If you were PM today, wouldn’t you take that IMF offer of free money? Okay, it’s not free money. It’s not a grant; it’s a loan. It has to be paid back. But at 0.5 per cent interest, with ten years to pay back and five years of extensions attached to the deal, wouldn’t it make more sense for the opposition to criticize the government for not taking more money from the IMF’s Exogenous Shocks Facility?
“You have to look at it from different points of view,” opposition leader Dr Kenny Anthony told reporters at last Thursday’s press conference. “The IMF never makes money available without conditionalities. If you listened to the government during the budget debates, you heard the PM speak of sound macro-economic policies. In my budget address I asked, What are these sound macro-economic policies?”
Anthony himself had the answer: The IMF, like any other bank, has to assure itself the lender has the methods and the means necessary to repay the loan. If the lender starts to default on payment, the IMF starts moving to take possession of the property and perhaps the collateral as well.
“When the statement was made and the IMF released the information, the deputy director of the IMF indicated employment would increase in St Lucia very sharply, that there is reduced revenue intake because of the problems in tourism but then the local admin had agreed or indicated that they would be reducing costs and raising taxes.
“These are not my words, these are the words of the deputy director of the IMF. The IMF has made this money available with the understanding that there would be certain policy adjustments by the government. And the government has indicated that the VAT is one tax it will introduce. The SLP has said it is madness to introduce the VAT in the current economic situation where you have an ongoing recession.”
So, as Anthony said at his latest Market Steps political meeting, “Taxes in your tail!”
Just yesterday, Caribbean Update reported that director of finance, Isaac Anthony, told St Lucians in New York that growth in St Lucia was expected to slow by more than four percent and that unemployment was expected to rise to 17 percent.
The numbers argue for both sides on the IMF issue. On the government side, it is clear that low interest loans could help small businesses and capital projects get off the ground, creating jobs just when they are needed most.
On the other end of the political spectrum, if the government fails to use the ESF funds to the benefit of St Lucians and the economy continues in a tailspin, the IMF could put St Lucia in something very much like receivership.
“It is instructive that countries who have gone the route of the IMF are so very careful,” Anthony continued. “The government of Barbados recently indicated through their prime minister that Barbados will not touch funding from the IMF except what it is entitled to under its special drawing rights. Barbados will go to the open market. Look at the new developments in Jamaica. The government is now in negotiations for $1.2bn and an IMF official has said Jamaica will have to go through some pain, some adjustment and Jamaica cannot expect they can get US$1.2bn without a whole heap of adjustments.”
Of course, Jamaica’s billion-dollar IMF loan has nothing to do with the IMF. It is much more like the frightening loan packages of the 1970s which put Third World countries in Africa and Latin America in a state of never-ending debt.
“My point,” Anthony pressed on, “is that once you are roped in with the IMF, no matter how attractive it is, there are conditions you must meet, you must satisfy, and if the IMF is not satisfied . . . ”
But seriously, though, if Kenny Anthony was Prime Minister today, wouldn’t he jump at the chance to put a few extra million in the Consolidated Fund to help St Lucia through the economic crisis?
“Never!” was reply. “The answer is no. Not with the IMF. John Compton and I will walk the same road on this issue. The IMF will not be allowed to dictate the economic policy of this country. I believe that fundamentally, where economic policy is concerned the government of St Lucia must not be dictated to by anybody. It is worth paying for. I value my freedom.”
Published in The STAR on August 11, 2009