TheEastern Caribbean Currency Union (ECCU) is one of the world's four regionalcurrency unions.[1] The union is a development of theOrganization of Eastern Caribbean States,[2] in which the member countries agree to share the samecurrency, theEastern Caribbean dollar (EC dollar).
The ECCU is composed of the nations ofAntigua and Barbuda,Dominica,Grenada,St. Kitts and Nevis,St. Lucia, andSt. Vincent and the Grenadines and the British territories ofAnguilla andMontserrat.[1]
The ECCU economies are very small and vulnerable to impacts.[2] Geographic barriers also pose a challenge for market integration, and high import and production costs affects economic activity.[2] With a combined total population in 2013 of approximately 500,000 inhabitants and a 1998 GDP of $2.6 billion, the countries face risks from natural disasters.[2]
The ECCU came into operation in 1983 when it replaced its predecessor, the Eastern Caribbean Currency Authority.[2] The currency union operates under the supervision of theEastern Caribbean Central Bank (ECCB).The ECCB maintains a stable currency by ensuring sufficientforeign reserves and setting borrowing limits for governments and banks.[3] In 2009-2010, foreign reserve backing was 93.93%, well above the prescribed 60% requirement.[3]
Before 1976, the EC dollar was pegged to theBritish pound sterling (GBP) at an exchange rate of EC$4.80 to £1.00.[3] However, since 7 July 1976, the EC dollar has been pegged to theUS dollar at a fixed rate of EC$2.70 to US$1.00.[3] Thefixed exchange rate allows for macroeconomic stability, low inflation, and growth of the financial system.[1]
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