The ex­ec­u­tive board of the In­ter­na­tion­al Mon­e­tary Fund (IMF) says the mem­ber coun­tries of the East­ern Caribbean Cur­ren­cy Union (EC­CU) have achieved a strong re­bound from suc­ces­sive ad­verse shocks.

The EC­CU groups to­geth­er the is­lands of An­guil­la, An­tigua and Bar­bu­da, Do­mini­ca, Grena­da, Montser­rat, St. Kitts and Nevis, St. Lu­cia, and St. Vin­cent and the Grenadines

The IMF has said that the EC­CU has pro­vid­ed a strong an­chor for macro­eco­nom­ic sta­bil­i­ty and that in 2024, strong tourism per­for­mance and con­tin­ued in­fra­struc­ture in­vest­ments have sup­port­ed ro­bust growth of 3.9 per cent, and in­fla­tion mod­er­at­ed to be­low two per cent in tune with glob­al trends.

In a state­ment fol­low­ing its Ar­ti­cle IV con­sul­ta­tion with mem­ber coun­tries on com­mon poli­cies, the IMF ex­ec­u­tive board said that strong tourism per­for­mance and con­tin­ued in­fra­struc­ture in­vest­ments have sup­port­ed ro­bust post-pan­dem­ic growth, while in­fla­tion has mod­er­at­ed in tune with glob­al trends.

It said this has fa­cil­i­tat­ed a mod­er­ate re­duc­tion in the cur­ren­cy union’s fis­cal and ex­ter­nal im­bal­ances, al­though pub­lic debt lev­els and cur­rent ac­count deficits re­main high in sev­er­al mem­bers.

“The EC­CU’s ex­ter­nal po­si­tion is as­sessed as weak­er than im­plied by fun­da­men­tals and de­sir­able poli­cies, but the cur­rent ac­count deficits re­main ful­ly fi­nanced and the sta­bil­i­ty of the EC­CB’s re­serves un­der­pin a strong cur­ren­cy back­ing ra­tio,”  the IMF di­rec­tors said, adding that the fi­nan­cial sys­tem has re­mained sta­ble, al­beit ex­hibit­ing con­tin­ued as­set qual­i­ty and cred­it con­di­tion weak­ness­es.

They said growth mo­men­tum is nonethe­less pro­ject­ed to wane and risks to the out­look re­main most­ly on the down­side.

“In­creas­ing con­straints to tourism ca­pac­i­ty and com­ple­tion of ma­jor in­fra­struc­ture projects are set to slow growth to around 2.5 per cent over the medi­um term. This mod­est growth po­ten­tial re­flects weak pro­duc­tiv­i­ty and lo­cal in­vest­ment, as well as head­winds from age­ing pop­u­la­tions, a shrink­ing labour force, and con­strained fis­cal space for pub­lic in­vest­ment in most union mem­bers.

“Down­side risks to the out­look are sig­nif­i­cant amid a high­ly un­cer­tain ex­ter­nal en­vi­ron­ment, where in­creased trade and geopo­lit­i­cal ten­sions could give rise to re­newed in­fla­tion­ary pres­sures and dis­rup­tions to tourism and FDI in­flows.”

The IMF di­rec­tors said high pub­lic debt, per­sis­tent cur­rent ac­count deficits, and weak­ness­es in the lo­cal fi­nan­cial sys­tem am­pli­fy vul­ner­a­bil­i­ty to re­cur­rent nat­ur­al dis­as­ter (ND) shocks along­side the un­cer­tain out­look for fu­ture Cit­i­zen­ship-by-In­vest­ment (CBI) in­flows.

They said achiev­ing more ro­bust, re­silient, and in­clu­sive long-term growth would sup­port the cur­ren­cy union’s fis­cal and ex­ter­nal sus­tain­abil­i­ty and raise liv­ing stan­dards.

“To sup­port this ob­jec­tive, com­mon re­gion­al poli­cies should be an­chored in build­ing eco­nom­ic, fis­cal, and fi­nan­cial re­silience and ad­dress­ing sup­ply bot­tle­necks that un­der­pin the re­cent decades’ down­ward trend in the re­gion’s growth po­ten­tial.”

The IMF di­rec­tors said that a key pol­i­cy pri­or­i­ty is al­le­vi­at­ing the re­gion’s struc­tur­al growth im­ped­i­ments, which calls for a co­or­di­nat­ed, mul­ti­pronged ap­proach.

They said ad­dress­ing fric­tions to em­ploy­ment and skills de­vel­op­ment re­quires a re­newed ef­fort to at­tune hu­man cap­i­tal to eco­nom­ic needs and de­vel­op­ment pri­or­i­ties through vo­ca­tion­al train­ing and mod­ernised ed­u­ca­tion sys­tems, com­ple­ment­ed by ac­tive labour mar­ket poli­cies and im­proved ac­cess to child and el­der­ly care.

