The IMF Report and SVG

True to form the release of the IMF report has sent persons scampering to their respective political camps. This appeared to have been stimulated by earlier responses which painted glowing pictures of the IMF report, neglecting areas of critical import. It is unfortunate that we have always to respond this way for there are serious issues raised in the report that as a society we have to come to grips with.{{more}}

Clearly the political parties should never take the lead on this and room might be left here for an organisation like the St. Vincent and the Grenadines Chamber of Industry and Commerce to initiate discussions on this report, discussions not only about issues related to the private sector but about all sectors of the society. Really the idea here is not to score political points but to examine certain realities, hopefully, frankly.

I have to admit that I have not completed reading the whole report but felt never the less compelled to begin writing about it. We must make no mistake about the role and impact of the International Monetary Fund. It is one of the International Financial Institu-tions that got started at the end of the 2nd World War. The Fund is ruled by the richer countries and dominated by the wishes of the United States of America. Its role is to impose financial discipline on small, developing countries which often result in frustrating the efforts of these countries. The key philosophy of the Fund was centred around structural adjustment for those countries that had to undertake IMF stabilisation programmes. Some countries had never really recovered from the IMF medicine, including, of course, Guyana, and to some extent Jamaica. In fact, as long ago as 1974 Cheryl Payer in a book entitled The Debt Trap: the International Monetary Fund and the Third Word used case studies to show the effects of IMF structural adjustment policies on a number of Third World countries. What is a key factor here is the ability of our countries not to find ourselves in a position where we have to use the IMF as a body of last resort.

In the same book quoted above Cheryl Payer makes the following point, “All of the major sources of credit in the developed capitalist world, whether private lenders, governments or multilateral institutions such as the World Bank Group will refuse to lend to a country which persists in defying IMF ‘advice’. The real importance of the IMF lies in the authority delegated to it by the governments and capital markets of the entire world.” So the IMF with the World Bank lies at the centre of Capitalist Development and is really an instrument of the developed countries. Among its long established remedies are a decrease in public spending on services to local citizens, reduction of government employees and the opening of domestic markets. Really, to-day we live in a world much more akin to the wishes of the Fund. With the market economy and liberalisation at full play we are at the mercy of these countries and their financial institutions as we can see with the fate of our bananas and our efforts to agree on an Economic Partnership Agree-ment with the European Union.

So let us be clear that the IMF is bad news but we cannot simply dismiss it given its central place in the global economy. That is why we have to pay attention to some of what it says. The report gave some pluses to the country. It indicated that growth was expected to pick up to 4 percent in 2006 because of continued expansion in tourism and tourism -related services, a rebound in weather affected agricultural production as well as strong public sector construction activity and that further acceleration was expected in 2007. I am assuming that the expansion in tourism services has more to do with the Grenadines than the mainland. Public sector construction would have been boosted by preparations for the World Cup and then we have to factor into this the prevalence of the Moko disease since which would have affected our bananas. We are also told that beside being the poorest country in the ECCU, SVG has strong social indicators and they mentioned near -universal adult literacy, the same average life expectancy at birth as the ECCU average and targeted interventions to reduce poverty in provision of low-income housing and access to free secondary education.

But there are many areas that should concern us and these are the ones that cry out for discussion in this country. While speaking about the existing alarming debt situation the staff representatives of the FUND involved in the 2006 Consultation encouraged the government to undertake an updated economic feasibility study for the airport, “given the cost of this project and its potential impact on the country’s debt position.” Let me focus a bit on what it says about the airport project. “First, there has not been any updated cost-benefit analysis since 1998. Relatedly, there has not been an update of the market analysis, which can be crucial in determining demand for use of the airport. Also, the cost effectiveness of the project has not been compared with alternative methods of improving air access, for example, improving the shuttle system between the existing airport and neighbouring island countries. Second, there are considerable uncertainties related to the grants in kind, for which there do not seem to be formal written agreements. Lastly, the possibility of public-private partnership, as an alternative to traditional public investment, has not been fully explored- at this stage, the government intends to seek private investment only if there is a need to fill any financing gap.”

I am alarmed that there has not been an updated cost benefit analysis since 1998 for such a major project, the largest to be undertaken in this country. It might be that we are prepared to make the sacrifices for the dream of being able to travel directly from some port in North America or Europe to St.Vincent. Let us in doing the updated economic analysis also pull together information about the operations and performances of our neighbouring airports, particularly in St.Lucia and Grenada. On the issue of what it referred to as ‘infrastructure enhancing projects’ the reports urged that more be done in ‘prioritizing and properly phasing’ those projects.’ One of the standard IMF remedies is a limitation of the growth in numbers of public servants and ‘prudently managed’ wage increases. This is another area where we are likely to face problems. Our private sector is small and not ready to be the ‘engine of economic growth’. We have many students studying abroad who are likely to be back soon and others preparing to improve their academic qualifications. There are hundreds leaving our schools every year. Clearly our private sector will not be able to absorb them. What therefore are our options? Really we have serious issues that demand serious discussions regardless of political colour. We dismiss them at our own peril and moreover we need as the body politic to find ways of impacting on public policy. We have to read the IMF reports guardedly. Given the role of that Institution in the Global Economy we cannot simply dismiss it, but we have to avoid falling into its grasps. We have also to respect its influence on other potential donors.

Really we are in a Catch 22 situation.