Don’t rule out IMF
Agency here to help, says visiting governor
A visiting Central Bank governor says getting assistance from the International Monetary Fund (IMF) should not be ruled out simply to remain “independent”.
Governor of the Central Bank of Denmark Per Callesen also believes that having a low sovereign rating may be “a substantial obstacle” in attracting potential investors.
He made those observations following a presentation at the Central Bank of Barbados this morning, though he repeatedly stressed that he was not giving advice to the Barbados Government.
Speaking with reporters, the self-confessed “strong proponent of the IMF” said the lending agency was there “to help”.
“From a political perspective, you would hate to have foreigners intervening in how you run your affairs. You would, of course, prefer to be on your own. It is just that if the way you have done that is [such] that you don’t have any credibility in the markets, then lining up with the IMF is a much better solution than going completely down the drains of your economy. So that is the balance,” Callesen said.
“There is a national room for maneuver and economic policy for sure, but there is a limit.
“Despite previous periods of economic uncertainty, Denmark has managed to avoid engaging in an IMF programme.
Callesen acknowledged that some of the IMF’s conditions might be harsh, but stressed that “if you want to be independent the only way to independence is not to reject the IMF; it is to be able to finance yourself”.
On the issue of credit ratings, Callesen said while it was “a difficult concept”, agencies that issued them were “generally very reasonable”.
Unlike Barbados, which has received several downgrades – the latest being last December when Standard & Poor’s (S&P) dropped both the short-term and long-term sovereign credit ratings – Denmark has managed to maintain a AAA rating for more than a decade.
“If you are a small economy, the smaller you are, probably the more you need ratings because if you are a large country you would automatically appear on the list of potential investors . . . ,” Callesen said, adding that he believed it would be better to having more rating agencies than just S&P, Moody’s, and Fitch Group.
10“I think a system where we have more competition in ratings and not only three big players would be helpful. We don’t have a European rating agency. The solution is not to have a public rating agency because that would not be credible. But if have we had five or ten I think that would be better than having only three.”
Although his country has maintained a AAA rating, Callesen said Denmark had to “monitor with care”.
“But [one] way to do it, you can speak with the rating agencies, and I find them generally very reasonable people. Sometimes they don’t understand everything that is going on so you have to take a lot of time in explaining what the issues are about,” he said.