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Caribbean Islands Banking and Finance
Dominica was a member of the Caribbean Development Bank (CDB)
and the Eastern Caribbean Central Bank (ECCB). The CDB provided
financial facilities for infrastructure and development program
activities either bilaterally or as a co-financing partner with the
World Bank (see Glossary), AID, and other international agencies.
The ECCB acted as a common central bank for the members of the
Organisation of Eastern Caribbean States (OECS). Dominica and the
six other members of the OECS have shared a common currency, the
Eastern Caribbean dollar (EC$), since July 1976. The exchange rate
has remained fixed at EC$2.7 per US$1.
The institutional arrangements of a shared common currency mean
that decisions about exchange rates cannot be made by any one
member nation. Given the differing production profiles of the OECS
countries, the various national economic policy imperatives do not
necessarily coincide either in objective, direction, or timing.
When coupled with the difficulty of decision making within a
regional institution, the arrangements concerning the ECD and the
ECCB are major constraints on the effective use of the exchange
rate as a tool of national economic policy. In Dominica's case, the
constraints have led to the use of wage policy as an alternate tool
of macroeconomic policy, a situation that can be domestically
unpopular and can limit the ability of the government to direct
economic growth. Throughout 1986 Dominica was able to mitigate the
effect of a fixed exchange rate because of the strength of the
pound sterling, the currency in which most foreign exchange
earnings were earned.
Data as of November 1987
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