The International Monetary Fund published a staff concluding statement from its 2026 consultation mission on common policies for the Eastern Caribbean Currency Union (ECCU), finding that the post‑pandemic expansion has continued but fiscal consolidation has lagged, public debt reduction has stalled, and financial-sector vulnerabilities persist despite broadly stable conditions. Staff recommended prioritising stronger fiscal sustainability and accountability aligned with the 60 percent of GDP regional public debt target by 2035, alongside measures to strengthen financial system resilience and intermediation while safeguarding the quasi-currency board. Regional growth was estimated at 3.0 percent in 2025 on the back of tourism and infrastructure investment, while inflation moderated; over the medium term, growth is expected to slow to around 2.5 percent with downside risks linked to global uncertainty, trade and travel barriers, geopolitical tensions, natural disasters, high public debt, and reliance on tourism, imports and uncertain Citizenship-by-Investment (CBI) inflows. With several members increasingly at risk of missing the debt target, staff called for a union-wide, time-bound commitment to operationalise national fiscal frameworks aligned with the regional target, supported by stronger peer reviews at the Eastern Caribbean Central Bank (ECCB) Monetary Council, independent oversight committees, clearer specification of the debt-target perimeter, and efforts to address data gaps and capacity constraints. On the financial side, staff highlighted legacy balance-sheet weaknesses and an NPL ratio above the ECCB’s 5 percent benchmark, recommending full provisioning for long-dated NPLs, a uniform time limit for write-offs, stronger use and capitalisation of the Eastern Caribbean Asset Management Corporation, and time-bound capital restoration plans where needed, alongside continued Basel II/III transition work, supervisory assessments to inform Pillar 2 add-ons and buffers, and further strengthening of the regional safety net including the resolution framework and deposit insurance scheme. For nonbanks, it urged prompt establishment of the Eastern Caribbean Financial Standards Board, expedited prudential standards for credit unions, closer coordination among supervisors, and stronger monitoring of insurance reinsurance risks; structural priorities included improved trade connectivity, coordinated customs and single-window reforms, skills and labour mobility measures, strengthened regional CBI governance, and more centralised regional approaches to data provision and transparency. IMF staff will prepare a report for consideration by the IMF Executive Board, subject to management approval.
International Monetary Fund 2026-02-09
International Monetary Fund staff urges tighter fiscal rules and faster action on bank NPLs in Eastern Caribbean Currency Union common policies review
The International Monetary Fund's 2026 consultation on the Eastern Caribbean Currency Union highlighted post-pandemic growth but noted fiscal consolidation delays, stalled public debt reduction, and financial vulnerabilities. Recommendations included prioritizing fiscal sustainability, enhancing financial system resilience, addressing non-performing loans, achieving a 60% GDP debt target by 2035, and strengthening regional financial oversight and standards.