Should we now question IMF help?

“Those are tied to LIBOR (London Interbank Offered Rate), the bank rate, and so as the [interest] rates in the market rise, we are finding that our [interest] rates are rising on the old debt that you borrowed in a time of crisis, which from a development point of view doesn’t make much sense.”

– Central Bank Governor Dr Kevin Greenidge, SUNDAY SUN, April 30, 2023

THESE WORDS ABOVE reverberate with me once more because there is something paradoxical about the saying that the International Monetary Fund (IMF) is the lender of last resort. To my mind then its help should be one that at least relieves your burden rather than increases your obligations.

Thus the fact that we are further indebted by LIBOR interest rates in the intervention of the IMF does not make sense. Today, each time that we get a little “tralya” from the IMF, it comes with an obligation to face an increase in interest rates.

So the latest $36 million drawdown the IMF is “perlixing” about has deleterious strings. It questions the whole idea of the IMF as a source of help in times of trouble.

You remember in Shakespeare’s The Merchant Of Venice the instructions given to Shylock by Portia. “Shed thou no blood, nor cut thou less nor more; but cut a pound of flesh but just a pound of flesh, if thou cut’st more or less than a pound of flesh, but it so much as make it light or heavy in the substance or the division of the twentieth part . . . thou diest and all thy goods are confiscated.”

That should be a fair instruction to the IMF with respect to lending. Can you imagine us telling a poor beggar for a loaf of bread that it will cost him a shilling?

Similarly, the IMF stands with darts to inflict more pain by virtue of the increasing penalty of LIBOR interest rates. Should we revive our thinking that the IMF is an instrument of help and that the so-called favourable review is but a smokescreen by yet another vulture?

What is so significant is that the blessing of the IMF is critical in qualifying and obtaining of help from other financial (LIBOR charging interest) international obligations like our own Caribbean Development Bank and the World Bank.

When a country underperforms for whatever reason, the intervention of the IMF involves harsher and harsher conditions. We saw this in Jamaica as the standard of living of the poor deteriorated.

Sometimes it goes as far as the value of the currency is depreciated. A double whammy.

While we resisted the temptation to devalue in 2018 and were prepared to face the consequences of non-payment of international debt and the wrath of non-payment of bonds to citizens and banks and insurance companies, we took the step that “does not make sense”.

But we are tied lock, stock and barrel to the IMF. Its participation in our affairs is the whetstone of our existence. Our foreign exchange is tied up with LIBOR rates also.

LIBOR interest rates

I see one of our ministers of finance being exuberant about the steps made in preparation for emergencies, but I do not see the time when we as a country will be free of the IMF or of LIBOR interest rates. If the blessing of the IMF is contingent on the availability of the loans that support our foreign exchange, whether or not LIBOR interest rates make sense, we are in duck’s guts like Jonah in the belly of the whale – that is a fictitious Anansi story.

Forty-six years ago Jamaica went to the IMF.

Today it is still in the hands of the IMF for survival.

Barbados went to the IMF in 2018 and I predict that this time I will not see us free in my short remaining lifetime. Quae cum ita sint (these things being the case), if we decide now not to pay the LIBOR imposition we, like Jamaica, will only be reducing our future to begging; the same begging which Jamaica has imposed on itself.

Hobson’s choice.

Our position is weak and if the future is lying in bed with the IMF, we are in a difficult position. What is noteworthy is that there is no opposing voice in our Parliament that can recommend a change in the course of our journey. I was never happy that our foreign exchange is borrowed money. The years 2008 to 2018 were more than a disaster.

Harry Russell is a banker. Email quijote70@gmail.com

DAILY