IMF, World Bank must assess impact of policies on poverty - Jagdeo

By Gitanjali Singh
Stabroek News
June 19, 2001

President Bharrat Jagdeo yesterday called on the International Monetary Fund (IMF) and the World Bank to assess the impact of their policies on poverty in Guyana before making them conditions for assistance.

Jagdeo pointed to the futility of granting debt relief to Guyana and then insisting on policies which would see people losing jobs, no doubt referring to the World Bank recommendation to close the Demerara sugar estates which will put over 8,000 persons on the breadline.

Jagdeo said Guyana enjoys a good working relationship with the IMF and World Bank but he has found them to be too rigid and not complying fully with the Poverty Reduction and Growth Facility focus.

He said civil service reform and agreeing with the World Bank on the restructuring of Guysuco are conditions to further debt relief for Guyana but these very policies would exacerbate poverty here.

The President's remarks were made as he launched the consultation process for a poverty reduction strategy for Guyana, which once approved by the IMF/World Bank, would clear the way for Guyana to enjoy further debt relief under enhanced HIPC (Heavily Indebted Poor Countries) terms.

Once granted, Guyana's debt servicing would be reduced to 12% of current revenues but Jagdeo said he is worried that Guyana may not be able to cut poverty by half by the date being stipulated. He noted that Guyana is losing markets for its products and policies are being recommended which will place additional burdens on the labour market.

However, the President said that he hopes the multilateral agencies would accept the positions being adopted by Guyanese on these policy issues.

"I hope that whatever comes out of the consultations that the multilateral financial institutions are prepared to live with that. If the people of Guyana agree that it makes sense to pursue one policy and the (Multilateral Financial Institutions) MFIs do not share that view, then they would have to take cognisance of what the people are saying. I hope they would be prepared to live by that outcome and not say it does not fit into their framework," Jagdeo said. Otherwise, he noted, the policymakers in Guyana would lose credibility.

Additionally, Jagdeo cautioned stakeholders that if Guyana secures further debt relief under the enhanced HIPC criteria, this will not signal an end to Guyana's other problems.

He noted that the targeted spending in the various sectors would have to be funded by the money being released from further debt relief.

As such, the President implored that those in the consultation process should not unduly raise the expectations of citizens given that many persons had felt that the HIPC relief would have solved all of Guyana's problems.

"It is a limited sum of money and it cannot eradicate all the problems in Guyana," Jagdeo stated.

He noted that in Guyana people tend to look at the government for solutions to all of their problems and hoped that further debt relief does not reinforce this belief. He argued that the government can only create the enabling environment and solving the other problems in society comes through individual initiative. The government, he noted, has no magic wand.

However, the President hopes that all stakeholders, civil society, parliamentary parties especially the People's National Congress REFORM, and others will come on board to make the process truly consultative. He hoped that the process will be completed speedily which would mean hard work so that the strategy can be taken to the IMF/World Bank before the end of the year.

The consultation process is expected to allow for broad-based ownership of the poverty reduction strategy, the final version of which is expected to go to the World Bank/International Monetary Fund Board later this year for final approval of the enhanced HIPC relief for Guyana. This would mean an additional US$25 million in debt servicing would be freed up.

Earlier in his presentation, the President explained the need for the enhanced debt relief and the rationale for his government's strategy in aggressively seeking debt relief. He noted that in 1992 when the PPP/Civic government assumed office, debt servicing was 94% of current revenues. Coupled with civil service wages and salaries, these two expenditures alone accounted for 114% of revenues and had to be met by borrowing.

As such, a debt reduction strategy was foremost in the government's strategy for rebuilding the economy. He noted the skepticism the government faced as it lobbied for multilateral debt relief.

However, today, as a result of bilateral and multilateral relief afforded by the Paris Club of Creditors, Guyana's debt servicing is down to around 30% of current revenues. With debt servicing projected to go down to 12% of revenues, this means that more money would be released for essential spending by the government within fixed targets set with the multilateral agencies.

Whilst he was disappointed at the time it took for Guyana to benefit from substantial debt relief (HIPC yielded US$25 million in annual debt relief also), Jagdeo said he is happy that Guyana is at the point it is today.

The broad-based consultations will last a month and the first draft of the final Poverty Reduction Strategy Paper (PRSP) should be completed by the end of August. The steering committee supporting the PRSP consultation is headed by Cabinet Secretary Dr Roger Luncheon. It comprises Norris Witter, President of the Guyana Trades Union Congress; Komal Chand, President of the Guyana Agricultural and General Workers Union; Jean La Rose of the Amerindian People's Association; George Jardim, Chairman of the Private Sector Commission; Wazir Baksh; Vidyaratha Kissoon of Help and Shelter; David Yhann of the NGO Forum; Jennifer Webster, Government of Guyana; Coby Frimpong, liaison with the Poverty Reduction Strategy secretariat and Jocelyn Dow, Red Thread.