August 22, 2014
PM Gonsalves reassures Teachers’ Union that IMF loan has ‘no conditionality’

Prime Minister Dr Ralph Gonsalves reassured the SVG Teachers’ Union (SVGTU) in Parliament on Tuesday that a recent agreement between the Government and the International Monetary Fund to fund damage costs following the December 2013 floods comes without conditionality.{{more}}

Gonsalves spoke of the US$6.4 million “soft loan” from the IMF, pointing out that it had generated concerns with members of the SVGTU in regard to the possibility of conditions being put in place that would negatively affect teachers and other public servants.

“I want to repeat that this loan – which amounts to EC$17 million at just over one per cent interest – does not have any conditionality attached to it at all. Absolutely none!” he reiterated. “I hope the Teachers’ Union, who raised an issue very publicly, will listen to me very carefully.”

“There is nothing there that I haven’t spoken about in the Parliament, the last Budget or in the preceding Budget as to what is the position of the Government.”

The Prime Minister explained that this particular loan, which falls under the Rapid Credit Facility and the Rapid Financing Instrument, is one that every IMF member country is entitled to.

“Each country has a certain number of allocated Special Drawing Rights (SDRs) which are denominated in US dollar equivalencies,” he said.

“You can go to get these monies when you have a balance of payment challenge arising from either a cataclysmic event taking place externally to create a problem for your principal export – in this case, tourism – or if you have a natural disaster.”

Gonsalves also referred to a letter he had penned to IMF managing director Christine Lagarde, requesting access to the aforementioned soft loan.

Originally, member countries were permitted to draw down under 75 per cent of their SDRs without conditionality. However, new emerging nations pressed for the permission to go beyond 100 per cent of their SDRs – and were granted up to 120 per cent.

“It is our right as members of the IMF to get those monies without conditionality, so long as we do not exceed the 120 per cent in the aggregate of our SDRs,” said PM Gonsalves.

He further explained that he drew down funding from the IMF in June 2011 to foot the cost of damages caused during Hurricane Tomas and the April 2011 floods.

“What I have done here is not novel.”

The Prime Minister said that in early May this year, he had the opportunity to speak with the head of the IMF team that visited while he was out of state about the issues on which the Government had based its loan application.

“He told me that he doesn’t see anything difficult with the application because the money which, we had received in 2011 for Tomas and also the April floods… we had used the money very sensibly, and we had reported well on the expenditure,” he outlined.

“All these things stand us in good stead!”

The Prime Minister’s addressing of this matter came in response to the SVGTU’s call for assurances that the agreement between the Government and the IMF does not interfere with the established terms and conditions for teachers and other public servants.

This call was made by the Union in a press released dated August 17, 2014.(JSV)