LONDON, CMC – A leading international strategic-consulting firm said Friday that the International Monetary Fund’s (IMF) resurgence in the Caribbean highlights a number of deep concerns.
The United Kingdom-based Oxford Analytica, which draws on a network of more than 1,000 scholar experts at Oxford and other leading universities and research institutions around the world, said that one of these concerns relates to the relatively small size of recent IMF loans.
It said this points to the IMF’s continued role “not as a major source of finance but rather (as) a body to which lenders and donors turn for assessments of whether financial support should be released or delayed.”
Oxford Analytica said this role is explicit in IMF documents, such as the July 2009 report on St. Lucia, “which notes that access to financing would signal endorsement of the authorities’ policy agenda and be a key catalyst in securing funding from the Caribbean Development Bank (CDB), the World Bank and other donors”.
It said this can also be seen in the Washington-based financial institutions’ recent report on St. Kitts and Nevis, “where a summary of the conditions for disbursement of a policy loan from the CDB includes a requirement that the IMF has no objection to the fiscal policy stance and policy arrangements”.
In addition, Analytica said the June 2008 IMF report on Grenada refers to delays in the disbursement of EU grants pending the completion of the first review of performance under the PRGF loan.
“Continued use of what can be viewed as a variant of cross-conditionality raises concerns that countries that would not otherwise approach the IMF might, nevertheless, do so because of pressure from lenders and donors,” it said.
“Such pressure is likely to undermine ownership of IMF programmes,” it added, stating that dependence on the IMF for signals also “raises the question of why assessments of the appropriateness of fiscal or other policies may not be made independently by donor agencies and lending institutions”.
In seeking a way out of “this conundrum,” Oxford Analytica said a “useful first step might be for the Caribbean and its development partners to reach agreement on a policy along the lines of that adopted by the UK (United Kingdom), which seeks to avoid the automatic linking of Department for International Development assistance to IMF programmes”.
The firm said a related concern is that, as access to low-conditionality financing for external shocks is exhausted, future IMF loans will carry tighter policy requirements.
“A challenge arising from this will be how to ensure coherence between the conditions attached to IMF loans and the coordination of policies among countries that is required under the Caribbean Single Market and Economy,” it said.
In the face of continued vulnerability, Oxford Analytica urged the region to consider an approach that combines the “centralization of the various forms of emergency assistance with negotiations aimed at delinking donor-and-lender-support from IMF assessments and programmes.”
Oxford Analytica said since 2008, six English-speaking Caribbean countries – Belize, Dominica, Grenada, St. Kitts and Nevis, St. Lucia, and St. Vincent and the Grenadines – have received financial assistance from the IMF to help cope with the effects of external shocks, including the global recession, that are affecting tourism, economic activity and government revenue.
Other shocks have included hurricanes, floods and the collapse of CLICO, a Trinidad and Tobago-based insurance company with banking and insurance subsidiaries throughout the Caribbean, as well as banks in Antigua and Grenada, it said.
Oxford Analytica said when discussions on an IMF loan with Jamaica are concluded, seven of the 12 independent English-speaking Caribbean Community (CARICOM) countries would be “active or recent recipients of IMF financial support.”
It said that Antigua and Barbuda, which has also had loan discussions, could raise that number to eight.