The US-based credit rating firm Moody’s Investor Service is calling for a devaluation of the Eastern Caribbean (EC) dollar in a bid to assist the region address the debt crisis.
In addition, Moody’s is also suggesting that the sub-regional Organisation of Eastern Caribbean States (OECS) adopt the US dollar as its official currency. Governor of the EaStern Caribbean Central bank (ECCB), Sir Dwight Venner said last month that maintaining the stability of the EC dollar and the Eastern Caribbean Currency Union (ECCU) financial system has been the Bank’s major achievement over the 30 years of its existence.
The ECCB established in 1983 serves as as the monetary authority for Anguilla, Antigua and Barbuda, Dominica, Grenada, Montserrat, St Kitts and Nevis, St Lucia, and St Vincent and the Grenadines.
The EC Dollar has been pegged to the US dollar at a rate of EC$2.70 to one US dollar since 1976.
But in a report, Moody’s noted that the Caribbean is faced with a debt burden that is sporadically being serviced.
The US-based financial group said productivity within the region has been under the microscope for some time.
“Currency devaluation and the dissolution of the Eastern Caribbean Currency Union (ECCU), while unlikely, could enhance the region’s competitiveness,” the report stated.
“We do not see policymakers voluntarily choosing these options because they would sacrifice price stability (Caribbean countries rely heavily on food and fuel imports) and risk political upheaval.”
It noted that “only a balance of payments crisis (similar to what happened in 1989 in Trinidad and Tobago, when it abandoned its currency peg and subsequently defaulted on its sovereign debt) could force policymakers to choose these options”.