Gonsalves lobs first missive in ‘fight’ against changes to World Bank loan terms

Prime Minister Ralph Gonsalves says he has written to the World Bank and 193 leaders around the world opposing a move to increase World Bank interest rate and shorten repayment period for loans to countries such as St. Vincent and the Grenadines (SVG). 

In sending the letters, Gonsalves has followed through on his promise to “fight” the World Bank’s International Development Association (IDA) in an effort to get it to back away from the changes.

Speaking on NBC Radio, Gonsalves noted that Minister of Finance Camillo Gonsalves, Director General of Finance and Planning Edmund Jackson and Director of Planning, Ricardo Frederick were attending the Spring Meetings of the Boards of Governors of the International Monetary Fund (IMF) and the World Bank Group (WBG) in Washington.

“And one of the issues which I want to address which is being dealt with is, where there is going to be a specific meeting on, is the question which I had raised before about leading a campaign globally against the reports which we had that the World Bank Group and IDA is initiating this –basically pitting the most vulnerable countries against the poorest,” the prime minister said. 

“So I’ve written every single head of government in the world — 193 of them. I’ve written the United Nations Secretary General, I’ve written, naturally, CARICOM and OECS and I’ve written the president of the World Bank.”

Gonsalves noted that small island economies (SIEs) such as SVG, St. Lucia, Dominica and Grenada that have access to IDA financing currently get 10 years’ grace period and up to 40 years to repay a loan. The principal payments is 2% interest for years 11 to 20 and 4% for the period 21 to 40 years. 

However, the World Bank is proposing to  reduce this to 30-year maturity and five years’ grace period.

“So, you come down to 35 rather than 50 years. And then the principal payments would range from between 3.3% for the years six to 25 years and 6.8% for the years 26 to 30 years. “

The prime minister said some people may argue that even with the change, the terms are more favourable than market rates.

“… you can’t build adaptation and mitigation to climate change on the basis of money which are seven-year money or 10-year money at 7% interest,” Gonsalves countered, however.

You can’t do it. You need 40-year money, you need 50-year money at interest rates ranging over that period between 1 and maybe 3%.

The prime minister quoted part of the letter that he wrote to World Bank, saying that IDA’s purported rational for the proposed changes was to focus on the poorest countries

“‘Rather than widening the net to embrace more vulnerable small-island economies, IDA is bent on making life, living and production more difficult for vulnerable countries, especially those in the Caribbean, in the Pacific, Asia and Africa’,” he quoted the letter as saying.

“‘Rather than the developed countries in IDA/World Bank, enlarging their contributions to IDA and taking greater responsibility for their battery on these vulnerable countries through climate change historically and contemporarily and otherwise, they seem determined to pit the most vulnerable against the poorest’,” Gonsalves further said.

“This is an unacceptable species of public immorality writ large globally. It is a mean-spiritedness unworthy of any enobling civilisation and of an institution which has as one of its central plants, the protection of vulnerable countries in an age of deleterious climate change.'”

The prime minister said he understood that IDA wanted to “test the waters with it.

Gonsalves said that small island developing states such as SVG make no contribution to climate change. 

He likened the situation to one homeowner having to spend money to repair their property because of damage caused by a neighbour’s wastewater.

“We are not responsible for climate change. We make no contribution to that. That’s like your neighbour having some noxious substance on their land and it coming into your place or your neighbour running their water eroding the foundation of your house,” Gonsalves said. 

“That is really what places like the main emitters US and China and Europe, too, that they’re doing to us because on Mother Earth, everybody is our neighbour.”

He said that a homeowner would sue over a noxious substance or damage caused by a neighbour’s wastewater. 

“Think about the sea defences and the river defences. We have to build a new hospital. You need money, which is long-term money,” Gonsalves said, adding, “Shorter-term money or commercial money can’t build those things.”

He said that the problem is that the indices that the World Bank uses do not take vulnerability into account.

“That’s why we are fighting for a multi-dimensional vulnerability index, what is called the MVI,” he said, noting that regional leaders speak about this at the United Nations and important conferences.

“… per capita GDP, that’s one index but Antigua, which has a high per capita GDP, one hurricane can blow them down overnight.

“And all they would have built up gone in the wind and the rain and the landslides and everything. We have seen the damage what can happen to us with that in St. Vincent and the Grenadines,” he said, adding that Grenada and Dominica have had similar experiences. 

“One of the problems is that you are in a sense penalised for doing very well. If your per capita income rises, the average per capita income rises like places like St. Lucia and St .Vincent and Grenada.

“…certainly ourselves, the way in which the economy is growing, we could be graduated out of the category to get IDA. So, this is why I made the point they need to enlarge rather than going in the opposite direction and restricting things; making it more difficult. 

“Now what is required is for more money to be put in by the developed countries and emerging economies like for instance, China to help to take care of what is happening because the consequences of climate change,” he said, adding that tackling the IDA issues is “a big battle.

“Some of the battles we fight about among ourselves here are trivial compared to these existential questions like the one I’m raising here.”