PM condemns World Bank’s interest rate hike, reduced debt repayment window

Prime Minister Dr Ralph Gonsalves has voice his strong displeasure over a decision by the World Bank to make the terms and conditions of its loans, less favourable to certain states, including St Vincent and the Grenadines (SVG).

He raised this issue on NBC’s Face to Face programme on Wednesday March 20, 2024 noting that the international agency’s doubling of its interest rate would negatively affect this country’s sustainable development.

The World Bank is a lending institution from which states, including St Vincent and the Grenadines, secure loans under favourable conditions, such as long grace periods and low interest rates.

Money sourced from that institution is often considered as “cheap money” because of the easy terms of loan repayment.

However, this is about to change and could signal a challenge for St Vincent and the Grenadines.

On Wednesday, Prime Minister Gonsalves said he received a document from the World Bank concerning its International Development Association (IDA), through which this country borrows money on favourable terms.

He said the World Bank now wants to reduce “the generosity of the terms of these loans”.

Apart from St Vincent and the Grenadines, this change will affect neighbouring countries such as Dominica, Grenada and St Lucia.

The World Bank is now seeking to reduce the repayment time from 50 years to 30 or 35 years.

The international lending agency is also seeking to increase the rate of interest from 3.3% to 6.8%.

Not pleased with the changes, Dr Gonsalves declared “I am going to fight them.”

“The World Bank wants to go in the opposite direction.”

Gonsalves has promised to “write every single leader in the world about this.”

He has also promised to write on the matter to United Nations Secretary General, Antonio Guterres who visited SVG from February to March 4,2024, for the Summit of the Community of Latin American and Caribbean States (CELAC) which took place at the Sandals Resort.

Additionally, Gonsalves said he is going to “lead a campaign, from the podium of the United Nations, about this absurdity.”

He said that he had spoken to the president of the World Bank in Paris in June last year, but that his words then were soothing.

“I understand that you want to help countries poorer than us…but don’t divide between the poor and the vulnerable.

“You want me to be going up a down escalator, where the downward movement of the escalator is faster and more ferocious than the slow upward climb?” Dr Gonsalves asked of the World Bank.

He said the World Bank changes are “wicked” and are driving a wedge between countries.

The Prime Minister pointed out that SVG needs the support of the World Bank for its sustainable development initiatives and he urged other leaders to join in this battle as well.

Along this vein he said he has already spoken to Dr Didacus Jules, Director General of the sub-regional Organisation of Eastern Caribbean States (OECS), about the matter.

After the eruption of La Soufriere Volcano in 2021, the government secured a loan of US $44 million from the World Bank to help in the rebuilding process.

This loan was used to finance the Volcano Emergency Eruption Project (VEEP), which saw families receiving financial assistance, and allowed other measures to be put in place to assist those who were rendered vulnerable as a result of the eruptions.