The Cushion and the Push

The Monetary Council of the Eastern Caribbean Central Bank met on 10 July at the Cabrits in Dominica, and published its communiqué this week under a new chairman, Dominica’s finance minister Dr Irving McIntyre. The meeting coincided with the fiftieth anniversary of the EC dollar’s fixed rate of EC$2.70 to US$1.00. Half a century at one number is a genuine achievement and it is worth being precise about what produces it. The ECCB Agreement requires external reserves equal to at least 60 per cent of currency in circulation and other demand liabilities. The Council reported a backing ratio of 97.6 per cent, on foreign reserves of EC$5.9 billion, which is about US$2.2 billion. The peg holds because the cover is far heavier than the law demands, and everyone who might test it knows that.

Days before the Council met, Antigua and Barbuda’s prime minister Gaston Browne proposed deploying 5 to 7 per cent of those reserves to finance regional development under the Bank’s new strategic plan, The Big Push. Governor Timothy Antoine has separately pointed to roughly EC$143 million, about US$53 million, sitting in unclaimed bank deposits, reachable through amendments to the Banking Act. Take the proposal at its widest. Seven per cent of EC$5.9 billion is around EC$413 million, or US$153 million, and it would move the backing ratio from 97.6 per cent to roughly 91. That is still half again the statutory floor. Anyone claiming this breaks the peg has not done the arithmetic. The mechanical case against it is weak.

The case that remains is about what the reserves are. They are not a surplus and they are not savings. They are the cover for the currency board’s own liabilities, which is why the ratio is expressed against those liabilities rather than against GDP or a budget. Spending a share of that cover on development projects converts the region’s most credible institution into a development financier, and credibility of that kind is easier to spend than to rebuild. There is also a question of whether the constraint being relieved is the real one. On this column’s own Debt Tracker, all six ECCU members carry public debt above the 60 per cent regional benchmark: Saint Vincent and the Grenadines at 120.1 per cent, Dominica at 98.3, Saint Lucia at 77.5, Grenada at 69.0, Antigua and Barbuda at 66.5, and Saint Kitts and Nevis at 64.0. The shortage in the currency union is not at the central bank.

What makes the Big Push worth taking seriously is that it aims at the right target. The Council’s own numbers show the problem. Visitor arrivals rose 9.0 per cent between the first quarter of 2025 and the first quarter of 2026, from 2.3 million to 2.5 million. Visitor spending rose 4.0 per cent, from EC$2.7 billion to EC$2.8 billion. More people came and each of them spent less. The communiqué names the constraint plainly, in sub-optimal air connectivity arrangements and high transportation costs. That is a growth problem with a physical cause, and it will not be solved by a monetary decision either way. The reserves question is worth debating on its merits. It should not be mistaken for the answer to the connectivity question, which is the one the visitor numbers are actually asking.