Former Barbadian Central Banker Calls For Caribbean Single Currency

by Amanda Banks, Tax News.com, London

25 March 2003

A former Deputy Governor of the Central Bank of Barbados has reiterated the need for a Caribbean single currency in order to promote future economic growth in the region. Dr. Leslie Worrell set out his theory in an IMF paper called "A Currency Union for the Caribbean".

Worrell describes the formation of a CARICOM currency union as a "vital element" of the development of a region-wide market that is capable of growing internationally successful firms. He envisages a similar set up as the EU for example, where nation states could convene to jointly plan and implement investment activities, especially in areas where the Caribbean already enjoys a "competitive advantage". Worrell pointed to the tourist sector, agriculture, mineral extraction and manufacturing as sectors that would benefit from joint planning projects.

At present, fluctuations and uncertainties in the exchange rates of the various countries are a barrier to the CARICOM region realising its full potential. A single currency would eliminate transaction costs and make trading within the region generally more efficient and cost effective. Further evidence of the benefits of a single currency would be seen in the cross trading of exchange-based securities. Worrell pointed to the existence of a cross border securities quotation system between Barbados Jamaica and Trinidad and Tobago though he explained that "no major investment has been financed in this way in the domestic currencies."

A common currency, which Worrell sees pegged to the US dollar, would also enable firms within the CARICOM bloc to borrow larger sums for investment purposes. At present, loans are not quoted in the home currency but in US dollars making transactions costly and bureaucratic.

Summing up, Worrell suggested that: "This would be a landmark step in the development of the regional capital market".

According to the Barbados Daily Nation, only 21 CARICOM bloc companies had capitalisation of over $100 million on the region's stock exchanges in 1999. At least 15 are thought to operate in more than one territory.

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