rizavi, Phebby Kufa
- Published: August 1, 2003
- Series: IMF Working Papers
- DOI: https://doi.org/10.5089/9781451857894.001

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### Summary
- The fiscal position of the Eastern Caribbean Currency Union (ECCU) has deteriorated significantly in recent years, resulting in sharp increases in public debt.
- The paper examines the sustainability of public debt using the public sector budget constraint to derive the maximum public-debt-to-GDP ratio that can be sustained based on a country's projected steady-state primary balance, interest rate on public debt, and economic growth rate.
- In this context, government deficits and debt in several ECCU member countries appear unsustainable, posing a risk to the stability of the currency union.
- A critical issue facing member countries is to implement fiscal policies consistent with sustainable public finances and debt to underpin the currency union.

### Methodology
- Fiscal sustainability is assessed using the public sector budget constraint framework.
- The maximum sustainable public-debt-to-GDP ratio is derived from three projected steady-state parameters:
  - steady-state primary balance,
  - interest rate on public debt,
  - economic growth rate.

### Main Findings
- The ECCU’s fiscal position has deteriorated significantly, leading to sharp increases in public debt.
- Based on the public sector budget constraint analysis, government deficits and debt in several ECCU member countries appear unsustainable.
- Unsustainable public finances pose a risk to the stability of the currency union.

### Policy Recommendations
- Implement fiscal policies consistent with sustainable public finances and debt to support the stability of the currency union.
- Strengthen measures in areas implied by the subject taxonomy (economic integration, fiscal policy, fiscal stance, government debt management, monetary unions, public financial management).

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## Content in this bundle

- **Fiscal Sustainability and Policy Issues in the Eastern Caribbean Currency Union - WP/03/162**
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_Source: https://www.imf.org/en/publications/wp/issues/2016/12/30/fiscal-sustainability-and-policy-issues-in-the-eastern-caribbean-currency-union-16603_