Posted: Sunday, March 21, 2021. 9:39 am CST.
The views expressed in this article are those of the writer and not necessarily those of Breaking Belize News.
By Dorian A. Barrow, Ph.D., Florida State University: The M in IMF is for MONEY! Teachers, their money and the International Monetary Fund (the IMF) for some strange reason became inextricably linked over the course of this week, and that link was further highlighted when the Leader of the Opposition, the Honourable Patrick Faber, said in his recent rejection of the “imposed draconian IMF inspired policy to reduce teachers’ salaries by 10%”. Faber was by profession a teacher. I saw the coming together of this perfect storm, as an opportunity to reflect on how international financial agencies help to sculpture our national education infrastructure even to the point of forcing us to decide on how much we pay our teachers for the critical work they do in national sustainable development. I also saw it as an opportunity to help me to better understand why there is almost universal opposition to the proposed 10% pay cut from the teaching fraternity.
Though we did not elect Elena Smith to run our Education System or Christopher Coye to mastermind our economic development – we respectively elected the Hon. Francis Fonseca and the Prime Minister, the Hon. John Briceno to do that – Christopher Coye is Belize’s alternate Governor on the IMF Board, and Senator Smith is leading a fight against the IMF inspired policy to reduce teachers’ salaries by 10%. But what is the IMF and why is it so important to our national development? The IMF was conceived in the US in 1944 at the United Nations Bretton Woods Conference. The 44 countries in attendance sought to build a framework for international economic cooperation and avoid repeating the competitive currency devaluations that contributed to the Great Depression of the 1930s. The IMF’s primary mission
is to ensure the stability of the international monetary system – the system of exchange rates, and international payments that enables countries like Belize and the US, and their citizens, to transact with each other.
One of the founding member countries of the IMF is the United Kingdom (UK), and at the time of its formation Belize was a colony of the UK. Five years after the IMF was established, in 1950, the Belize dollar was devalued by half at the behest of the IMF. That single act of the IMF triggered the rebirth of the nationalist movement in Belize that had begun in 1919 by soldiers who returned to Belize after World War I, but this time led by George Price and Philip Goldson. This begun the march forward to Belize separating itself as a nation from the UK. The nationalists won that battle in 1981 when Price became Belize’s first Prime Minister and Belize, in its own right, a formal member of the IMF. To become a member Belize had to buy about US$30 million of Special Disbursement Amount (SDA) shares
(0.01% of the total shares of the Fund) to acquire membership Quotas and Voting Rights on the IMF Board of Governors and once Belize became an official member of the IMF, the Fund became even more directly involved in maintaining stability of the country’s monetary system.
In order to maintain stability and prevent crises in the international monetary system, the IMF continues to monitor Belize’s national policies as well as regional and global economic and financial developments through a formal system known as Surveillance. The IMF provides advice to the Government of Belize and promotes policies designed to foster economic stability, reduce vulnerability to economic and financial crises, and raise living standards in the country. It also provides periodic assessments of global prospects, financial markets, public finance developments and external positions of its largest economies, in addition to a series of regional economic outlooks.
But if that was not enough, the IMF is also very transactional in giving advice to governments like the Government of Belize (GOB) on how to achieve economic stability, prevent financial crises and improve standards of living like the advice it gave to the UK in 1950 that lead to the devaluation of the Belizean dollar. However, it sometimes does so through financial assistance by providing loans to member countries that are experiencing actual or potential balance-of-payments problems and considers this one of its core responsibilities. Individual country adjustments programs are designed in close cooperation with the IMF and are supported by IMF financing, but ongoing financial support is dependent on effective implementation of these adjustments.
For example, in 1997 the Right Hon. Manuel Esquivel and his UDP Government took the IMF’s advice and effectively implemented it in December by retrenching close to one thousand (1000) government workers to lower the government’s wage bill in exchange for balance-of-payment help for the country by the IMF. The effects of taking that bad transactional advice was devastating for him and his party. The following year the UDP was swept out of office by a landslide and Esquivel had to step down as Party Leader.
However, not all IMF advice are transactional, that is, I will do this for you if you follow my advice. For example, in response to the COVID-19 pandemic, the IMF temporarily increased the access limits under emergency financing instruments and the annual limit on overall access under the non-concessional resources. The IMF also provided a short-term liquidity line to provide a backstop to members with very strong policies and fundamentals. In these and other ways the IMF provides financial support and works with governments (critics say to control governments) to ensure responsible spending. But what they consider responsible spending is not, according to the Hon. Patrick Faber, “always in the best interest of the people especially those hardest hit by the pandemic and those living in poverty. Yes, we have to listen to them (IMF)” Faber says, “but we don’t have to always follow their prescriptions”.
And Faber is not alone on this one. Senator Smith and the Belize National Teacher’s Union (BNTU) are taking the same position. The BNTU is saying to the Prime Minister and to Mr Christopher Coye, our Governor on the IMF Board, that they must find another way to reduce their proposed budget by the eighty million dollars ($80M) by which the budget must be reduced. “Don’t touch teachers’ salaries” they say. They have also put forward some proposals on ways to breach the deficit gap, but from what I hear nothing close to the $80M the IMF is advising that the government cut its budget by. In the final analysis, it all boils down to this: will the Government listen to the teachers who elected them? Or to the IMF who can hurt the whole country by, for example, devaluing the Belizean dollar like they did in 1950? This is a significant call, and whatever it is, we will all know in a couple of weeks whether Smith or Coye will have her or his way on this one. Feel free to challenge any or all the positions taken in this or any of the other pieces in this column. The purpose of Point and Counter-Point is to try to generate critical discussions on issues affecting our sustainable developments.
Dr. Dоrіаn Ваrrоw іѕ сurrеntlу wоrkіng аt Gаlеn Unіvеrѕіtу аѕ thе Dеаn оf thе Dераrtmеnt оf Еduсаtіоn. Не hаѕ а lоng hіѕtоrу оf іnvоlvеmеnt іn еduсаtіоn іn Веlіzе, hаvіng ѕеrvеd аѕ а Lесturеr аt thе Unіvеrѕіtу оf Веlіzе, аnd аѕ Сhіеf Ехесutіvе Оffісеr іn thе Міnіѕtrу оf Еduсаtіоn. Dr. Ваrrоw іѕ аn еmіnеnt рrоfеѕѕіоnаl whо іѕ wеll rеѕресtеd bоth lосаllу аnd аbrоаd. Не іѕ ѕеrvіng аѕ аn еdіtоrіаl mеmbеr аnd rеvіеwеr оf ѕеvеrаl іntеrnаtіоnаl rерutеd јоurnаlѕ аnd hаѕ аuthоrеd mаnу rеѕеаrсh аrtісlеѕ/bооkѕ rеlаtеd tо еduсаtіоn. Араrt frоm еduсаtіоn, hе іѕ аlѕо а ѕроrtѕ еnthuѕіаѕt.
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