by Linda Straker
- Loan deferrals caused by loss of jobs or salary reduction because of Covid-19
- ECCU financial sector remained stable in 2020
- Currency Union experienced expansion in its foreign reserve portfolio in 2020
4,069 commercial bank loan deferrals caused by loss of jobs or salary reduction because of the Covid-19 pandemic have placed Grenada at the 2nd-highest number of deferrals in the Eastern Caribbean Currency Union (ECCU), as of 30 November 2020.
As of that date, commercial banks within the ECCU were providing deferrals on 16,834 loans with a total outstanding balance of $4.3 billion, which represents 32% of total loans. St Lucia was in the top position with 6,635 deferrals.
Antigua and Barbuda is in 3rd place with 1,684 deferrals; St Vincent and the Grenadines is 4th with 1,642 deferrals; St Kitts and Nevis is in 5th position with 1,182 deferrals; Dominica in 6th place with 990 deferrals; Anguilla in 7th position with 630; and Montserrat in 8th position with only 2 deferrals.
During the 98th Meeting of the Monetary Council of the Eastern Caribbean Central Bank on 12 February 2021, the Council was advised that overall, the financial sector in the ECCU remained stable in 2020, despite the pandemic and the subsequent economic contraction.
“To date, none of the Licensed Financial Institutions (LFIs) operating in the ECCU has requested liquidity support from the ECCB. Over the five quarters ended 30 September 2020, there was an upward trend in Non-Performing Loans (NPLs) culminating with an ECCU average of 11.2%,” said the communique issued following the meeting.
It is anticipated that the NPL ratio will increase when the current loan moratorium expires in September 2021. Domestic credit is estimated to have contracted in 2020, relative to the previous year.
“The Covid-19 pandemic posed substantial economic and health-related challenges to the ECCU in 2020. The ECCU economy is estimated to have contracted by 15% compared to a projected pre-pandemic expansion of 3.2%. Tourism, the region’s dominant export, is estimated to have declined by 75%. The ECCU economy is projected to grow by 4% in 2021,’ said the communique.
Amid the challenging economic environment, the Currency Union experienced an expansion in its foreign reserve portfolio in 2020. However, the Backing Ratio declined on account of an increase in credit to member governments.
“As of 5 February 2021, the Backing Ratio was 96.2%, well in excess of the statutory requirement of 60%. The economic outlook for the region is uncertain.” The communique disclosed that the recent spike in the number of confirmed Covid-19 cases in key source markets and some member countries are undermining the prospects for recovery of Tourism and growth in the ECCU.