PM – Eustace’s reason for IMF date change is absolute nonsense

Prime Minister Dr. Ralph Gonsalves has described the reasons given by Opposition Leader Arnhim Eustace for the delay in the release of the International Monetary Fund (IMF) report on St. Vincent and the Grenadines as “nonsense.”{{more}}

The Leader of the Opposition recently claimed that the delay suggests that the Unity Labour Party (ULP) government is negotiating with the IMF what medicine should be prescribed for the local economy, which has registered an unprecedented three years of decline.

In response to Eustace’s claim, Prime Minister Gonsalves explained to listeners of a WE FM radio programme on Sunday, November 13, that the executive board of the IMF was scheduled to meet in Washington to consider the Article IV consultation which was done here during August 10 to19 period, but that meeting had been postponed to November 16.

According to Gonsalves, “that’s what I had been advised by members of the Ministry of Finance.

“On these matters I don’t keep in touch with the IMF… I have officials who do that,” he added.

Dr. Gonsalves, who also wears the hat as Minister of Finance, revealed that the consultation that was conducted by the IMF is the 11th one since he has been elected as Prime Minister.

“… Article IV consultation, an article comes out, then they put it before the executive board. The executive board has a discussion and arising out of that discussion, they will make comment upon proposals put forward by advice given by the staff.

“I heard it was said by the Leader of the Opposition that the reason why the date change came is because the report is so bad and we are trying to change it and that is how we got a date change for the executive board. Just nonsense, absolute nonsense,” Gonsalves said.

With intent to shed more light on the matter, Dr. Gonsalves began reading a report on the IMF Article IV consultation, which he said was provided to him on November 2, by Budget Director Edmond Jackson.

“It says here in the opening lines of the Depth Sustainability Report, growth and inflation. With regard to the growth issue, they (report) saying it is 0.4 minus, but I hear people saying it’s plus 0.8 and that is from our local and regional institutions.

“Fiscal balance: when the central government primary balance is projected to record a deficit of 3.0 percent of GDP in 2011, over the medium term it is assumed that the primary balance will register a surplus in the range of 2 per cent in the GDP, in line with the authorities’ commitment in the context of the recent RCF discussion; further discussions took place in July.

“Revenue is projected to increase in the medium term, reflecting the authorities’ plan to implement a number of revenue enhancing measures such as implementation of market base, property tax, and improvements in compliance, and tax audits…,” the report states.

Continuing reading from the report, the PM also disclosed that the central government external grants, which peaked in 2009, are projected to decline to around 2 per cent of the GDP over the medium term and further to fault 1.5 percent of GDP.

“On the other hand, expenditures in percentages of the GDP assumed to gradually fall to decree crisis level, reflecting a planned expenditure savings discussed in the staff report,” he added.

According to Dr Gonsalves, the report further stated in its conclusion that St. Vincent and the Grenadines’ public debt is expected to revert to a sustainable trajectory over the medium term and the external debt distress remains moderate.

“While the physical situation has been deteriorating in recent years, the authorities have stepped up physical consolidation measures, both in revenue and expenditure funds. These, along with projected improvements in economic prospects, are expected to improve the fiscal situation and reduce the public debt, the GDP ratio by the year 2021.”

Prime Minister Gonsalves gave the reminder that the ruling ULP government is prepared to run a deficit for 3 to 4 years, as long as there is a medium plan for the consolidation of the fiscal situation.

Gonsalves said that the staff report further indicated that the outlook for near term growth remains subdued, but economic activities are expected to recover gradually over the medium term.

“Where GDP growth is expected to recover somewhat in the second half of this year, reflecting a modest pickup in the construction sector and agricultural production.

“Although growth will be negative in 2011, they are saying that those numbers show that we have been slightly positive… but I still say it’s flat.

…”Next year growth is expected to get a boost from construction at the airport, donor finance projects that were approved during the natural disasters and the opening of the two new medical schools.

“Over the medium term the economy is expected to recover towards its potential growth of 3.5 percent, but the recovery to potential output is slower and more projected than the time of the July consultations, reflecting the downward revision for advance country’s growth,” the report further stated.

According to Gonsalves, the IMF report does not reflect badly on SVG.

“Why would I want to change a report like this?” the PM asked.