Technical article

Which Island Currencies Are Pegged to the US Dollar, and What That Means for Monthly Spending

For these seven islands, the central banks give a clear first answer.

By Neil Solomon · 5 min read

Picture a couple named Walter and June. Walter is 66. June is 63. They get a pension paid in US dollars, and they are looking at islands in the Caribbean. June asks a plain question. If prices on the island are in a different currency, will our monthly spending jump around from one month to the next?

For these seven islands, the central banks give a clear first answer. Every one of them ties its money to the US dollar at a fixed rate. That does not settle everything. It does settle something important.

The fixed rates

The five EC dollar islands. One central bank issues one currency for all of them. Its page says the EC dollar "has been pegged to the US dollar at a rate of XCD2.7 to USD1.00, since 1976." A second page gives the day: 7 July 1976. Before that, the currency was tied to the British pound. The same bank lists eight members in all. The other three are Anguilla, Montserrat and St Vincent and the Grenadines. Only the central bank's pages were read. A separate government page for each island is not among the sources.

Barbados. The central bank's page quotes its Governor: "it's one US dollar equals two Barbados dollars, every day." A second page, dated 2016, says the rate was announced and took effect on 5 July 1975, "fixed to the US dollar at a rate of USD1.00 to BBD2.00." It adds that protecting the peg "has become a central goal for successive governments."

Bahamas. The central bank's pages speak of "the fixed parity between The Bahamian and U.S. dollars that has prevailed since 1973." They do not write out "one to one" in numbers. Parity in plain words means equal value, so US$1 would be BSD 1, but that is my reading. The same pages say that notes issued by the central bank are "the sole legal tender of The Bahamas." They do not say whether shops must take US dollars.

What a fixed rate could mean for Walter and June

My arithmetic, from the official rates: a US$1,000 pension would be XCD 2,700 on the five EC dollar islands and BBD 2,000 in Barbados, in any month. If the rate holds, that part never moves.

Two things are left open.

First, the rate is fixed to the US dollar only. For a pension paid in pounds, euros, Canadian dollars or Australian dollars, the swings between that currency and the US dollar would still reach the island. This is my reasoning, not a line from a central bank.

Second, a fixed rate is a promise that someone keeps with reserves of foreign money. The Barbados page of 2021 says, in the Governor's words, that without foreign exchange the bank could not deliver at the two to one rate (my paraphrase). The page gives 12 weeks of reserves as a benchmark. The Eastern Caribbean bank says its backing is at least 60 per cent by law, and stood at 99.0 per cent on 12 June 2026. Its reserves cover just over six months of imports.

The Eastern Caribbean bank also lists what could strain it: "high import bills from elevated fuel and food prices can deplete the reserves." It names slow tourism, hurricanes and close to 90 per cent of energy coming from imported fuel. That page is a staff blog, and its disclaimer says the views are the author's. It asks whether it is time to talk about the peg's "future relevance." Any decision to change the peg "rests with the Monetary Council," says the bank's FAQ. There is no official sign that a change is planned.

What is left open

• What banks on each island charge to change one currency into another. The Eastern Caribbean bank links to a fees page that is not among the sources.
• Whether US dollars are taken in shops and restaurants on each island.
• Whether the Bahamas rate is written as one to one on an official page.
• Pages from each island's own government. I relied on the central banks.