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On Sao Tomo IMF Talks Extended Credit Facility As Inner City Press Asks Of Corruption

By Matthew Russell Lee, CJR PFT NY Post

NEW YORK CITY, August 6 – When the International Monetary Fund held its biweekly embargoed media briefing on July 25, Inner City Press submitted five questions including on Jamaica and Lebanon which the IMF answered, see below. On August 2 on São Tomé and Príncipe the IMF said, "A staff team from the International Monetary Fund (IMF) led by Xiangming Li visited São Tomé and Príncipe during July 24 – August 6, 2019 to discuss a new program that can be supported by an IMF Extended Credit Facility (ECF) arrangement.[1] At the end of the visit, Ms. Li issued the following statement:  “The government and the staff team made significant progress in the discussions of economic policies and reforms that could be supported by a new IMF arrangement. The discussion will continue, including through telecommunication. Reducing debt vulnerability, restoring fiscal sustainability, and enhancing macro stability are essential for supporting inclusive and robust growth.  “The economy faces pressing challenges. In 2018, growth slid to 2.7 percent reflecting declining foreign inflows, energy shortages, and political uncertainty; higher prices for fuel and fish and vegetables drove inflation to 9 percent; and international reserves declined by $16 million. Economic activities continued to be sluggish in 2019, though reserves and inflation improved slightly.  “Public debt has been rising steadily over the past decade and reached a level that significantly elevates the country’s vulnerability. This is due to continued large losses incurred by the state-owned utility company (EMAE), which rose by more than $9 million during the first semester of 2019. A significant amount of the debt is due to past fuel price subsidies and arrears owed by the central government to suppliers. Based on data that became available in early 2019, overspending in 2018—including on wages—raised the domestic primary deficit including borrowing by autonomous public entities to over 5 percent of GDP, far exceeding the 2018 target of close to 1 percent of GDP.  “Decisive measures are needed to rein in the debt. The arrears owed by EMAE to its fuel supplier, ENCO, need to be formalized, with the value reduced or repayment period phased over a long period of time, while EMAE needs to become commercially viable to ensure the country’s energy safety. EMAE currently only pays a fraction of its imported oil supply. The fuel price should cover import costs to avoid fuel subsides.  “The government has committed to closing the sizeable gap between revenues and expenditures by containing fiscal spending; reducing public sector energy consumption; stepping up tax collection; and introducing a new value-added tax (VAT), to broaden the tax base equitably, joining over 150 countries worldwide with a VAT. Currently, the tax-revenue-to-GDP is only 12.5 percent and remains well below the regional average. The government is further committed to minimizing the impact on low-income households and protecting the most vulnerable with the support of the World Bank.  “ Addressing financial stability and inclusion will also contribute to economic growth and higher international reserves. To this end, the authorities are working to develop a new payment system, which is crucial for boosting tourism and foreign exchange receipts. However, funding constraints for developing and implementing this system remain. Monetary policy will also play a role in promoting savings in domestic currency and reducing domestic demand. Fostering financial inclusion will be accomplished by removing structural bottlenecks in conjunction with implementing a new national strategy that is to be completed by the end of 2019. Meanwhile, financial sector supervision will be strengthened to safeguard stability.  “Over the medium term, raising private-sector-led inclusive and sustainable economic growth through comprehensive structural reforms is essential. In particular, the government is committed to publishing a clearly-codified procedure for the approval of investment to improve transparency and facilitate investment. Promoting tourism is a key component of the medium-term growth strategy, and the country expects to open a new tourism school with the support of the World Bank at the end of 2019. Additionally, plans for supporting local fisheries and eco-agriculture will not only help these industries but also develop the local supply chain to the tourism industry.  “Women’s economic empowerment and financial inclusion remain key issues for the government, and work continues on the drafting of a new national action plan. The authorities, in coordination with the IMF and UN, and with support from the High Commission of Canada, convened an international conference on July 31 to discuss gender equality and commemorate the International Day of the African Woman.  “The mission met with President Evaristo Carvalho; Prime Minister Jorge Bom Jesus; President of the National Assembly Delfim Neves; Minister of Planning, Finance, and the Blue Economy Osvaldo Vaz; Minister of Foreign Affairs Elsa Pinto; Minister of Infrastructure Osvaldo Abreu; Governor of the Central Bank Américo Soares De Barros; the Parliamentary Economic and Financial Affairs Committee; Attorney General Frederique Samba; Former Presidents Manuel Pinto da Costa, Miguel Trovoada, and Fradique de Menezes; other government officials; representatives of the private sector including banks; and development partners." Sao Tome is one of the Lusophone countries where Pedro Guimarães e Melo De Oliveira Guterres the son omurky UNSG Antonio Guterres, who won't disclose his financial links with UN briber CEFC China Energy, is said to do (murky) business, again undisclosed by Guterres. Instead of answering questions including about CEFC China Energy, Guterres has banned the Press, now 399 days. While preaching transparency.