“Com­mon poli­cies can al­so en­hance the scale, re­silience, and ef­fi­cien­cy of the re­gion’s cap­i­tal stock by help­ing to ac­cel­er­ate en­er­gy tran­si­tion to lo­cal re­new­ables, op­ti­mise the CBI fund­ing mod­el, and in­crease ND pre­pared­ness.

“Sub­stan­tial pro­duc­tiv­i­ty gains may al­so be achieved through co­op­er­a­tive ef­forts to ad­dress bot­tle­necks to in­no­va­tion and al­loca­tive ef­fi­cien­cy, in­clud­ing by dig­i­tal­is­ing key ser­vices, stream­lin­ing li­cens­ing and ad­min­is­tra­tive process­es, and strength­en­ing fi­nan­cial in­ter­me­di­a­tion.”

The IMF di­rec­tors said fis­cal poli­cies should re­main close­ly fo­cused on re­build­ing buffers, re­duc­ing pub­lic debt con­sis­tent with the re­gion­al debt an­chor, and im­prov­ing re­silience to shocks.

“Re­gion-wide adop­tion of strong medi­um-term fis­cal frame­works (MTFFs) em­bed­ded with well-de­signed fis­cal rules and cred­i­ble pol­i­cy plans would sup­port sus­tain­abil­i­ty ob­jec­tives and cre­ate pol­i­cy space for growth-en­hanc­ing so­cial and re­silience in­vest­ment.

“Com­pre­hen­sive fis­cal re­silience strate­gies, in­clud­ing ad­e­quate dis­as­ter-fi­nanc­ing frame­works, can help al­le­vi­ate pe­ri­od­ic ND dis­rup­tions to debt sus­tain­abil­i­ty and sup­port the re­gion’s growth re­silience.”

The IMF di­rec­tors said strength­en­ing the fis­cal man­age­ment of un­cer­tain CBI rev­enues can sim­i­lar­ly al­le­vi­ate risks and fa­cil­i­tate fis­cal plan­ning. These ef­forts can be sup­port­ed by more in­sti­tu­tion­alised re­gion­al over­sight and con­tin­ued strength­en­ing of na­tion­al fis­cal in­sti­tu­tions.

En­hanc­ing fi­nan­cial sys­tem re­silience and re­duc­ing per­sis­tent cred­it fric­tions can sup­port a more con­ducive en­vi­ron­ment for growth-sup­port­ing lo­cal in­vest­ment.

Re­gion­al pol­i­cy pri­or­i­ties in­clude re­duc­ing vul­ner­a­bil­i­ties from lega­cy bank bal­ance sheet weak­ness­es, mit­i­gat­ing risks from rapid cred­it union ex­pan­sion, build­ing readi­ness to man­age risks from high de­pen­den­cy on glob­al rein­sur­ance, and strength­en­ing na­tion­al AML/CFT frame­works.

The IMF said com­mon min­i­mum NBFI reg­u­la­to­ry stan­dards un­der the planned East­ern Caribbean Fi­nan­cial Sta­bil­i­ty Board (ECFSB) will be an im­por­tant step to­ward their more uni­fied over­sight, al­though a more cen­tralised su­per­vi­so­ry struc­ture would bet­ter fa­cil­i­tate man­age­ment of re­gion­al sta­bil­i­ty risks.

“Co­or­di­nat­ed ef­forts to re­duce in­sti­tu­tion­al fric­tions in lo­cal cred­it mar­kets and sup­port small EC­CU busi­ness­es’ bank­a­bil­i­ty can help ad­dress struc­tur­al chal­lenges in fi­nan­cial in­ter­me­di­a­tion, re­vive lo­cal cred­it and in­vest­ment, and fos­ter de­vel­op­ment of a more vi­brant pri­vate sec­tor.”

The di­rec­tors said strength­en­ing eco­nom­ic da­ta could sig­nif­i­cant­ly im­prove re­gion­al pol­i­cy de­sign and risk man­age­ment.

“Pri­or­i­ties in­clude ad­dress­ing short­com­ings in cov­er­age, qual­i­ty, and time­li­ness of key na­tion­al and ex­ter­nal ac­counts and re­duc­ing sig­nif­i­cant blind spots in ar­eas such as the re­gion­al labour mar­kets and CBI flows,” the IMF di­rec­tors said, not­ing that greater lever­ag­ing of syn­er­gies in re­gion­al da­ta com­pi­la­tion and pro­cess­ing could help ad­dress per­sis­tent re­source and ca­pac­i­ty gaps.

WASH­ING­TON, May 9, CMC

CMC/gh/ir/2025