The IMF staff concluding report on the structural adjustment program – Part 1

After campaigning in 2013 on a platform of no new taxes and a pledge not to go to the IMF, immediately on forming the Government, the NNP broke its promises and took Grenada to an IMF monitored Structural Adjustment Program (“SAP”).

The SAP was to be for 3 years from June 2014 to 2017. The SAP was characterised by over 30 new and increased taxes, duties and fees, wage freeze and hiring freeze for the public service, a cut in social safety net programs and overall sacrifice and belt tightening for the people of Grenada.

The period of the SAP has ended and the IMF has issued its concluding statement. Nonetheless, all the SAP measures remain in place so that there is no ease of the tax burdens on the people.

Throughout the period of the SAP, the IMF and government reported growth of an average of 4% and a primary budgetary surplus of 5% of GDP. These figures are encouraging and the NDC would have highly commended the Government on its performance under the SAP had it not been for a number of indicators suggesting that at best, this reported growth is not sustainable because it is not real.

It is very telling that up to now, the Prime Minister and Minister of Finance bluntly refuses to tell the people of Grenada what the current national debt is.

Is he afraid to tell the people that after enduring the sacrifices of the SAP, the national debt is higher than when the SAP started?

Added to that, in his letter of intent to the IMF dated 26th June 2014, the Prime Minister disclosed that unemployment as at September 2013 was 33 ½ %. Yet, in his 2017 Budget Statement he reported that unemployment was “over 40% when we assumed office (in 2013)”.

The IMF report is based on figures provided by Dr. Mitchell’s Ministry of Finance. He is not forthright on simple matters as the national debt and the unemployment rate. Therefore, we must be wary of any statistics given by him, including the reported rate of growth and surplus; especially so since the reality of life on the ground for the average Grenadian does not reflect the economic buoyancy that the Government boasts of.

When the “favourable” IMF Concluding Statement is thoroughly scrutinised, it becomes clear that any inclination to celebrate or heap praises must be restrained because the gains highlighted in the report are fragile and tenuous at best.

Firstly, the primary surplus of 5 ¾ of GDP is said to be: “supported by buoyant tax revenues due to the strong economy, improved tax administration, and better compliance.”

It means that rather than deriving growth and increased revenue from increased and sustainable productivity, the NNP administration has resorted taxing its way to prosperity. Any such “growth” is not real but fanciful and whimsical; and any resulting budgetary surplus is only fleeting.

Winston S. Churchill put it best when he said: “I contend that for a nation to try to tax itself into prosperity is like a man standing in a bucket and trying to lift himself up by the handle.”

Of concern too, is the finding at paragraph 2 of the IMF report of “a shortfall in grant financing and bottlenecks in project execution combined with capital outlays well below budgeted levels”. These findings point to a number of deficiencies within the NNP administration of which the people of Grenada must take note:

(1). Foreign Governments and entities that provide grant aid are inclined to do so only in an environment of transparent and accountable government. So while many Grenadians continue to ignore matters of transparency, accountability and good governance, others outside who may be in a position to support us with grant funds will not ignore these matters.

For instance, they will not ignore the fact that the head of our Financial Intelligence Unit is disqualified by law from holding that position. Neither will they ignore the opaque arrangement where the Chairman of our Integrity Commission is also an Agent under the CBI Programme and her husband is the sitting Attorney General.

(2). Bottlenecks in the system that negatively affect project implementation happen when political party hacks and stooges are hired to execute projects, rather than competent and qualified people. Such appointments demoralise and ultimately destroy the established public service.

(3). Capital outlays below budgeted levels suggest that the economy is in fact not performing well and there is a lack of resources to execute capital projects. In fact, this finding by the IMF team is inconsistent with the claim of a budget surplus.

Equally inconsistent with the claim of a budget surplus, is the announcement by Government recently of the auctioning of Government Treasury Bills on the ECSE to raise fast cash. Boasting a surplus and auctioning treasury bills at the same time is like having cash in a savings account at the bank but going to Fast Cash for a salary advance.

The IMF Concluding Statement notes that the recent announcement of natural gas discovery was a positive impetus for growth if proved viable. What they seem not to know, is that the arrangement that Government made with the Global Petroleum Group is wholly disadvantageous to Grenada. We will see very little, if any revenue at all from this arrangement.

Part 2 of this column with delve deeper into the IMF Concluding Statement; but from all of the above, it is already clear that Grenada’s economic outlook is not as healthy and positive as the administration would have us believe.

(The above reflects the views of the main opposition National Democratic Congress)

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