On July 25 on Jamaica Inner City Press asked, "given that the $1.6-billion Precautionary Stand-By Arrangement comes to an end in November, please state and explain what the functions will be of the IMF office that, unlike elsewhere, is to remain in the country for two years after the expiration of the SBA." Spokesman Gerry Rice, after reading out the question from "our friend Matthew Lee in New York" - these days covering it from the U.S. District Court for the Southern District of New York SDNY amid cases about for example Nigerian oil and GSE bonds - replied that it is be no means unheard of for the IMF to keep and office behind after a program. Inner City Press might add that it has given rise to enough concern among some Jamaicans that the IMF wrote to the Gleaner... 

From the IMF transcript, Rice: "On that one, I'd like to refer to a letter that was actually published by our mission chief in Jamaica, Uma Ramakrishnan and that was published in the Glean[e]r newspaper in Jamaica just yesterday. So, I urge you to take a look at that. I would also add that since 2013, we have had consecutive IMF-supported programs. Jamaica has established an exemplary track record of economic reform achieved through commitment and implementation of the Economic Reform Program. Now in that context then, IMF and the Jamaica Government consider it useful to have that office open, remaining open in Jamaica with the ResRep to continue the support in the post-program period, and as we transition from program to the Article IV annual process with Jamaica, and to continue to support Jamaica with capacity building. And what I can say is, you know, the question said that this as suggested that this was unlike elsewhere. In fact, this is not an unusual arrangement, so it's not unique to Jamaica by any means."

On Lebanon Inner City Press asked, "what is the IMF's comment on or response to PM Hariri having said, "I know the IMF has some reservations, but also if we want to adopt everything the IMF does ... (well then it also) proposes that we leave the Lebanese pound to float, that it go up and down as it wants." The IMF had also requested an increase of fuel excise in addition to an increase in VAT, Hariri said.  What is the IMF's comment?" On this, Spokesperson Rice said, "What's the IMF's comment on that? I would refer you to the recent concluding statement of our staff mission to Lebanon which said, amongst other things, rebalancing the economy in the current framework of an exchange rate peg requires strong implementation of a large and credible fiscal adjustment and ambitious structural reforms." We'll have more on this.

 Back on June 27, on Pakistan Inner City Press asked, "On Zimbabwe, what is the IMF's response to Finance Minister Mthuli Ncube saying 'The first order of business is to clear the arrears and then move on to phase two, which is the bilateral discussions with the Paris Club' - asked if Zimbabwe would seek financing from the IMF next year, Ncube said: 'Why not? We can only ask, they can only say no'?"  Camilla Andersen, Assistant Director of the IMF's Communications Department, read out Inner City Press' question and replied among other things that while Zimbabwe has cleared its arrears to the IMF, other debts that would have to be cleared remain. She cited the Staff Managed Program running into 2020 (transcript to come).

 On Moldova Inner City Press asked, "On Moldova, please confirm or deny this from the government: "The head of the IMF mission, Ruben Atoyan, said that the International Monetary Fund had quite attentively monitored the situation in Moldova and that the Fund showed full openness to help Moldova.  ... The resumption of the negotiations with the International Monetary Fund and implementation of the provisions of the memorandum of economic and financial policies will allow Moldova receiving the last two installments of the financing program on behalf of the Fund, worth about 66 million Dollars."  The IMF's Camilla Andersen replied among other things that the the IMF has disbursed $112 million under the program and continues to assess (full transcript to come). 

