The big test ahead!!!

The Grenada government and its people should pay very close attention to a case currently being played out in a New York court involving Argentina and its creditors since the result can have significant implications for this small island state of just over 100, 000 inhabitants.

The judge’s ruling can impact heavily on the debt restructuring that the cash-strapped Keith Mitchell-led government might be seeking from a host of creditors around the world.

The New York case involves Argentina which might be forced to default on payments to all of its creditors barring a last-minute breakthrough in negotiations with hold-outs from the payment plan that it is seeking to enforce or barring a court order on the way forward to address the debt stock.

This newspaper understands that Argentina’s grace period to pay bonds that were restructured after its 2001 default expired on July 30.

United States District Judge Thomas Griesa ruled that Argentina cannot pay the 92% of restructured bond holders unless the South American country also pays hold-out predatory hedge funds in full.

Representatives from Argentina and the hedge fund, NML Capital, continue to meet with New York court-appointed mediator, Daniel Pollack in an attempt to negotiate a settlement.

If a settlement is arrived at then the Mitchell government and its advisers should carefully look at the contents.

The court matter that is being played out in New York will have direct ramifications on the estimated $75 million plus that Grenada owes to its nemesis, the Republic of China on Taiwan that Taipei has been seeking to collect after the Mitchell government dumped the Taiwanese after the passage of Hurricane Ivan in 2004 in favour of a more lucrative package from Mainland China.

The NNP administration has stated publicly that Taiwan is prepared to accept the same package that is worked out with the other mainstream creditors as part of the debt restructuring

However, it begs the question of where will the money come from to pay Taiwan and what happens in the case of another default to a not so friendly country which is all the more likely?

The IMF seems to be holding the view that the court’s ruling in New York could make it more difficult for countries like Grenada to restructure their debts by making it more attractive for creditors to hold-out.

This newspaper is of the view that the easiest thing for the Mitchell government to handle and deal with is the austerity measures that it has been forced to institute as part of the so-called 3-year Structural Adjustment Programme (SAP) to deal with the fiscal crisis facing the country.

The administration can easily go to Parliament and pass legislation after legislation to raise additional revenue in the form of taxes from an already docile population.




However, the biggest test for the government is to arrive at an appropriate and acceptable debt restructuring package to satisfy its many and varied creditors especially those international commercial banks and financial institutions that gave loans at unfortunately for us very high interest rates back in the early 2000’s.

The Mitchell government is yet to make a definitive statement to the people of the country on where it intends to get the money to honour its future commitments to our creditors that is critical to tackling the massive national debt of EC$2.4 billion.

The government has not been paying any of these critical international creditors since it came to office 18 months ago. That being the case – and given the problems experienced from time to time to fulfill other financial obligations to civil servants, pensioners and others – then where will be the money be coming from to address the issues surrounding Debt Restructuring?

This is the issue which current Prime Minister and Minister of Finance, Dr. Mitchell and his high profile Permanent Secretary in the Ministry of Finance, Timothy Antoine need to address since it can impact negatively on the success of the Structural Adjustment Programme.

The other issue which is of serious concern to THE NEW TODAY is the total silence of local economists like Dr. Wayne Sandiford, Gregory Renwick, and Company on the current situation in the country especially in light of the signed Letter of Intent with the IMF and its implications for the country.

The silence of one of the premier economists, Bernard Coard, the former Minister of Finance and Deputy Prime Minister of the People’s Revolutionary Government (PRG) is understandable given the role he played in the bloody and tragic political events of October 1983.

So too is Dr. Patrick “Jagan” Antoine, the architect of the New Economy concept for the NNP in Campaign 2013.

Dr. Antoine who is now in the government is not likely to come out in the open and criticise the handling of the economy by his boss, Dr. Mitchell and PS Antoine whom he apparently has no respect and regards for in the area of economic management.

But it is the likes of Dr. Sandiford and Renwick and to a lesser extent persons like Richard Duncan and Dr. Arnold “Porgie” Mc Intyre whose silence on the current Grenada economic landscape is cause for concern and only serving to raise a major red flag.

Are some of the silent economists sucked into the so-called “Project Grenada” or merely waiting on another election to see where the breeze is blowing to open their mouths once again and then look for a safe ride on the bus that leads to the Botanical Gardens?

The only Grenadian economist who has offered any profound analytical thought on the situation is Dr. Brian Francis, a Senior Lecturer in Economics at the Cave Hill Campus in Barbados of the University of the West Indies.

Dr. Francis has gone on record and put his credibility at stake by predicting that Dr. Mitchell and NNP are now walking on the road to destruction by focusing on raising revenue through additional taxes on an economy that is already depressed coupled with the fact that it has not unveiled any plan to grow the economy in order to create jobs.

Unlike the others who have apparently gone into oblivion, Dr. Francis has come out openly and said that the government should really focus at this time on serious cuts to expenditure by lowering the wage bill which eats up more than 70 percent of revenue collection and not focus too much on trivial matters like the taking off of a light here or there in the Ministerial Complex to pay less to GRENLEC.

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