The PPP/C and the IMF are singing from the same songbook

Oct 04, 2022 Features / Columnists, Peeping Tom

Kaieteur News – How times have changed. There used to be a time when the mere mention of the International Monetary Fund (IMF) would send the PPP into convulsions.

Now the IMF is the PPP/C’s best friend, more especially so when the IMF’s reports give overall favourable assessments of the PPP/C’s management of the economy. But such favourable assessments merely imply that the Government has been faithful to the neo-liberal economic creed.

The PPP used to rail against IMF prescriptions. Cheddi Jagan, the former PPP President, had described the IMF polices as massively flawed. But he found it difficult to renegotiate those policies because of the precarious economic situation which he inherited in 1992.

One decade earlier, when it came to the attention of the PPP/C that the PNC Government was planning to downsize public corporations, Cheddi Jagan accused the then PNC Government of succumbing to the dictates of the IMF/World Bank condition. He even protested the Letter of Intent which the Government had signed with the IMF. Burnham eventually backed out of any arrangement with the IMF/World Bank saying that the prescriptions were a recipe for riots.

When Desmond Hoyte was forced into a structural adjustment with the IMF and World Bank, Jagan described the subsequent Budget as a sell-out. As he predicted the Bretton Woods organizations-imposed measures which led to extreme hardships on the population.

Hoyte’s economic policies which were endorsed by the IMF and World Bank hurt the poor and working classes. These policies urged the government to privatize state entities – Hoyte did this on a massive scale resulting in job losses in the public sector. Public expenditure had to be shrunk, and as is well known, employment costs became a casualty of that process. Subsidies were removed from goods and this led to price rises which hurt the poor the hardest. The exchange rate was allowed to freely float which led to massive and progressive devaluation and increased the cost of imports. Trade restrictions were removed with the result that foreign goods flooded the local market and displaced small local producers.

When Bharrat Jagdeo became President he was greeted with a strike by public servants. One of the grouses of the union was the IMF dictated policy of red circling certain positions, thereby excluding them from salary increases. Jagdeo resisted offering the sort of increases which would have pleased the union because, it was said, this would have led to problems with the IMF. In fact, one IMF official in the country at the time made it clear that wage increases would undermine the economy’s restructuring.

Eventually, Guyana exited from any arrangement with the IMF and World Bank. But interestingly the analyses which the IMF produced annually are always used by the PPP government to support its claim that it was properly managing the economy.

The IMF has once again produced a report on Guyana’s economic performance. But the Government should be concerned about some of the recommendations found in that report. The IMF is recommending the Government remove the subsidies which now exist; it wants the market to set prices. This is another way of telling the Government to reinstitute the fuel taxes, something which would make petrol unaffordable.

The IMF is also concerned about the Government overspending. It wants the Government to be careful to moderate public expenditure. But the PPP/C Government is on fast-track to fast-paced economic spending. If the PPP/C follows the IMF advice, it will cramp their style.

The IMF also wants a fiscal spending plan. The PPP/C is not good at developing such plans and it would not be surprising if they seek technical assistance from either the IMF or the IDB to develop such plans.

Despite the fact that these are areas which the PPP/C will have problems with the recent IMF report, the Government is tripping over itself in publicizing selected parts of the report which it feels make it appear as if the PPP/C is soundly managing the economy.

The PPP/C is likely to selectively endorse parts of the IMF report. But in so far as a Fund programme is concerned, the IMF has no leverage on the PPP/C. Guyana will never again have need to go back to an agreement with the IMF. That in itself is of some comfort considering how comfortable the PPP/C now appears when it comes to neo-liberal economics.

(The views expressed in this article are those of the author and do not necessarily reflect the opinions of this newspaper.)