Back on June 13 Inner City Press asked, "what is the IMF's response to JI leader Sirajul Haq criticism of the "budget of IMF purely concentrating only on increasing taxes and prices of essential commodities, and was just read out by its slaves.  He said the budget did not care about reducing the problems of common man and price hike, adding that it was just a jugglery of figures and words which was incomprehensible even to the economic champions of the government."

  IMF Spokesperson Gerry Rice in the briefing said, transcript and video here: "There is a question on Pakistan, from our friend Matthew Lee in New York, asking in summary what is the IMF's response to the criticism of the Pakistani budget which was recently announced that the IMF is purely concentrating on increasing taxes and prices and doesn’t care about reducing the problems of the common man. Again, stepping back, Pakistan has requested a program from the IMF. Last month we reached a staff level agreement on that program so that’s now under discussion. So, I don’t really have a specific comment on the budget.  But in terms of our discussions, I can say that we are talking about broadly how to restore stronger, more balanced growth by reducing domestic and external imbalances, improving the business environment, strengthening institutions, increasing transparency and importantly protecting social spending. So that last part does indeed speak broadly to the point that Matthew is raising, that social spending is and protecting social spending is in fact an important part of the discussion that we are having on a program with Pakistan."

 Inner City Press asked asked, "On Kenya, please state the status with the IMF given reports that the country is "on course to renewing its $1.5 billion standby credit facility with the IMF signing a deal with selected banks to release close to Ksh1 trillion ($10 billion) in loans to the private sector despite the prevailing rate caps."  On the upcoming June 25-26 Bahrain conference on Palestine, given that the IMF has said it "has been invited to the meeting and expects to attend, along with other international financial institutions," please state if the IMF understands that the wider United Nations will attend, and/or has been invited."

Rice said, "There is a question on Kenya. “Please give the status of the IMF program with Kenya given reports that it's on course to renew its standby credit facility.” And on that about all I can say is that negotiations indeed are ongoing on a Fund supported program. I don't have a timetable on that but with the negotiations are underway."

  Inner City Press asked asked, again, for an update on Haiti.

 Rice said, "There is a final question online that I want to take which is on Haiti and asking about developments there and the status of IMF discussions on a program. And again, this is a case where recently there have been protests on the streets and some violence I'm sad to say. So, on that front of course as always, we express our condolences for the loss of life there in Sunday's demonstrations in particular. And, what I can also say is that of course we hope that the dialogue can go forward there and, you know, eliminate the violence that’s taking place and that we can have some consensus around a reform agenda.  On the program and discussions around the program, given the time that has now elapsed since the IMF team reached a staff level agreement, that was back in March. And given the changes in Haiti's' economic situation a reassessment of the economic framework and of the measures needed to stabilize and support the economy is going to be needed before we would be in the position to propose a program to our executive board. That said, we look forward to engaging with Haiti's new government as soon as feasible to find the best way forward and to protect the most vulnerable groups, improve governance and secure macroeconomic stability. So that’s where we are on Haiti."

  It's appreciated.

More on this, including transcript, to follow. And on this:

  As China uses its Belt and Road Initiative to take over ports in Sri Lanka and prospectively Kenya, while using supposed NGOs to bribe UN officials including bidding on an oil company owned by Gulbenkian Foundations whose payments to UN Secretary General Antonio Guterres were omitted from his public financial disclosure covering 2016, even the IMF's Christine Lagarde is genuflecting in Beijing, albeit less cravenly than Guterres. Unlike Guterres' obsequious blue washing of BRI, Lagarde in her April 26 speech as least gently chided China for unsustainable loans. She said, "The BRI is clearly having an impact. From stimulating infrastructure investment to developing new global supply chains, some of the promises of BRI are being realized. Consider Kazakhstan, where a new manufacturing zone is beginning to unleash previously untapped economic potential. Or look at Senegal, where robust economic growth of over 6 percent in each of the last four years was supported partly by BRI-linked investment projects, including the construction of a new highway linking the airport to three large cities. At the same time, history has taught us that, if not managed carefully, infrastructure investments can lead to a problematic increase in debt. I have said before that, to be fully successful, the Belt and Road should only go where it is needed. I would add today that it should only go where it is sustainable, in all aspects." But what does this mean in terms of the BRI loans to Sri Lanka, and to the Kenya railroad? We'll have more on this.

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