-as economic crisis bites
AMID THE increasing social, economic and political challenges confronting governments in the Caribbean and other poor and developing regions, largely as a consequence of the global financial and economic crisis, Jamaica is the latest of CARICOM states queuing to access new funding arrangements with the International Monetary Fund (IMF). The IMF and the World Bank have long come to be viewed as major pillars of the very capitalist financial system that collapsed late last year in the USA– heartland of capitalism –and spread across the world with devastating social and economic consequences for the poorest nations.

Since then, the traditional wealthy and economically powerful nations comprising the G-8 Group and the new and emerging  economic ‘power houses’ of Asia and Latin America — (count China, India and Brazil) — met last April for a G-20 summit in London and made some promising decisions.

Of particular interest to nations like ours in the Latin America-Caribbean region was the decision to quadruple the financial capacity of the IMF to US$1trillion to invigorate its involvement in helping to ease the crises afflicting the developing nations, with emphasis, initially, on the most vulnerable economies. 

The promised new money have not yet reached the coffers of the IMF, according to reports, but the institution is preparing to be a major player in responding to the financial needs of the developing countries in the prevailing global crisis. Its Managing Director, Dominque Strauss-Khan, has already been enthusiastically speaking about the ‘new influence’ of the IMF.

But if the decisions of the G-20 Summit are to be carefully assessed, the IMF is expected to pose less access difficulties for more realistic lending terms and, hopefully, less intrusion, as had been the pattern that had previously aggravated the problems of borrowing countries — as borne out by experiences of Caribbean states such as Jamaica and Guyana under previous governments.

For the present, Jamaica and some other CARICOM member countries are seeking emergency financial aid under the IMF’s concessional funding arrangements, such as its Exogenous Shocks Facility (ESF) — a mechanism basically that relates to a country’s fiscal problems resulting primarily from external factors. 

The first CARICOM country to have turned to the IMF for concessional funding was St.Vincent and the Grenadines, to be subsequently followed by applications from St. Lucia and Dominica.

Jamaica’s own agonising decision to return to the IMF, after some fourteen years, to borrow up to 300 per cent of a US$1.2 Billion quota under the so-called ‘standby agreement’ with the Fund, was made in parliament last week by Finance Minister Audley Shaw, who said the details were still being finalised.

Here in Guyana, in contrast to growing concerns over expected retrenchments in the public sector of some CARICOM states and decisions against any possibility of pay increases to help cushion the effects of rising cost-of-living and falling real income, President Bharrat Jagdeo last week made the surprising announcement of coming pay hikes for public services employees. 

The new engagements between the IMF and some CARICOM states — Antigua and Barbuda being among others yet to be officially announced — coincide with some fresh warnings for the economies of the Caribbean and Latin America.

UN/ECLAC warnings
They have come in reports from the United Nations Conference on Trade and Development (UNCTAD) and the Economic Commission for Latin America (ECLAC). 

The UNCTAD report is urging serious review of the development model that the Caribbean has been largely following over the past thirty (30) years, if it wants to beat back poverty and stimulate economic growth. And that of ECLAC points towards “a drastic fall of fiscal resources” in 2009 by approximately two per cent.

According to ECLAC, this expected decrease, along with financial restrictions, “will hamper the implementation of anti-crisis measures” that have been announced by countries of the region in response to the prevailing global financial and economic crisis.                             Coincidentally, as both the UNDP and ECLAC assessments of the region’s fiscal and development policies were being considered, the President of Guyana, Bharrat Jagdeo, is heading a ‘High-Level Task Force’ to engage the international financial institutions for new approaches to help the region deal with the global crisis.  

The Jagdeo-led task force includes the Prime Ministers of Trinidad and Tobago (Patrick Manning); Jamaica (Bruce Golding); Barbados (David Thompson) and St.Vincent and the Grenadines (Ralph Gonsalves).

The leaders are served by a team of top regional technocrats, who are scheduled to meet during this week prior to their first working session with the five Heads of Government to map out an overall strategy in the quest to secure better access to financial resources from the international financial institutions to help cope with immediate and medium-term fiscal and economic challenges.

A quick reading of a summary released by ECLAC seems daunting enough: The global financial crisis, it said, has placed the public finances of Latin America and the Caribbean economies in a complex situation. 

On the one hand, it explained, fiscal income has shrunk, due to economic slowdown and a fall in commodity prices. On the other, countries are facing significant restrictions to external financing, jeopardising their capability to apply counter-cyclical fiscal policies..:”

For its part, the UNDP’s report calls for focused attention to deficiencies in the current approaches to the prevailing development model, in particular in relation to the Less Developed Countries (LDCs) which, in the case of CARICOM, will be more applicable to the sub-region of the Organisation of Eastern Caribbean States (OECS).