|How viable is a single Caribbean currency? - Part 2
|by Al Edwards
Friday, October 27, 2006
The call for a single Caribbean currency is once again in vogue and questions about the political will to implement it are being raised.
Last week, the deputy secretary of CARICOM, Dr Edward Greene, said: "One of the ways we can move toward the achievement of the CARICOM Single Market and Economy (CSME) by 2008 would not necessarily be by expecting all countries in the first instance to be in the common currency regulation, but perhaps six or seven countries."
Those who support a single Caribbean currency point to both the Euro and the EC dollar as successful models to be emulated. They say a common monetary policy can be attained.
Those who don't support the idea say it is completely unfeasible and that the economies of the Caribbean are so diverse with different exchange rate mechanisms that to simple tout the idea is nonsense.
Caribbean Business Report ascertained opinions on the matter from a number of Caribbean luminaries.
Governor of the Bank of Jamaica, Derrick Latibeaudiere: " The Minister of Finance, Dr Davies has said explicitly that Jamaica is not going that route and I fully support him. I would never say that it will never happen but it won't happen in my time or the next two or three governors. The reason why I say so is because the conditions for monetary union do not exist and I can say that quite definitively.
The fact of the matter is Jamaica has a liberalised system with a flexible exchange rate and many of the other islands have a fixed exchange rate with no monetary policies. Barbados has a fixed exchange rate regime and so do Belize and the Bahamas. Both Trinidad and Suriname have flexible regimes but not as flexible as they ought to be. So you see the systems themselves would not be lending the support to monetary union."
The Governor of the Bank of Jamaica said that the political will across the region was essential and that all the governments would have to decide upon a fixed or floating exchange rate regime. He said that it was doubtful whether they could all co-ordinate their fiscal policies.
GraceKennedy's Chief Financial Officer, Don Wehby, in an interview with this paper last year, said: " Although the Caribbean Single Market and Economy (CSME) will become a reality, its implications and impact are yet to be fully considered and digested in the region. Conceptually, it has to happen. On the whole, I think it is a good thing. I heard Owen Arthur say that for it to be properly implemented there will be a need for over 300 legislative changes.
"I think for the CSME to truly work, we need one Caribbean currency, a single one like the Euro. A single Caribbean dollar for the region is vital if we are serious about having a single trading block. Although corporations may well drive the CSME, the various governments are needed to navigate and facilitate it because certain legislative changes are required."
Trinidadian broadcaster, Ann-Marie Ganness: While I treasure my autonomy as a citizen of Trinidad & Tobago, I fully support any effort that serves to not only unite the region, but enhances its marketability in the eyes of the economic power houses. I note the difficulties ahead in implementing a monetary union, which in this case would be a single Caribbean currency. My concerns really lie with the ability of the region to get its act together.
"I can't help but reflect on the long periods of uncertainty following the signing of the declaration re: the Caribbean Single Market and the lack of information available not only to the media, but to residents. The issue of the Single Economy follows closely in the CSM's footsteps with lots of unanswered questions still lying around. What is there to be said of a monetary union?
"My concerns also surround the ability of the region to implement a regional central bank and what it would mean to some countries following a loss of monetary and exchange policy autonomy. Needless to say, I believe the advantages clearly outweigh the anticipated difficulties. A monetary union will after all deepen the sense of regional identity, with the single currency serving as a symbol of regional unity. That I believe is the bottom line."
Former NCB deputy chairman, Kris Astaphan: "With respect to the issue of a single currency, I examine it by asking myself a simple question - if there is a run on the currency, who defends it? As we stand now, I find it difficult to imagine that the people of Trinidad and Tobago would allow any of their political parties to commit their hydrocarbon revenues to an undertaking to defend a common currency. Moreover, there cannot realistically be a currency union where you have the two largest economies in the region so far apart in terms of strength.
"A single currency in many ways would result in a merger of the economies of the region. Without political amalgamation, political budgets in one country would potentially impact the well-being of voters in other countries who play no role in the election of the particular budget-makers.
Remember that the exchange rate of a country's currency is in some ways a report card on the government and central bankers of that country, and a single currency without political unity could very well result in mis-allocation of funds "I would love to see a single currency because, in my mind, it would force a political unity it would force an examination of, and hopefully a reduction of, wasteful spending.
It would force an examination by the citizens of each country of the political and economic affairs of every country. I would love to see this occur in my generation's time however; I would not bank on it. We need to start with the simple things like a single stock exchange and a single financial services regulator."
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