While the world awaits a decision on whether the United Kingdom will allow a second referendum on the matter of leaving the European Union, Montserrat is already being affected by last Friday’s decision.
Following the announcement that 52% of voters wanted to Leave the European Union and amidst the confusion of what the implications could mean, the British pound fell to its lowest rate in over 30 years.
Prior to the decision, the pound rate against the US dollar was 1 GBP to 1.49 US. Today it is 1 GBP to 1.34 US. Against the Eastern Caribbean Dollar (XCD) the rate is 1GBP to 3.61 XCD, down from 3.69 last week.
While this is a good time to be purchasing pounds for personal or business use, it means a loss in the value of the aid package the Government of Montserrat receives from the Department for International Development (DFID).
DFID presents an aid package in pounds and then it is converted to EC Dollars when received. Therefore, if the exchange rate for the pound to XCD is low the amount of money which will be available to finance government operations and projects will be lower.
For example, if the government is expecting a tranche of 20 million pounds at today’s rate it will be 72,200,000. Whereas last week, they would have received 73,800,000 at a rate of 3.69 XCD. A loss of 1.6 million XCD.
Opposition party MCAP said last weekend that “a change is coming and that the aid arrangements and financing assistance that Montserrat receives both from the UK and the European Union will be impacted, if not in the short term, in the medium to long term.”
Financial Analyst and MCAP supporter Peter Queeley told Discover Montserrat “the Government was advised since the Budget debate to look into this issue and take steps to either enter into a spot exchange rate or utilize foreign currency derivative instruments to sure up their position.”
It is hoped that a new referendum will reap a different result which could help to bring stability to the market and the British currency. At least 3,564,886 signatures have already been collected at the time of this publishing to request the UK government to implement a rule that if the remain or leave vote is less than 60% based a turnout less than 75% there should be another referendum.