Last week, a good friend and colleague sent me an email message with this link: http://www.ipetitions.com/petition/help-jamaica-grow-the-peoples-petition-to-the.
Having clicked on the link, I immediately recognized the caption: Help Jamaica Grow: The People’s Petition to the IMF.
The petition read: “(1) relax the 7 1/2% of the GDP primary surplus set aside to service the debt, such that the primary surplus be reduced to no more than 5 1/2%, leaving the remaining 2% or more to be used to stimulate growth. (2) relax the 9% ceiling on government expenditure on the public sector wages since the bulk of the public sector work force is employed in the security forces, education, and in health care, none of which should be reduced at the present time.”
Having internalised the message, the patriotic fibres in me instantaneously directed my intellectual attention to Grenada and its past and present associations with the International Monetary Fund (IMF), particularly the country’s dealings with the IMF under the People’s Revolutionary Government (PRG) and the self-styled home-grown Structural Adjustment Programme (SAP) currently underway in our beautiful country.
Admittedly, I reside outside of Grenada. However, my ears remain as close to the ground as is humanly possible, allowing me to gain access to pertinent information on the politics and economics of the day.
Therefore, I remain confident that I have a fairly reasonable understanding of the ongoing plight of the Grenadian people and the struggles of the government to stabilise and grow the economy under agreed-to economic and financial austerity measures.
It is therefore not my intention in this piece to scrutinise the contents of Grenada’s past or present SAPs. Instead, I believe it would be instructive to share with the public some perspectives on the IMF in relation to the roles and functions of this important institution and how it is adjusting to change.
At the end, each reader can decide whether the IMF’s engagements with Grenada were intended to do more good than harm or more harm than good when it comes to SAPs. Bear in mind, though, that the conclusions you reach should reflect your own experiences, since Grenada has had several brushes with the IMF going back to the PRG.
Originally, the goal of the IMF was to “build a framework for economic cooperation that would avoid a repetition of the disastrous economic policies that had contributed to the Great Depression of the 1930s and the global conflict that followed.” That meant that from time to time to IMF would lend countries funds to assist them to achieve stability on their balance of payments.
The fulfilment of that broad objective meant that the IMF was charged with the responsibility of providing inter alia “policy advice to governments and central banks based on analysis of economic trends and cross-country experiences; research, statistics, forecasts, and analysis based on tracking of global, regional, and individual economies and markets; loans to help countries overcome economic difficulties.”
With the massive changes that have taken place globally involving the evolution of development paradigms, the many currency and financial crises, and several worldwide recessions, the IMF was forced to adjust the way it did business.
Accordingly, “the IMF has emerged as a very different institution. During the crisis, it mobilised on many fronts to support its member countries. It increased lending, used its cross-country experience to advice on policy solutions, supported global policy coordination, and reformed the way it makes decisions.
The result is an institution that is more in tune with the needs of its 188 member countries.”
Despite the changing role of the IMF, it is important to note that a country is free to determine the nature and extent of its involvement with the Fund. That determination is often based on economic or political strategising. To illustrate this point, in a published journal article in the late 1980s, Claremont D. Kirton, an economic planner with the PRG, said this in reflection on a 1981 IMF arrangement with Grenada: “…an important rationale for the PRG’s approach to the IMF when the Grenada economy was relatively buoyant was the expectation (in an economic political sense) that once an IMF “seal of approval” was granted to Grenada (via an EFF [Extended Fund Facility] arrangement), a much more favourable economic climate would exist, allowing for increased levels of participation of both domestic and foreign capital in the country’s development efforts. This was genuinely believed (and probably erroneously so!) by the country’s political directorate.”
Based on your take from that excerpt, your personal experiences now and in the past, the unique and sprouting roles of the IMF, do you think differently about that institution and what it does generally in relation to SAPs? And what are your evolving thoughts about Grenada’s continued engagements with the IMF?
To sum up, this column has suggested to readers that the IMF does what it does and it is up to countries to determine how they relate to this powerful financial entity. Hence, the IMF, in this writer’s opinion should not be seen as necessarily good or bad. Given the hardships that Grenadians have had to bear under IMF-supported SAPs one can reasonably infer that few people in Grenada hold serious love for this institution, despite our country’s dependence on IMF funds to overcome our present economic difficulties. That scenario is clearly one major factor that leads many individuals to categorise the IMF as a necessary evil.
Remember, the IMF is a lender of “last resort”, meaning that countries often approach this important international financial institution for funding only when the probability of borrowing fromother sources becomes diminutive.
Clearly, therefore, when it comes to Grenada’s involvement with the IMF, there are lessons to be learned all around. The sooner we become cognisant of this fact as a society, the better for our people and our country going forward!