As many Caribbean nations have gone to the International Monetary Fund for emergency financing, one economist believes that T&T should also head in that direction.
In an interview with the Business Guardian, economist Dr Vanus James said, “I agree that we should head to the IMF.”
James has rationalised that the country would need at least 20 to 30 per cent of its GDP ($24 to $30 billion) in financing to adequately cope with the pressures of COVID-19 on the economy; and has expressed: “I think the IMF is a prime candidate.”
The economist also said that the government should not be worried about IMF conditionalities because these are “special circumstances.”
The IMF has already disclosed that Dominica (US$ 14 million), Dominican Republic (US$ 650 million), Grenada (US$ 22.4 million), Haiti (US$ 111.6 million), St Lucia (US$ 29.2 million) and Jamaica (US$ 520 million) have applied for emergency financing.
The Dominican Republic and Jamaica have accessed the IMF’s Rapid Financing Instrument (RFI) and the other islands received funds through the institution’s Rapid Credit Facility (RCF).
The difference between the two facilities lies within the framework of the conditionalities attached, whereby the RCF has limited conditionalities as it places emphasis on the country’s poverty reduction and growth objectives.
Another economist also told the BG that discarding the option of the IMF would be unwise. Dr Ronald Ramkissoon explained: “So there are a number of different things we can get from the IMF, simply because we are a member of the IMF and it would be foolish not to make use of whatever is available.”
As an economist, Ramkissoon said that he has no problem with the country going to the IMF as it not only provide funding but technical advice as well. Ramkissoon highlighted that the IMF also provides a link to other sources of financing.
The Finance Minister, Colm Imbert said in 2019 that T&T does not wish to return to the days of the IMF, which bailed out the country but on terms that hurt the general population.
He noted that the appropriation of a severe model of structural adjustment at the expense of human capital is not a road that the country should travel again.
Meanwhile, former Finance Minister Selby Wilson articulated that the government has to make a judgement call on whether it should go to the IMF or drawdown on the country’s Heritage and Stabilisation Fund (HSF).
Allowance for emergency drawdowns from the Heritage and Stabilisation Fund (HSF), not exceeding US$1.5 billion ($10 billion) can be made in any given year, for budgetary support in exceptional circumstances such as the current pandemic.
The current value of the HSF is US$6.1 billion.
The country also has 242.03 million in Special Drawing Rights (SDR) with the IMF. With regard to the SDR, Wilson said it is “what you’re entitled to; you’re actually drawing your own money from out of the fund.”
He added, “That is different from the Stabilisation Fund which is supposed to be excess revenue for future generations”. Wilson argued that the HSF should not be touched because it is the country’s savings, and it should be used to create future wealth.
According to Wilson: “It should be used for development rather than recurrent expenditure.”
Nonetheless, when it comes to meeting expenditure and servicing debt, Minister Imbert at a press conference on May 12 noted that the ministry was confident it can meet its obligations.
Imbert explained: “We at the Ministry of Finance over the last month have been adjusting our medium-term macroeconomic fiscal framework, we’ve done projections up till the year 2023.”
He added that the ministry has looked at all the sources of funding available to cover the country’s projected budget deficits and debt servicing, up to the year 2023. Imbert announced: “We are satisfied, on a proper examination of all that is available, that there is more than adequate financing available.”
The finance minister highlighted that some of the financing facilities that the country has pursued in the last two months are very generous in their terms and conditions.
He indicated that the loans accessed from the Andean Development Bank (CAF), have a 20-year repayment period, a five-year moratorium on payments and “very generous interest rates” approximated to three per cent.
Imbert noted that similar terms are being made available to T&T from the Inter American Development Bank (IDB) and the World Bank.
Imbert said that the ministry’s projections also considered the country’s debt to GDP ratios, projected growth in the economy and alternative sources of financing.
He emphasised: “There is more than adequate financing to support all of these measures we’re taking to deal with the pandemic and also going forward into the next several years in terms of rebuilding the economy. I don’t think we have any difficulty at all, we’ve been doing our homework for the last month.”
In spite of this, the BG reached out to the Minister of Finance via email with the following questions:
1. Do you think that T&T going to the IMF has merit, seeing that many other Caribbean nations have sought funding from the institution?
2. What will such financing accomplish if T&T were to go the way of the IMF?
3. Is T&T currently looking at the IMF as an option for financing in light of COVID-19?
Up until press time, he did not respond.