The Dr. Denzil Douglas government, in the midst of developing a debt-rescheduling package to meet International Monetary Fund (IMF) stringencies, announced in November its “inability to make payments for a bond which became due on November 25”.
And Eustace, an economist and former prime minister and minister of finance, said that this could affect investor confidence in the eight-member OECS, which shares a common currency and economic union.
He said on Monday during his weekly radio appearance that the international community does not see the OECS as individual nations. “… the OECS is about having one economy, one economic space for all the countries. And therefore, what happens in one country affects all of us,” he said.
“In other words, we are supposed to be one economic space attracting investments and so forth, both domestic and foreign.”
According to Eustace, the international community considers what happens in each OECS nation “in the same way that today, in Europe, people are looking at what is happening in Greece, … Spain, … Portugal and how it affects the whole of Europe, the whole European economy”.
He said that the first address of newly-elected French President Francois Hollande on Sunday “was directed at Europe, … saying that the measures that Europe has proposed to deal with the economic problems are too austere and he would want that pact renegotiated.
“We are in a similar situation here — maybe not as bad as some of the countries in Europe — but we have some serious problems, very, very serious problems in the OECS, which have to be addressed.
“And when it affects one, it affects all … to different degrees and it … hampers the future of the integration movement itself,” said Eustace, who last week attended in Castries a meeting of OECS opposition parliamentarians and St. Lucia Prime Minister Dr. Kenny Anthony.
The meeting discussed a proposal for an OECS assembly and Eustace said that in the face of these talks there are “serious financial problems in some of our OECS countries which could impact on all of us”.
He said that after Basseterre could not pay the bond issue, the Douglas government substituted a new bond that was half the value of the old one and at a lower interest rate.
“The loss of money to those who invested in those bonds is significant. I heard some discussion, which range from a loss of 75 to 85 per cent on those bonds.
“… Now, when an investor sees that happening in one OECS country, they are wondering what would happen in another … All these things are critical and some people may say it has nothing to do with them but I am telling you it has to do with everyone of us as citizens of OECS countries,” Eustace said.
He further said that such developments “send messages internationally and will affect investment” which in turn affect job creation and a state’s ability to provide services, such as healthcare, to its citizens.
Antigua misappropriates IMF funds
The government of Antigua and Barbuda, Eustace said, did not use some IMF monies for the intended purposes and the international financial institution stopped disbursing to St. John’s, forcing the government to renegotiate.
Eustace noted that Antigua is one of the largest OECS economies — representing, when coupled with St. Lucia, 48 per cent of the OECS economy.
“So, when these economies have serious financial problems, they impact on us,” he said, noting that the OECS has had to withstand international pressure to devalue its currency, which has been pegged to the U.S. Dollar at EC$2.70 for more than 20 years.
“We want to maintain the value of that E.C. dollar and it is important that all sectors of our economy get a jump, move forward to bring less pressure and less desire by the World Bank and others to try to devalue our currency. … But we have to keep our exports going. We have to strengthen our economies because the pressure to [devalue] will mount if we don’t do it.
“So, when we have those financial things that I spoke about, all those have implications. They have impact. And I am not being alarmist here. I am worried about it. If all of us are having problems at the same time, a lot more pressure is going to come on us internationally,” he said, adding that the IMF previously insisted every year that the E.C. Dollar be devalued.
“And the countries have stood together in all those time. But they didn’t just stick together. The big economies were doing well. And we have to watch that,” Eustace said.