KINGSTOWN, St. Vincent – Opposition Leader Arnhim Eustace yesterday defended his predictions that the International Monetary Fund’s (IMF) public notice on Article VI Consultation here would have been a prescription for bitter medicine for Vincentians.
“I am going to go through that in some detail because a lot of the language is diplomatic,” Eustace told I-Witness News.
He said that he would today do a comprehensive analysis of the statement, in preparation for his weekly radio appearance tomorrow.
Eustace said he was particularly interested in the section of the notice that spoke of the action that the government has agreed to take.
“ … they mentioned the property taxes, they mentioned revenue enhancement, they mentioned expenditure control in relation to wages and they mentioned a number of other things in that general area,” said Eustace, an economist and former finance minister.
He further said that the Unity Labour Party government has to agree to the IMF’s proposals and sanction the public information notice before it was released.
“They (the IMF) seem to have given some indication of some of the things they (the government) may have agreed to but one cannot judge from the statement and get what exactly is meant – what is the nature of the agreement,” he said.
“I expect they will want some fairly tough measures from us in terms of expenditure control and other possible avenues of raising revenue,” Eustace told I Witness News.
“It will be in the report itself but they also made a statement there which suggests to me that they don’t think things have gone far enough – whatever has been agreed,” he further stated, adding that the report is not available to the public.
IMF director welcome the government’s “plans to introduce market based property taxes, strengthen revenue administration, contain the public sector wage bill, limit transfers to state owned enterprises, and rationalize spending on goods and service” according to the notice.
“They may have agreed to do something about the taxes on households but you don’t know to what extent. It seems to be in relation to getting it at market value for the tax on homes,” Eustace said.
“And when you talk about expenditure overall, there are a number of areas where you can have restraint in relation to expenditure but these have not been identified in a specific way,” he further stated.
He said the options open to the government in this regard are freezing wages, cutting staff, or a combination of both.
“But I have no way of knowing what the government has agreed to. … We just need to see the actual agreement in terms of what has actually been agreed,” he said.
“I expect they will want some fairly tough measures from us in terms of expenditure control and other possible avenues of raising revenue. It will be in the report itself but they also made a statement there, which suggests to me that they don’t think things have gone far enough – whatever has been agreed,” Eustace said.
He, however, stated that one cannot read the statement “and get definitively what has been agreed to.
“All this is the press release for the board meeting. The appraisal report done by the staff will have all the details,” he said.
“I have an idea what is behind some of them but I need to see what has been agreed. In the end, what is implemented is what government has agreed to. But I read into it, from what is there, that they are not satisfied that the government has not gone as far as they would like them to,” he said.
Eustace promised further elaboration tomorrow, saying “one needs to get more information on what has been agreed to.
“They just give you the topic heads. That does not give you any detailed information as to what has been agreed so far. … That is simply a release from the board of directors and one can surmise as to what may be included under some of those subjects but one does not have the detail until one sees the document,” he said.
The IMF has said that the local economy has been adversely affected by two natural disasters in the past year, in addition to the impacts of the global slowdown and higher commodity prices.
“As a result, real GDP has contracted and public sector debt has risen,” the IFM Executive Board said in an assessment of the local economy this week.
The international body is therefore projecting that the local economy will register negative growth for a fourth year of consecutive year, a projection that contradict the 0.4 per cent growth forecast by the Eastern Caribbean Central Bank (ECCB) and the 0.8 per cent the government expects.