Guyana must generate its own economic growth - IMF Caribbean Chief By Gitanjali Singh Stabroek News September 9, 1999 Economic growth has to be generated within Guyana and casting blame on donors, multilateral agencies or the international environment will not be of much assistance, IMF Chief for its Caribbean Division, Gopal Yadav, says. Addressing participants at a ten-day capacity building workshop to devise a post-Heavily Indebted Poor Countries Initiative (HIPC) debt strategy for Guyana on Monday, Yadav acknowledged the criticisms made by President Bharrat Jagdeo about the hardships facing developing countries because of impractical conditionalities imposed by multilateral agencies. "The President is correct in noting that `we know better'; that is, the [developing] countries know [their] problems better than the international institutions and they [the IMF and World Bank] should not be coming here to put undeserved, unthinking conditions [as part of structural adjustment programmes]," Yadav stated. He also acknowledged that President Jagdeo was correct when he said that the financing the IMF and donors provide to developing countries was only one element of countries' efforts at reform. "The main elements actually reside within the country. The growth has to come from within. We can blame the international environment, we can blame donors/agencies..., but probably that can only take you so far...," Yadav said. He added that countries had to develop their own institutions and managing these had to come from within. "No international institution, no donor can do it for you," the IMF senior official said. Yadav, who has been heading IMF missions to Guyana in recent years, emphasised that because growth had to come from within it was important for consultation to take place between the international agencies and the governments, but of greater significance was discussion between governments and populations. "[This is] so that the programme we develop is supported by the larger population and not just the government," Yadav pointed out. President Jagdeo's address at the opening session of the capacity building workshop criticised conditionalities of funding programmes which were working against Guyana's best interest, such as the blockade on contracting commercial debt, lack of flexibility in social sector spending of resources freed up by debt relief and fixed spending targets which may not yield value for money. Yadav, whose presentation dealt with the evolution of structural adjustment programmes and their aims, said that the results of the past ten years of the IMF adjustment programmes have shown a mixed outcome. While countries following structural adjustment have been able to improve their growth programmes, Yadav noted the failures as well; a crucial one being civil service reform. "At times it feels like the civil service is run like a welfare agency and the two get mixed up," Yadav told his audience of mainly civil servants and members of the diplomatic community. He assured that it was not that the civil service was incompetent but fewer were needed than were employed. "[And] perhaps they deserve higher salaries but they are restricted from getting these because there are other people employed who are not needed and they have to be taken care of too," Yadav said. Guyana is not the only country implementing a fund programme which has had difficulty reforming its civil service. Yadav feels Guyana has made a lot of progress but said that much more needs to be done. "Maybe a clear division of welfare and civil service might help," he suggested, stating that overstaffing affected the ability to pay higher salaries and this in turn compromised the quality of the civil service, as better qualified persons could not be attracted. Two other areas of failure by countries undergoing structural reform have been in improving the management of public enterprises and banking reform. However, successes have been recorded in reducing all forms of price controls, liberalising the foreign exchange system and reorienting public sector expenditure. Limited success has been recorded in reducing the public sector deficit. Yadav also spoke of the evolution of the HIPC initiative which grew out of the IMF's Enhanced Structural Adjustment Facility to deal with the requirements of debt relief of countries implementing fund programmes and to provide relief of up to 80% on commercial and bilateral debts. He also touched on President Jagdeo's assertion that the multilateral agencies' definition of unsustainable debt using the debt to revenue criteria was 280% (now reduced further) while Guyana's debt to revenue ratio stood at 400%. "When we say sustainable external debt, really it means sustainable economic growth, sustainable balance of payment, a sustainable fiscal position. You cannot have a sustainable debt when everything else is not sustainable. And just having the debt relief does not make the country sustainable, does not make the fiscal situation sustainable, does not restore the confidence of the private sector to invest in a country. Those things have to be done... and are the crux of economic growth," Yadav stated. However, he acknowledged that Guyana's tax to GDP ratio at 30% was a burden. Yadav also touched on efforts to improve the HIPC initiative via the Cologne Initiative which might see faster relief to more countries. A © page from: Guyana: Land of Six Peoples