A retired Central Bank of Barbados Economist believes that it is a risky venture for a government to enter an arrangement with the International Monetary Fund (IMF) on the eve of a general election.
“No government will go to the IMF when a general election is pending,” according to Trevor Campbell, who served as an economist for many years at the Central Bank of Barbados (CBB).
He has pointed out that to do so could mean the IMF programme, which is designed for economic recovery, could be a tough one that undermines a government’s re-election chances.
Campbell spoke to The Barbados Advocate yesterday against the background of calls by some economists, including Professor Michael Howard, that this country should enter an arrangement with the Fund, to correct certain imbalances in the economy.
General elections are constitutionally due early next year.
The rationale behind the calls for an IMF programme is that Barbados would be able to secure financial assistance to boost its net international reserves which, according to the latest CBB review for the third quarter of 2017, amounted to about $549.7 million or about 8.6 weeks of imports.
This figure comes after the reserves dipped by $133.9 million.
Campbell admitted that by going to the IMF, a country would have access to financing from that institution as well as from other financial market players, who would see the arrangement as a positive sign that would allow them to commence lending to the country having the economic challenges.
However, according to him, IMF programmes are tough and “no government will seek one with the Fund as the election approaches since its desire is to be re-elected”.
He explained that in disbursing money to the country, it would also have to undertake certain measures to improve the troubling areas in the economy and in specific times.
“These are the conditionalities and once the country abides by them and meets the performance targets set, then more of the IMF money will become available in tranches,” he maintained. “If those targets are not met, then the two parties (Government and the IMF) would have to re-start the programme all over again,” the Economist remarked.
He also said that the IMF does not insist that a country coming to it for financial assistance, has to adjust its exchange rate. The Fund will put various options before the country’s negotiators, who will then decide the best approach for economic recovery.
Commenting on the drop in the foreign reserves, Campbell said that this was expected since after the second quarter, reserves are taken up to make foreign loan repayments and to finance stocks acquired by the business sector. (JB)