Economist Peter Queeley
The region reacted quickly from several quarters at the reported suggestion by the International investment-rating agency Moody’s Investor Services that Caribbean territories should devalue the currency or adopt the US dollar in an effort to address what Moody’s has described as a “debt crisis” in the region.
In a report published by WINN radio in St. Kitts-Nevis, it states that ‘The Eastern Caribbean Central Bank (ECCB) has ruled out devaluing the EC dollar within the next five years.’ The report quotes the Bank’s Managing Director, Jennifer Nero making it clear that devaluation is not on the cards.
She confirmed there has been “substantial analysis” done on the matter of the value of the EC dollar, the report states.
The report further stated: “It’s under watch all the time, but as of this point in time there is no real reason for that (devaluation) at all,” the Central Bank official told Winn FM. “The currency has been within the acceptable bands, coming and going. The volatility is within range,” she affirmed. Asked specifically whether the EC dollar was likely to be devalued within the next five years, Managing Director Neto responded: “Well what we can say, we at this particular point in time, we don’t see that”.
Here in Montserrat ZJB Radio reported speaking to persons on the ground. It said that, “Agricultural Economist Claude Gerald says devaluation of the EC dollar or the adoption of the US dollar will not be a good idea for the Eastern Caribbean.”
Manager Michael Joseph at Bank of Montserrat
Gerald, a regular columnist and social commentator in The Montserrat Reporter, is further of the view that smaller islands such as Montserrat, which are import dependent, will be adversely impacted if the EC dollar is devalued.
As to the adoption of the US dollar, Gerald believes the currency is losing its value and as such it would not be beneficial for Eastern Caribbean countries to make that move.
Meanwhile Economist Peter Queeley who manages the St Patrick’s Cooperative Credit Union says the suggestions by Moody’s Investment Services that the Eastern Caribbean devalue its currency does not make sense.
Agricultural Economist Claude Gerald
He says devaluation was originally based on the principle that developing countries can increase their export revenues due to lower prices for their exports. But, this is not the case, he says, in the ECCU, where tourism related industries are now the order of business as opposed to agricultural or manufacturing products.
Moreover, Queeley says, given the openness of the ECCU countries and their heavy reliance on imported food supplies and petroleum products, devaluation will only serve to increase inflation.
He argues yet, there are some economic merits to the argument that the ECCU adopt the US Currency and do away with the Eastern Caribbean Currency. But, this, he cautions would worsen the already high debt burden in the islands.
Manager Michael Joseph at Bank of Montserrat has agreed principally with Gerald and Queeley, acknowledging that there are pros and cons to the topic. “
However, in the recently published report, Moody’s Investor Services said currency devaluation and the dissolution of the Eastern Caribbean Currency Union (ECCU), while unlikely, could enhance the region’s competitiveness.
