The politicians of the Caribbean have created a fascinating imagery of the International Monetary Fund as the organizational embodiment of Satan, the great serpent hiding in the dark to bite small island states. The reason in part for this portrayal is wrapped into whether the IMF is seen as a lending institution or an adjustment institution. When weak leadership and governance produces results that require the IMF to function as an adjustment institution then the blame sharing, the characterization becomes more pronounced.
The IMF has a membership of 188 members of which all the OECS states are part of. The core activities of the IMF are as follows:
The IMF supports its membership by providing
- policy advice to governments and central banks based on analysis of economic trends and cross-country experiences;
- research, statistics, forecasts, and analysis based on tracking of global, regional, and individual economies and markets;
- loans to help countries overcome economic difficulties;
- concessional loans to help fight poverty in developing countries; and
- technical assistance and training to help countries improve the management of their economies.
The IMF does not invade a country and take over as has been so wrongly conveyed. The member country approaches the institution.
Prime Minster of Antigua and Barbuda was invited as the featured speaker at the Economic Business Forum, hosted jointly by the Antigua & Barbuda Chamber of Commerce and IMF Western Hemisphere Department. In his contribution Prime Minister Browne castigated the IMF for contributing to economic stagnation in the country and harming the investment climate. He made some very strong remarks in the presence of the IMF Officer that took many by surprise, he said:
“The fiscal problems have not been resolved, but yet still we are being asked to pay back EC$320 million over the next four years …. When the IMF come and gives us EC$320 million for four years it does not help us. They are the ones, who would eventually be very critical about volatile investment flows, but what do you say about a temporary support programme, and you literally pull the plug. We have to pay you back even before the problem is solved.’’
Indeed the Great Serpent has emerged and the swords must be raised to cut off his neck. The truth of the matter is that this loan was agreed by the previous Government, that the funds obtained kept Antigua afloat and alive, and without it Antigua may have been declared a failed state.
Prime Minster Browne informed the meeting that he held discussions with President Maduro of Venezuela for a loan to wipe out the IMF loan. With Venezuela is the serious economic crisis, one has doubts that this will happen.
It is most noteworthy to read the thinking of the IMF on the problems facing the OECS States. In an IMF Report entitled Caribbean Small States: Challenges of High Debt and Low Growth (February 20, 2013), the Report outlined the following issues facing Caribbean States:
- An extreme version of low growth
- High debt
- Significant vulnerabilities
- Limited resilience to shocks
- Low productivity and high costs
The Report also provides the prescription from the IMF Pharmacy as outlined below:
- Fiscal adjustment is unavoidable but exceptionally difficult to implement
- Develop a comprehensive growth strategy which replaces public sector demand with self-financing private sector demand
- Assess the appropriateness of the exchange rate instrument as an element to jump-start growth
- States should be in the front line for support from climate –change funding given the exceptionally high cost and frequency of natural disasters
- Strengthen the supervisory and regulatory framework in the financial sector
- Pursue debt restructuring
Fiscal adjustment is viewed as political suicide through self immolation. Debt restructuring is almost impossible now. Devaluation of the EC Dollar is totally rejected by all. Some work has been done on strengthening the supervisory and regulatory framework in the financial sector.
We are down to only two recommendations as proposed by the IMF that OECS countries might embrace. These two are the development of a comprehensive growth strategy and raising the noise level on climate change funding.
Where are OECS states on these two recommendations? I have not seen any comprehensive growth strategy presented as defining a path for economic growth, and the noise level is now focused on reparations.
I maintain that the political and diplomatic capital of the Caribbean is best expended in making the case for Climate Change Funding. I maintain that the argument on reparation while sound is inappropriate in the present global realities.
I read Dr. Hilary Beckles’ statement on reparations to the House of Commons, and while it was a good history lesson, it failed in making the case that the British taxpayer should now pay for the sins of their forefathers. It did not speak to the fact that some slave owners stayed on in the Caribbean, it did not reference that the British Taxpayer has contributed through British Aid, and the EU funds, billions of dollars to the Caricom countries. Anyone that is saying that we should spend millions of dollars to get a two line apology from the British Parliament is engaging in recklessness to the highest degree.
I maintain that a clear, definitive and comprehensive growth strategy is required for St. Lucia. The strategy should include manufacturing as a sector with deep rooted economic development benefits. I recently reviewed all the Industrial Estates belonging to Invest St. Lucia, to observe the present use of the buildings, it is a sad commentary. Some are now hardware stores, one houses a publishing company, some are warehouses, and many are empty and abandoned.
It is time for bold, decisive and creative approaches to our problems, so the next time you hear the word IMF don’t be fooled into believing it is the Great Serpent, the brood of vipers are hiding elsewhere.
John Peters