Some Grenadians are welcoming with glee the news that the World Bank has approved a US$15 million loan from the International Development Association (IDA) for the island.
The IDA is an arm of the World Bank that gives loans to the world’s poorest countries especially in Africa, the Caribbean and Pacific areas.
It was rather interesting to hear a number of people expressing the view that, “money coming at last”, “we get the money”.
However, many of the very said people are ignorant of the fact that this is not free money but funds that will have to be repaid by the taxpaying public including many of them over a period of time.
But one important question which THE NEW TODAY is forced to ask is the following – is this loan really a knight in shining armor to be embraced with open arms or a Pandora’s Box that should not have been opened?
It is interesting to note that the loan is categorised as a development policy loan rather than an investment loan.
The receipt of a development policy loan should be of concern to Grenadians as the World Bank only offers two basic types of loans – investment loans and development policy loans.
For those who are not that knowledgeable, investment loans are used to finance goods, works and services that support economic and social development projects across a broad range of sectors.
In other words, projects that can create jobs; put idle hands to work and generate much needed revenue.
On the other hand, development policy loans, which Grenada received approval in the past two weeks from the World Bank, provide a quick supply of external financing to support a government’s policy and institutional reforms.
The recipients of development policy loans are required to have an agreement on policy and institutional reform actions that can be monitored; satisfactory macro-economic management; and must comply with conditions set by the World Bank and IMF.
Additionally, preparation and approval of a development policy loan requires coordination with the International Monetary Fund (IMF).
This means approval of the IMF programme by the Board of Directors at their recent meeting in Washington was a necessary factor in Grenada’s receipt of the World Bank loan.
Arguably such policy measures are necessary for improving Grenada’s economic performance. However given the state of the nation’s economy – high unemployment, enormous foreign debt, economic stagnation, and stunted business growth, it begs the question: should Grenada borrow money for policy development at this particular time or investment development at this time?
Unlike an investment loan, a development policy loan will only result in more paper work being prepared by Consultants and being stashed in some government office.
In effect, consultants are the ones who will mainly be hired to prepare policy documents and few Grenadians, if any, will qualify as Consultants for these consultancies.
Do we need more Consultants to tell us what we already know? The Ministry of Finance, headed by one of its longest serving Permanent Secretaries in the history of the country, Timothy Antoine, has enough reports sitting in the Registry on the problems facing the country and the way forward.
Even the political directorate in charge especially Prime Minister Dr. Keith Mitchell who often boast of doing consultancy work with the World Bank, and the Macro-economic planner within the Cabinet, Education Minister, Anthony Boatswain know what the problem is with this ailing economy.
Moreover, a review of the record shows that Grenada recently borrowed money from the World Bank for projects with similar objectives as those of this current loan.
These projects include US$4.5 million for the Safety Net Advancement Project which has an end date of 2015; US$18.2 million for the Regional Disaster Vulnerability Reduction Project covering the period 2011-2017; and US$1 million for the Small Farmer Vulnerability Reduction project which ended in 2010.
Given these factors, why is Grenada borrowing money again from the World Bank to achieve similar objectives of ongoing or just-ended projects at a time when investment in the productive sector to grow the economy is needed?
The last government of the National Democratic Congress (NDC) of Tillman Thomas had undertaken similar projects with funds from the World Bank.
Did the Mitchell administration approach the bank for funding for the new scope of work to be done?
If not, is it a case of the IMF and World Bank putting this on the table as part of the agreement reached for the so-called homegrown 3-year Structural Adjustment Programme (SAP)?
Clearly there are more questions in the air than forthcoming answers from the NNP government of Dr. Mitchell about the details of this loan agreement with the World Bank.
However, one thing is certain, Grenada must put its economic and good governance house in order before it receives any further loans.
There is no doubt that when government went to the World Bank and IMF it opened a Pandora’s Box and all that we have left is hope and nothing more.