The Monetary Council of the Eastern Caribbean Central Bank held its 55th meeting at the Eastern Caribbean Central Bank Headquarters in St Kitts on 17 February 2006. Dr the Honourable Denzil L. Douglas, Prime Minister and Minister of Finance, St Kitts and Nevis, chaired the meeting.

The Council received the Governor’s Report which addressed the following:

• The external economic environment
• Exchange rate stability
• Financial sector stability
• Developments in the money and credit markets
• Economic performance and outlook for the ECCU

Council deliberated on the following issues:

1. Currency Stability
   Council noted the almost thirty years of exchange rate stability in the ECCU, recognising the importance of competitive wages, prices and productivity to maintaining such stability. Council reaffirmed its commitment to implement decisions which support continued currency stability.
   
2. Financial Sector Stability
   Council reviewed the indicators of financial sector stability in the ECCU member countries and noted the improvements needed to enhance the regulatory and supervisory structure of the financial system. In this regard Council agreed to recommend to member governments the passage of the enabling legislation and the adoption of measures for the effective functioning of the Single Regulatory Units in the public sector.
   
3. Fiscal Support for Currency Stability
   Council, cognisant of the relationship between fiscal policy, the stability of the financial system and the currency, agreed that member countries should set annual targets for reaching the agreed fiscal benchmarks. In addition, Council agreed that such targets should be declared to, and published by, the Monetary Council.
   
4. Money and Capital Markets
   Council noted the importance of money and capital market development to the transformation of the economies and the facilitation of growth. Council was apprised of recent developments and, in particular, the listing of non-OECS firms on the Eastern Caribbean Securities Exchange (ECSE). Council members recommitted themselves to pursue in their respective countries the expeditious enactment of legislative amendments to the Securities Act to enable the Exchange to operate in the wider CARICOM. With regard to the Regional Government Securities Market (RGSM), Council recognised the increase in efficiency which can be realised by member governments from participation in the market, as well as the opportunities for wider investor participation.
   
5. Economic Performance
   Council noted the provisional 5.0 per cent rate of economic growth in 2005 which compared with growth of 4.1 per cent in 2004.
   
   The expansion was underpinned by a sharp increase in construction activity, estimated at 21 per cent compared with 5.3 per cent in 2004, and involved substantial expenditure by both the public and private sectors. The main activities were associated with preparations for Cricket World Cup 2007, substantial hotel development in a number of countries and reconstruction in Grenada in the aftermath of Hurricane Ivan in September 2004.
   
   Council, while noting the current expansion in economic activity in the ECCU, was nonetheless cognisant of the risks posed by developments in the global economy and, in particular, the high oil prices.
   
6. Money and Credit Policy
   Given the current economic circumstances, Council decided to maintain the officially administered rates as follows:
   
   a. The regulated minimum rate of interest on saving deposits at 3.0 per cent and
   
   b. The Central Bank’s discount rate, at 6.5 per cent.
   
7. Statistical Development in the Member Countries
   Council noted the improvements which were required to raise the quality of statistics in the member countries and agreed to recommend to member governments:
   
   i) The appointment, within a reasonable time frame, of Statistical Advisory Commissions.
   
   ii) The recruitment of the requisite human resources to enhance the statistical capacity in the statistical offices.
   
   iii) The draft Model Statistics Act for review, with the intention of addressing the independence of the statistical offices.
   
8. An ECCU Oil Pricing Mechanism
   Council reviewed the elements of an oil pricing mechanism geared to addressing the implementation of a full pass through system in the member countries at a date to be specified.
   
   Council noted that the PetroCaribe Agreement was signed by most countries but there were certain issues to be considered in its implementation which were now under discussion.
   
9. ICC Cricket World Cup 2007
   Council noted the potential benefits which could be derived from the hosting of the Cricket World Cup (CWC) and agreed that this event would signal the start of a new era in the economic development of the region.
   
   Council recognised that in order for the long-term benefits of the Cricket World Cup to be realised, strategic economic management would be required. Member countries would therefore need to have in place the appropriate policy making framework geared at achieving specified overall macro-economic objectives.
   
   Council noted that a study was being undertaken by the Central Bank to assess the impact of the hosting of the CWC on the ECCU’s economies and agreed to lend their full support to the exercise.
   
10. CSME and the Proposed Regional Development Fund
    Council noted the decision of member governments to accede to the Caribbean Single Market and Economy (CSME) in June 2006. In this regard, Council recognised the importance of the Regional Development Fund to the economic transformation of the countries which would position them to derive increased benefits from the arrangement.
    
11. A Policy Framework for decision-making in the ECCU
    Recognising the importance to growth and development of a strategic approach to policy making involving:-
    i. the setting of clear objectives for the economic transformation of countries by the year 2010; and
    ii. the establishment of institutional and policy making arrangements at the regional and country levels to achieve these objectives by the stated date;
    
    Council agreed to recommend to member governments the full utilisation and strengthening of Policy Units, Planning Units, Debt Units and Statistical Departments within the public sector architecture.
    
    Council also agreed that member governments should seek to enhance the consultative process in policy making by operationalising the Tripartite Committees and National Economic Councils, as previously recommended.
    
    At the regional level Council supported the establishment of the OECS Economic Union as the way forward to enable member states to compete more beneficially in the current international trade environment and to meet the challenges of vulnerability and equitable development.
    
    Council agreed that the general public in the OECS should be sensitised to the implications for the countries of the region of the establishment of the OECS Economic Union.
    
12. Pension Reform and Administration Commission
    Council approved the action plan to operationalise the Pension Reform and Administration Commission including the appointment of Pension Commissioners. The Commission would be expected to make recommendations for improving and harmonising the administration of private and public sector pension plans in the ECCU.
    
13. Date and Venue of the next meeting
    Council agreed that the next meeting would be held in St Vincent and the Grenadines on 21 July 2006.

ATTENDANCE

Council members attending the meeting were:

• Honourable Victor Banks, Minister of Finance, Anguilla
  
• Dr the Honorable Errol Cort, Minister of Finance, Antigua and Barbuda
  
• Honourable Roosevelt Skerrit, Prime Minister and Minister of Finance, Commonwealth of Dominica
  
• Honourable Anthony Boatswain, Minister of Finance, Grenada
  
• Honourable Margaret Dyer-Howe, Minister of Agriculture, Montserrat
  
• Dr the Honourable Denzil Douglas, Prime Minister and Minister of Finance, St Kitts and Nevis
  
• Mr Trevor Brathwaite, Permanent Secretary, Ministry of Finance, Saint Lucia (Alternate Member)
  
• Honourable Conrad Sayers, Minister of State in the Office of the Prime Minister, St Vincent and the Grenadines (Temporary Alternate Memb