CARICOM Multilateral Clearing Facility

• Author: Duke Pollard
• Profession: Sitting senior judge of the Caribbean Court of Justice (CCJ), the highest appellate municipal court of the Caribbean Community (CARICOM)
• Pages: 362-365

362 THE CARICOM SYSTEM

19

THE CARICOM MULTILATERAL

CLEARING FACILITY

The foreign exchange crunch which beset most CARICOM non-oil producing Member

States following the quintupling of oil prices in 1973 and the resulting escalation in

interest rates, especially from private financial institutions, informed the initiative to

establish among CARICOM Member States, a system of settling debts among

themselves that would conserve scarce foreign exchange. This became known as the

Multilateral Clearing Facility whose membership included Jamaica, Guyana, Barbados

and Trinidad and Tobago.

The objectives of the Facility were to facilitate on a multilateral basis, settlement

of payments for eligible transactions as agreed; to promote the use of currencies of

Participating Governments in settling eligible transactions between the countries

concerned thereby effecting economies in the utilisation of foreign exchange reserves,

and to promote monetary cooperation among participating Governments and closer

relations among their banking institutions thereby contributing to the expansion of

trade and economic activities in the Caribbean Region.

The powers of the Multilateral Facility were vested in a Board of Directors

comprising one representative of each Participating Government and who was entitled

to nominate his alternate. The unit of account of the Multilateral Facility was the

United States dollar and all accounts with the Facility were to be maintained in United

States dollars and all payments of interest and related charges were to be made in

United States dollars. Each Participating Government subscribed an agreed amount to

the Multilateral Clearing Facility and enjoyed a line of credit from the Facility which

bore a meaningful relationship to its subscription to the capital of the Facility.

Disciplines for the management of the Multilateral Clearing Facility were not readily

enforced and the MCF collapsed after a few years of operation.