On September 16, 1963, Trinidad and Tobago became a member of the International Monetary Fund.
But it was twenty-five years later that the IMF became a “dirty word” of sorts in this country.
In 1988 T&T sought assistance from the IMF for the first time in the midst of a deep recession caused by a collapse of global oil prices and falling domestic production.
T&T requested both an arrangement under the Compensatory Financing Facility (CFF) and a Standby arrangement.
The IMF’s board approved the CFF in November 1988 for US$85 million and the Standby Arrangement in January 1989 in the amount of US $99 million.
“The IMF lends under concessional and non-concessional arrangements or can provide outright loans. A lending arrangement, which is similar to a line of credit, is approved by the IMF Executive Board to support a country’s adjustment program. The arrangement requires the member to observe specific terms and subject to periodic reviews in order to continue to draw upon it. An outright loan is also approved by the IMF Executive Board, however, it does not require a member to observe specific terms,” the IMF states.
The austerity measures implemented in T&T led to significant job loss in the public sector and increased taxes.
“T&T underwent an IMF Structural Adjustment program in the 1980’s which arguably contributed to socio-economic deterioration and the 1990 attempted coup d’état,” economist Marla Dukharan stated in a publication titled “Coup d’état PTSD? Or same old disinformation and fear mongering? Or both?” dated May 24.
Dukharan’s piece was in response to a tweet from Finance Minister Colm Imbert two weeks before.
On May 12, Imbert tweeted, “We keep being told to go to the IMF for loan financing. What the ‘experts’ don’t disclose is that the IMF requires a commitment to structural adjustment before they give you one cent. This means retrenchment and removal of subsidies and social grants. This ‘advice’ is dangerous.”
Imbert again addressed the calls to go to the IMF as he presented the Finance (Supplementation and Variation of Appropriation) (Financial Year 2021) Bill, 2021 in the House of Representatives on Wednesday.
“I just want to clear this all up. Countries only approach the International Monetary Fund when they run out of Foreign Exchange and they can’t service their foreign debt. That Madam speaker is economics 101.”
Apart from this Imbert said there was “absolutely no reason” for T&T to go to the IMF for financial assistance since the balances of our reserves (US$7 billion) and the Heritage and Stabilisation Fund (US$5.6 billion) had healthy balances.
Former trade minister Vasant Bharath said the IMF is not the “big bad wolf” that Imbert is trying to make it out to be.
“That is another fallacy that the minister has been foisting on the population that the big bad wolf the IMF is waiting to take us down this road of no return where there will be major social dislocation and so on. Maybe 25 years ago that might have been the footprint of the IMF but I can assure you having interacted with them for the last ten or 12 years, that is certainly not the case,” Bharath said.
Bharath said the IMF has provided support to a number of countries just to give them “wiggle room and the breathing space”.
He said countries do not need to be in a “dire situation”, or a point where they are unable to pay foreign debts to approach the IMF.
Bharath said if he were in Imbert’s position he would go to the IMF.
“In this particular situation definitely I would have gone I would have sorted out funding wherever it was available that was at the least possible for to the country,” he said.
Economist Dr Indera Sagewan however said she is not in agreement with going to the IMF at this time.
“I support the minister’s stance in terms of not going to the IMF however we may be divergent in terms of what we should do in the meantime to ensure that we don’t get to there,” Sagewan said.
“And he has simply pointed to the fact that we have US7 billion in our reserves and we have about $5.7 billion in our HSF and because we have that amount of foreign exchange we are not in a balance of payments crisis which generally is the trigger which sends a country to borrow from the IMF, and this is true, but the question is from a more medium term perspective how does the country really deal with the issue of recovery,” she said.
Former minister in the finance ministry Mariano Browne said going to the IMF is not as bad as it is made out to be.
“Wherever there are resources that are available and we can get it on soft or easy terms I would do so,” Browne said.
“Being a member or being a part of the IMF is not such a bad thing as the minister paints it all the time and certainly the IMF, in this current dispensation has certainly I think been generous with the extent to which they have resources to countries in difficulty,” he said.
Browne said Jamaica and Barbados have both benefited from the IMF.
“Even if we should not go to the IMF now, it means that at some stage in the game we are cutting down our options and we are waiting for the price of natural gas to rebound,” Browne said.
Browne argued that with reduced revenue and increased borrowing, we would need to take stock before we are forced to go to the IMF.
“So even if we don’t go to the IMF now the bottom line is that you have to start making some plans just in case we continue at this level and the reality looks like we are going to continue at the level for some time,” Browne said.