THE ORGANISATION OF THE EASTERN CARIBBEAN STATES - The Birth of the Eastern Caribbean Currency Union (ECCU)

Spring - St. Kitts & Nevis

The nine Eastern Caribbean States are Anguilla, Antigua & Barbuda, British Virgin Islands, Dominica, Grenada, Montserrat, St. Kitts & Nevis, St Lucia, St. Vincent & the Grenadines.

The British Virgin Islands is the only OECS country whose official currency is not the EC currency and hence is not a member of the ECCU. These nine countries have a long history of economic collaboration and interdependence. This is rooted in their common goal to succeed though they be small island states dispossessed of oil and other natural resources enjoyed by bigger Caribbean islands. In fact cooperation between the Eastern Caribbean States started long before The Treaty Basseterre (1981) establishing the OECS.

When the West Indies Federation (1958-1961) came to its demise, preceded by the exit of Jamaica and the subsequent declaration by Premier Eric Williams of Trinidad and Tobago that “1 from 10 leaves 0”, the smaller islands faced a formidable task of pursuing economic development in a manner that would satisfy the people. The answer was the pursuit of joint goals via regional arrangements and regional institutions. This philosophy of coordination and collaboration gave rise to the Eastern Caribbean Currency Authority (ECCA) with responsibility for issuing and managing the Eastern Caribbean Currency which debuted on 6th October 1965.

Many areas of collaboration have continued to emerge (which CH & L will highlight in subsequent issues) adhering to the principal that ‘the sum of the whole is greater than its individual parts’.  It is this principle which has ensured a stable and strong EC currency, one of the strongest currencies in the Caribbean. Initially pegged to the pound sterling, the EC has since 1976 been pegged to the US$ at an approximate rate of 2.7 to 1. Being pegged to the regions main trading partner, the USA, affords stability and confidence in the purchasing power of the EC$.

Prior to the existence of the EC$, British Caribbean notes and coins constituted the currency in circulation. These were issued by the British Caribbean Currency Board (BCCB) which was established in 1950 and had the sole power to issue currency for its member countries: Barbados, British Guyana, The Leeward Islands, The Windward islands, Trinidad and Tobago.  After Trinidad and Tobago and British Guyana obtained their political independence from the UK, these two countries elected to withdraw from the BCCB Board and establish their respective central banks.  Their withdrawal led to the dissolution of the BCCB. The Eastern Caribbean Currency Authority (ECCA) was established in 1965 with the authority to manage a common currency for Barbados, The Leeward and Windward Islands (and Grenada from 1968).  In 1974 Barbados withdrew its membership from the ECCA to establish its own central bank. The HQ for ECCA was moved from Barbados to St. Kitts.

On June 18th 1981, the nine small English speaking islands of the Eastern Caribbean continued in a united effort to pursue their joint economic development. With the signing of the Treaty of Basseterre, the member states agreed to collaborate on eighteen main issues. These include:
1) External Relations including overseas representation.
2) International Trade Agreements and other External Economic Relations.
3) Financial and technical Assistance from external sources.
4) The Judiciary.
5) Currency and Central Banking.

The ECCB Agreement was signed on 5th July 1983 and the Eastern Caribbean Central Bank came into being on October 1st of the same year. This transition from a currency authority, ECCA to a fully fledged central bank, the ECCB, gave the region an institution that was better equipped than its predecessor to influence the economic transformation of its member territories.

It is noteworthy that the agreement did not solely promote the economic development of the territories, but included a directive to instruct the direction that the central bank must take “to actively promote through means consistent with its other objectives the economic development of the territories of the Participating Governments”

In pursuit of this economic development mandate, the ECCB’s focus includes developing regional financial institutions, and promoting the integration of the region’s financial sector to allow for the expansion and efficient transmission of financial services. To this end the ECCB has facilitated the development of the following:

Eastern Caribbean Institute of Banking & Financial Services (ECIB) 1996
Eastern Caribbean Home Mortgage Bank (ECHMB) 1996
Eastern Caribbean Securities Exchange (ECSE) 2001
Regional Government Securities Market (RGSM) 2002

The Eastern Caribbean Enterprise Fund (ECUT) and the Eastern Caribbean Unit Trust (ECUT) are two other regional institutions earmarked by the ECCB for future development.

CH&L wishes to thank the OECS ECCU Exhibition Centre and especially Sybil Welsh of the ECCB Central Bank Organization for invaluable assistance in compiling this article. Readers are invited to further their information by visiting the Exhibition Hall in St Kitts or the OECS website at www.oecs.org.