The September 2-13 visit by a team of officials from the International Monetary Fund (IMF) should not be viewed by the people of Grenada as just another of those regular treks to the island by the Washington-based institution to look at how things have been progressing since the outcome of the February 19 general elections.
This is one of the most important visits in recent years and could mark the first significant step being taken by the government to ask the fund in a serious and practical way to help the island get out of its current financial and economic mess.
Grenada is simple broke financially and does not have the means to service a massive debt of EC$2.3 billion and growing almost daily.
The country needs to find a way to get out of the hole that it has found itself in due to its own doing – massive borrowing over the years at high commercial interest rates on non-productive projects that were never income generating and could not even pay back the interest much less the principal amount that was borrowed.
The biggest culprit was the New National Party (NNP) of current Prime Minister, Dr. Keith Mitchell when it was in charge of the affairs of the nation between 1995 and 2008.
The wasted millions on the Garden Group hotel project in the south of the island, the Mt. Hartman fiasco with U.S investor, E.J Miller and the failed Call Centre experiment are three significant ventures that impacted significantly and negatively on the public purse.
A programme with the IMF cannot be avoided at this point in time by Grenada. The foreign creditors are not being paid by government and have said quite clearly that they would not engage Grenada in the proposed debt restructuring negotiations without the involvement of the IMF.
There is a very important question that many Grenadians need to ask at this point in time in light of recent statements being made by our Prime Minister that any programme from the IMF must have growth and economic development for it to be accepted by his government.
Will Dr. Mitchell have his way with the IMF which as a lender of last resort has a history of making recommendations for the implementation of measures aimed at stabilising a country’s economy as priority and not growth at first instance?
It should be noted that the broad policy goal and objective of the IMF is to stabilise the local economy for a country that ask for its help and this is done mainly through the implementation of a set of restrictive or contractionary fiscal and monetary policies (mostly fiscal policies given that Grenada follows the ECCU’s fixed exchange rate system).
Once the economy stabilises, then, the government with assistance from the World Bank and other developmental institutions will seek to grow the economy through expansionary fiscal policies that could include, for example, increased capital expenditures.
THE NEW TODAY has reasons to believe that Grenadians should look at the current IMF/Jamaica negotiations to get a glimpse into what more than likely the fund will recommend as the prescription for our ailing economy.
The fund has traditionally looked at a country’s wage bill to determine if it is way out of proportions and to make recommendations to bring it in line.
Will Dr. Mitchell, Timothy Antoine and Dr. Patrick Antoine be prepared to accept suggestions on a trimming of the over-bloated civil service, as well as putting a cap on additional hiring, retrenchment or cutting salaries in order to make the wage bill more realistic?
The current visit by the IMF team and their eventual recommendations will also have some implications on the government’s stated policy of building a brand new economy for the country.
What the country needs mostly is a massive injection of funds to generate economic activities. However, the important question is – where are these funds coming from? Is it through the sale of passports as a result of the return to the economic citizenship programme? Are we still waiting on the so-called “lined-up” investors to bring in the millions?
Clearly, the Mitchell government does not have the kind of financial resources that it needs to meet the demands of its supporters and the country on the whole at the moment and secondly, its ability to borrow is seriously affected by its own inability to pay the current creditors.
In addition, the Prime Minister has been speaking rather vaguely without giving specifics about his charge that “positive developments” are taking place in the country.
At a recent meeting in the River Road area, he pointed specifically to the fact that government has been paying the salaries of civil servants on time and some time three or four days in advance.
This might be true but at the same time Dr. Mitchell and his government are not paying the creditors and the millions in interest rates keep mounting each and every day. When would this situation end?
There was also a very interesting statement made by the Prime Minister at the River Road meeting when he said, if he was to listen to all his supporters and their demands the country will “smash up.”
Are these demands being made by the NNP supporters on the basis of the promise that was made to them for the February 19, general elections – “We will deliver”? Is the Prime Minister facing up to the reality that he might have gone too far with his “We will Deliver” catch-phrase?
The Prime Minister also said at the meeting that “good things are coming” but definitely stopped short of being specific.
At a meeting Tuesday night at Morne Jaloux, he elaborated and mentioned one of the so-called “good things” that was coming was subsidised housing in which the people will have to make financial contributions to get a home from government.
That has been tried in the past by many governments with the end result being that many people occupy the state-organised houses and fail to meet their financial obligations.