Ex PM warns that Barbados may be getting the worst end
Government continues to say “no” to any formal programme with the International Monetary Fund (IMF).
However, former Prime Minister Owen Arthur has sought to warn Barbadians that they may in fact be getting the “worst” end of the IMF stick, on account of the Government’s current economic policies and programmes.
In a statement issued last weekend in response to the latest Standard & Poor’s downgrade, Prime Minister Freundel Stuart said there were those who appeared to believe that Barbados lacked the capacity to execute its strategy for growth and development and would be forced to appeal to the IMF to take charge of its affairs.
However, Stuart contended that “we Barbadians know better”, while insisting that his Government had set a course, crafted its needs and remained resolute in pursuing that strategy to the successful revival of economic growth in 2015 and beyond.
In responding to Stuart, Arthur pointed out that many of the Government’s current plans and programmes, including its controversial 19-month Fiscal Consolidation Programme (FCP) that was recently extended by one year, were either “IMF-influenced or “bear a sound relationship to what is recommended by the IMF in its Article 4 consultations”.
Arthur, who is an economist by training, further pointed out that it was currently a requirement by institutions, such as the Inter American Development Bank (IDB), which has provided financial support to Government for the FCP and several other policy-based loans, that Barbados pursues policies deemed “acceptable to the IMF”.
The former Minister of Finance therefore warned that if the Democratic Labour Party-led administration continued to follow IMF policies without taking IMF funds, Barbadians would “end up getting the worst of both worlds”, since from his experience and assessment, “IMF policies means you are going to have to follow these rough policies [without] the IMF funds that are intended to help you to assuage the pain that the IMF policies cause”.
Arthur further pointed out that a similar situation existed back in 1994 when late Prime Minister David Thompson had the country under “an enhanced IMF surveillance programme”.
“We weren’t getting funds but we were about to follow IMF policies,” noted Arthur, who stopped just short of saying the island needs to enter a formal programme, but boasted that he had so carefully navigated the island during his tenure as prime minister to keep it away from the IMF‘s clutches.
Reacting to the comments by Arthur, Minister of Finance Chris Sinckler said there needed to be consistency in the debate on this matter. He charged that some of the same voices that were demanding a year ago that the island enters an IMF programme were now saying that it did not need to go that route, based on its current level of reserves.
However, he was adamant that there would be no formal programme under his watch.
“We are not doing an IMF programme, we are doing a Barbados programme,” he stressed, while noting that the IMF had its view which it had expressed.
However, the Minister of Finance said the “fundamental fact was that what the IMF has on offer is not what the people [of Barbados] say they want and what we ourselves, from our analysis, say would make sense in Barbados.
“Ultimately, if you go to the IMF and you have a serious balance of payments crisis and you run out of reserves, you can secure a standby arrangement to ensure that you can pay your creditors and not default on debt and other balance of payments problems,” he said.
The other option was an extended fund facility, similar to Jamaica’s, which offers budget support.
However, Sinckler warned that to get it, “ you first have to get past the hawks on the IMF board who are saying that this country needs to devalue its currency or needs to go into as debt restructuring programme . . . If that is what Mr Arthur and other people in Barbados want, well then say so,” said Sinckler, warning that “we will get the IMF money at a low cost on the financial side, but there may be a higher and more devastating cost otherwise”.