Mr. Martin is a graduate of business studies, a former business executive in Nevis, and now resides in Antigua where he recently acquired a well-known business there. He is also a former Chairman of the Nevis Tourism Authority and former Chairman of the Nevis Branch of the St. Kitts & Nevis Chamber of Industry & Commerce.
We print, for the benefit of readers, the full interview below.
Val Henry: What do you think of the recent IMF loan to SKN?
Chris Martin: In one aspect, it is very, very timely. The IMF stepped in because SKN Govt asked them to help with a debt burden problem that had grown excessive, exactly as the IMF had predicted for years. That debt burden had put tremendous pressure on our indigenous banks. These banks are saddled with non-performing government loans, which had created a stain on their cash supply. The IMF funds have helped restore liquidity. Can you imagine a situation where by government salaries could not be paid, ATM machines out of cash, and not being able to access savings accounts? SKNA National Bank is the largest bank in the OECS and problems with it could have devastating effects locally and regionally. To me, the IMF intervention has averted a financial crisis … just in the nick of time.
Val Henry: What does the IMF really do?
Chris Martin: Taken from their website, the IMF is an organization of 187 countries, working to foster global monetary cooperation, secure financial stability, facilitate international trade, promote high employment and sustainable economic growth, and reduce poverty around the world. IMF is an organization that oversees the global financial system. Half of its funding comes from the US.
It does have ideal aims, and it most of its visible actions are to provide loans mainly to poor countries, to help them foster economic stability and growth, and reduce poverty. It acts as an economic/financial consultant and lender of last resort to Governments. In SKN case, they are here to loan money to our Govt, for they were, simply put, broke.
Val Henry: How did SKN reach this situation?
Chris Martin: As the IMF implied – mismanagement of SKN Govt finances.
Val Henry: Didn’t the global financial crisis cause our problems?
Chris Martin: No. Our bad situation is self-inflicted. The global issues made an already bad situation, worse. You see, the IMF, which also acts as a financial watch dog, continuously reported on the dangerous road we were on long before the global financial meltdown in 2008. These reports can still be found on the IMF website.
Val Henry: The IMF indicated that it would like to see the debt reduced to 60% of GDP by 2020. How do you think SKN Govt will do this?
Chris Martin: Here are some possible ways to reduce the debt:
- Increase GDP through economic growth
- Increase debt payment allocations
- Increase Govt revenue via taxes
- Reduce government services
- Beg for debt write-offs
SKN has done some of these and the IMF had reported that it was pleased with the actions of government: introduction of VAT, increase in electricity rates, freeze on government salaries, and early retirement of civil servants. However, the IMF went on to report that these actions did not reduce the debt, but it INCREASED! So, at the start, something is not going right.
The goal is 60% in just 9 years is a very aggressive one. I’m not hopeful.
Val Henry: Why not?
Chris Martin: In my opinion, the aims of IMF, as it relates to poor countries, are idealistic. Their policies run counter to their aims of economic growth and poverty reduction. Here is why: low taxes do stimulate economic growth, but they have told us to raise taxes; poverty reduction depends on government programs and they have encouraged us to reduce services. Perhaps, that’s why, for poor countries, the IMF seem to have more failures than successes. But to be fair, there was recent success with Dominica, but massive failure in Jamaica.
Another issue I have is that the IMF works through existing government structures in the hope that sensible policies trickle down to its citizens. You see, leaders in government rarely exercise the same level of responsibility of management of other people’s money as they do their own. Reflect on the many financial scandals of politicians all around the world. But the IMF still uses the same channels. I would recommend the IMF to go directly to the people.
Val Henry: So how do you think the IMF should help SKN?
Chris Martin: They can help by simply disclosing of the conditions of the loan agreement, so citizens can have an idea of how to prepare themselves and possibly pitch in with helpful policies. You see, when a person takes out a loan, either hire purchase, student loan, to buy land, to buy a house, etc., attached to the loan are conditions. These conditions stipulate repayment terms and things you can and cannot do, and possible ramifications for breach of the agreement. Likewise, the IMF ought to reveal the conditions of the SKN loan and the possible ramifications. In the past they have done a good job of disclosure, but they are very silent now. Puzzling!
But wait! Looking back, the IMF has been advising our authorities for many years, providing warnings and predictions. We didn’t listen then, not sure if we can change and listen now.
Val Henry: So what can the citizens of SKN expect?
Chris Martin: If past behavior is any indication of future possibilities, SKN seem to be in for a rough ride. Austerity Measures seem imminent. For more detail on these, check the IMF website and other sources on the internet.