Dr. Fraser’s error on IMF issue

19.JUNE.09

EDITOR: In his column in The Searchlight last week (June 12, 2009), Dr. Adrian Fraser asserted that “We (meaning St. Vincent and the Grenadines) have been forced to go to the IMF.”{{more}}

If this assertion is meant to be a factual statement, it is wrong, since no entity or circumstance “forced” St. Vincent and the Grenadines to go to the IMF. If the assertion is meant to be taken as “opinion”, then it is jaundiced (perhaps prejudiced in a partisan political sense) in that there is no matrix of facts to support or ground the opinion.

St. Vincent and the Grenadines is a member in good standing of the International Monetary Fund (IMF). It has been a member since 1980 or thereabouts. Every year since then the IMF conducts a routine Article IV Consultation on the Macro-Economy and Fiscal Situation of St. Vincent and the Grenadines. The Reports of these consultations have been published every year since the ULP has been in office.

St. Vincent and the Grenadines has allocated to its Special Drawing Rights (SDRs) which are funded through its membership of the IMF.

Thus, Dr. Fraser’s formulation “going to the IMF” cannot mean St. Vincent and the Grenadines’ on-going interface with the IMF as one of the Bretton Woods Institutions upon which rests the financial architecture of the world. The other major such institution is the World Bank.

So, I take Dr. Fraser’s “going to the IMF” as a special and horrible event which St. Vincent and the Grenadines has been “forced” to embrace. In this regard, Dr. Fraser is way off the mark. As the Prime Minister has stated in and out of Parliament, his government made an application to the IMF for a low-interest loan, with no conditions whatsoever, from a special facility known as the Exogenous Shocks Facility (ESF). This is a facility open to countries which have suffered a loss of export earnings due to an external (exogenous) circumstance or a natural disaster.

“Going” to the IMF for ESF funds does not indicate that there is a fiscal crisis of some kind. Countries with several fiscal problems cannot access the ESF. They must go for an IMF-type programme with conditions. Several instruments other than the traditional IMF-type programmes have evolved in the IMF as a result of critiques of the traditional IMF approaches.

As a result of the application to the ESF, the Government of St. Vincent and the Grenadines has received 45 percent of its SDRs amounting to US $5.7 million or EC $15.4 million. The loan is over 10 years at a one-half of one percent interest. That’s excellent money to get. St. Vincent and the Grenadines jumped at it. It led the way for Dominica and St. Lucia. The PM would have been foolish not to go for such cheap funds.

No one in St. Vincent and the Grenadines has been more critical, in an informed manner, of the IMF than Dr. Ralph Gonsalves, our Prime Minister. He has repeatedly stated that the IMF does not run SVG. He listens to them and others. He adopts and adapts any idea from any source which is sound. He has no permanent, dogmatic anti-IMF stance as some others without responsibility or good sense may have.

Dr. Fraser, the Resident Tutor for our University, continues to disappoint with his frequently uninformed and politically-biased offerings. He must not allow his close friendship with the Leader of the Opposition to blunt or prejudice his intellect. We expect better of and from him in his commentaries on public policy.

Hans King

Press Secretary to the Prime Minister