Barbadians are enduring the pains of an International Monetary Fund (IMF) structural adjustment programme without reaping the accompanying benefits of financial draw-downs at concessionary rates, former Prime Minister Owen Arthur charged yesterday.
Delivering a lecture titled, Towards A New Governance at the Errol Barrow Centre for Creative Imagination, Arthur contended that Barbados had quietly agreed a fiscal adjustment programme with the IMF, but said because there was no formal agreement, Government was unable to benefit from soft loans that accompany such packages.
“Barbados has been carrying out a programme of fiscal consolidation and economic restructuring as prescribed by Article IV consultations with the Fund. It is essentially employing IMF type policies,” Arthur said during the lecture sponsored by the Sir Arthur Lewis Institute of Social and Economic Studies, along with the St James South Constituency Council.
The former Prime Minister said while the Article IV recommendations did not call for an exchange rate adjustment, “they do, however, call for timely and effective implementation of the policies which the Government of Barbados agrees with the Fund as being the best suited for the transformation of the economy”.
He said that in going this route, “Barbados is essentially implementing an IMF style adjustment programme without having access to the IMF funding”.
Arthur added that among opportunities denied the country because of Government’s strategy was the ability to capitalize on, or leverage, Barbados’ current quota in the IMF of US$130 million.
The noted economist explained that the administration could borrow three to five times the quota – between US$390 and US$650 million – at an interest rate of one per cent, based on the arrangement with the Washington-based lending institution.
An agreed and publicly announced programme with the IMF would also trigger access to policy-based loans at concessionary rates from the Inter-American Development Bank and the Caribbean Development Bank, which could run into hundreds of millions of dollars, he added.
“There is no point implementing IMF policies without having access to its funding to cushion the negative effects of those policies,” he said.
Arthur warned that Government’s reluctance to formally strike a deal with international monetary institution meant it would continue to be burdened with overwhelming debt.
“The Government of Barbados is not going to be able to clear the arrears with the UWI [University of the West Indies] and the private sector, nor make some of the transformations necessary to restructure the economy unless it can have access to funding on this scale and on these terms.”
He cautioned that “an hour of decision” had arrived and Government should determine whether it wanted to be “all the way in or all the way out” with the IMF.
“This present half way house in which Barbados finds itself puts us in the worst of all worlds,” he said.
Arthur warned the Freundel Stuart administration that it could not return Barbados to a sustainable footing unless it had access to large amounts of money.
However, he all but ruled out commercial loans as an option, pointing to the country’s international credit rating, and again slammed the Central Bank’s financing of Government programmes through the printing of money as “a path that leads to certain destruction”.
Making specific reference to Jamaica and St Kitts, the former Barbados Labour Party leader, who provides economic consultancy to a number of regional governments, virtually advised the administration to follow the lead of Caribbean countries that have turned to the IMF to help get them out of economic trouble.
“The turnaround they are experiencing is because the IMF has recently adopted a new approach to structuring its relationships with countries. It no longer imposes quantitative targets of its own deviation on the countries,” he said.