In the midst of dealing with his domestic responsibilities relative to the impact of Covid-19, Prime Minister and Minister of Finance, Dr the Right Honourable Keith Mitchell, is maintaining his regional and international responsibilities, and on Friday, he chaired a special meeting of the Monetary Council of the Eastern Caribbean Central Bank (ECCB).
Although the Prime Minister has not been very visible in recent weeks, he has been working steadfastly on refining the economic stimulus package announced in March and holding discussions with regional and international financial institutions as Grenada seeks to cope with the economic impact of the pandemic.
At Friday’s meeting, the ECCB Monetary Council approved a reduction in the bank’s discount rate which will make millions of dollars in short-term credit available to Grenada and other member states of the Eastern Caribbean Currency Union (ECCU).
A communiqué issued at the end of the meeting explained that, “the Discount Rate is one of the monetary policy tools the ECCB has at its disposal to influence credit conditions. This rate, set at 6.5% (since 2003), refers to the interest rate the ECCB charges on loans to commercial banks and member governments.”
At Friday’s meeting, the Monetary Council agreed to temporarily reduce the Discount Rate to 2% to provide what it terms, “low-cost short-term credit”. The decision comes against the backdrop of the bank’s recognition of the “far-reaching health, economic, fiscal and financial implications of the Covid-19 pandemic and in the context of the limited fiscal space of ECCB member countries.”
The Monetary Council also noted the increased credit allocation recently approved by the board. The decision makes an additional $138.1 million available to member Governments. The communiqué further explained that “the ECCB provides a credit allocation to its member governments and commercial banks operating in the ECCU at the Discount Rate.”
Dr Mitchell has welcomed the Monetary Council’s decision saying, “It represents a vital step in helping to ensuring the economic survival of Grenada and other ECCU member countries. The Covid-19 crisis has created a serious challenge not just for our health sectors but for our already fragile economies. Grenada welcomes this move and as Chairman of the Monetary Council, I feel honoured to be at the helm at a time when we are faced with making such widely impactful decisions.”
Friday’s meeting of the ECCB Monetary Council included the Governor’s Report on Monetary and Credit Conditions in the ECCU. This report noted the prediction by the International Monetary Fund (IMF) that there will be “a global recession in 2020 of a magnitude equal to or larger than the 2009 recession.”
Delegates attending the meeting also noted that “the Financing Gap for the ECCU is projected between EC$1.4 billion to EC$2.3 billion.” As a result, Grenada and other ECCU member countries have supported the call by the IMF and World Bank for G20 to suspend debt payments for IDA countries during this period.
Voicing Grenada’s support for this particular initiative, Dr Mitchell said, “The suspension of debt payments during this critical period will enable Grenada and other countries in the region to have more cash flow available to invest in the massive fight we are mounting against this dreaded disease. The vast increase in the demand for personal protective equipment (PPE) for our frontline personnel and other necessary health-related equipment, along with financial support for workers significantly impacted by the crisis, require a significant amount of resources. While Grenada is better positioned to face the current challenge because of the fiscal responsibility demonstrated in recent years, the crisis is unprecedented, therefore any initiative to ease its detrimental impact, will be welcome.”
Office of the Prime Minister