Historical Sketch

The English colonization of the Caribbean began in the 16th century, in a competition with Spain and later France. The different islands were administered as separate colonies. Some smaller islands were merged into the Leeward Island colony, the corresponding Windward Islands were not merged but formed an administrative unit. In 1958 Great Britain created a political structure for its possessions in the Antilles, called the Federation of the West Indies. The step was intended to pave the way for independence. The plan failed because the two largest constituents, Jamaica and Trinidad & Tobago, both pursued their own way and attained independence separately in 1962. The federation was dissolved, and the remaining islands returned to colonial status. Under the West Indies Act of 1967, they formed the West Indies Associated States, which implied economic cooperation but no common political structure beside the relationship to Great Britain which retained responsibility for defence and foreign affairs. In the 1970s and 1980s, the different islands attained independence one-by-one, with the exception of Anguilla, Montserrat and the Turks & Caicos Island.

Monetary History Overview

The Caribbean had always been an important station on the trade routes between the Spanish American possessions and Europe. Thus, Spanish trade coins got introduced and dominated the payment transactions, predominantly the so-called "Spanish Dollar", the eight Reals in silver. Unlike other islands, in Barbados gold coins like the "Spanish Doubloon" of 8 Escudos were more prominent than silver. The isolation of the islands brought scarcity of specie and thus caused an overvaluation of the trade coins compared with the European markets. In the English possessions, various "accounting Shillings" emerged which were determined by the local valuation of the Spanish trade coins, differing considerably from the metropolitan rating of 50 Pence Sterling per Spanish Dollar. In 1825, the Pound Sterling became the sole currency for all British possessions. The dominance of Spanish trade coins in payments did not change for the time being. In the mid-19th century, however, the local accounting currencies were abolished everywhere, which corresponded to a massive devaluation of the local money. The foreign coinage was tolerated in payments until the late 19th century, and the name "Dollar" remained in customary use for an amount of 50 Pence Sterling, the former rate of the Spanish Dollar.

In the late 19th century, three private commercial banks began issuing paper money for British Guyana, Barbados and Trinidad and Tobago. The banknotes for the latter two were then also circulated on the smaller islands of the Northern and Southern Antilles, respectively. The currency denomination used was "Dollar" at 50 Pence Sterling. In the late 1930s, the colonial administration set up a currency board in Barbados and revised the ones in Trinidad and Tobago and British Guyana that had been founded at the beginning of the 20th century. The goal was a closer regulation of money issuance by both the governments and the commercial banks. At the 1946 West India Monetary Conference, finally, the unification of the three monetary areas was decided. In August 1951, the Currency Commission for the British Caribbean Territories (Eastern Group) began operations. The British West Indian Dollar was issued as the common currency, still equal to 50 Pence Sterling. In the 1960s, most of the British colonies attained independence. Step by step, they decided to leave the common currency area and to introduce national currencies. After Trinidad and Tobago, Guyana and Barbados had left, the monetary union comprised only the smaller islands. In 1965, the colonial currency commission got replaced by the East Caribbean Currency Authority, reconstituted as Eastern Caribbean Central Bank in 1983. The currency was renamed into Eastern Caribbean Dollar. The Sterling peg remained unchanged when Great Britain devalued its currency in 1967. The Dollar also followed the floating of the Pound Sterling in June 1972, which meant a steady depreciation against the US currency. To stop this, the East Caribbean Dollar repegged to the US Dollar peg in July 1976. This has remained unchanged since then.

In 1965, seven British territories had adopted the Eastern Caribbean Dollar, Antigua, Barbados, Dominica, Montserrat, St. Kitts-Nevis-Anguilla, St. Lucia, St. Vincent. Grenada joined in 1968 and Barbados left in 1972. Meanwhile, Anguilla has split off St. Kitts and re-joined the currency union as separate member in 1987.

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