Mon | Aug 21, 2017

St Kitts defends early repayment of IMF loan

Published:Friday | August 29, 2014 | 8:00 AM

A senior finance official has said the St Kitts-Nevis government did the right thing when it repaid, ahead of schedule, US$17.1 million in obligations to the Washington-based International Monetary Fund (IMF), in a push-back on critics.

“It has been brought to my attention that there is a suggestion that the government could have kept this money and use it for other things,” said Acting Financial Secretary Hilary Hazel.

She said the money in question “was granted as part of the Stand-By Arrangement (SBA) support by the IMF for a specific reason and that reason is to support the banking sector in the event that something was to go wrong as a result of the restructuring, as a result of going through the programme”.

In July, the IMF said the payment made on June 24, was about one fourth of the US$73.1 million that the twin-island federation borrowed from the IMF under its SBA.

“This is the first time that a payment of this magnitude has been repaid early to the fund by a Caribbean nation,” the IMF said, adding that the federation borrowed less than the total amount approved under the three-year arrangement, equivalent to US$84 million, as the authorities began to treat the arrangement as precautionary in March 2014, during the combined seventh and eighth review.

The senior public servant, responding to suggestions that the Denzil Douglas government could have used the funds for “any other purpose”, said there had “been no requirement whatsoever, not even a hint towards using this money.

“While we were holding it, it was counted against the debt. It must be repaid and while were holding it also, we were paying interest, interest is accruing to the IMF and we saw no wisdom in keeping it beyond the period and so therefore the decision was taken and supported by all advice that the government is granted to return the money. So why saddle the public with a debt that you really don’t need to have,” Hazel said on a local radio programme.

The successful three-year IMF programme was “actually designed by our own people at the Ministry of Finance and that is fact. I think we also need to realise that it probably would have blown over in the news, but the whole idea of not accepting further funds from the IMF started since last year,” the financial secretary said.

“We were actually eligible to draw down an additional US$22.2 million which at the end of the appropriate assessments, we would have written to the fund, indicating that we would not wish to draw those funds down. So effectively, what has happened is that we have returned US$46 million, and have not drawn down on US$22.2 million - so about US$68.3 million is no longer a part of the script of our debt,” Hazel said.

The IMF said the Douglas government should be commended for its “economic achievements under the programme”.

CMC