BARBADOS HAS EFFECTIVELY been a member of the International Monetary Fund (IMF) since December 29, 1970.
More than 45 years later, mysteries about that relationship, including the annual Article IV Consultation, remain in the minds of some Barbadians. From the time it signed up as one of the IMF’s now 189 members, Barbados opened itself up to such mandatory surveillance.
And even though since 1997 the Article IV work has shifted from private to public “with documentation from the consultation freely available at the Fund’s website”, all member countries have the right to ask the IMF not to release information related to the consultation.
“When a country joins the IMF, it agrees to subject its economic and financial policies to the scrutiny of the international community,” said the IMF via information posted on its website.
“It also makes a commitment to pursue policies that are conducive to orderly economic growth and reasonable price stability, to avoid manipulating exchange rates for unfair competitive advantage, and to provide the IMF with data about its economy.
“The IMF’s regular monitoring of economies and associated provision of policy advice is intended to identify weaknesses that are causing or could lead to financial or economic instability. This process is known as surveillance.”
The IMF said while its surveillance of Barbados and other members was “an ongoing process”, the effort culminated with Article IV consultations, as “required by Article IV of the IMF’s Articles of Agreement”.
It continued: “During an Article IV Consultation, an IMF team of economists visits a country to assess economic and financial developments and discuss the country’s economic and financial policies with government and central bank officials. IMF staff missions also often meet with parliamentarians and representatives of business, labour unions, and civil society.
“The team reports its findings to IMF management and then presents them for discussion to the Executive Board, which represents all of the IMF’s member countries. A summary of the board’s views is subsequently transmitted to the country’s government.”
It became routine for information on Barbados’ Article IV consultation to be released soon after the IMF team finishes its visit and leaves the country. That happened on May 19 at the conclusion of a visit by a team headed by Judith Gold.
There was some controversy last year when the 2015 IMF Article IV consultation on Barbados was not released. Individuals speculated that this was because the contents were not favourable to Government.
Such issues are not unique to Barbados. In 2011 Martin S Edwards, Kelsey A Coolidge, and Daria A Preston of the John C Whitehead School of Diplomacy And International Relations, Seton Hall University, South Orange, New Jersey, wrote a paper on the topic Who Reveals? Transparency And The IMF’s Article IV Consultations.
They referred to “a dramatic change” in the way the IMF conducted its annual surveillance of member state economies.
The study said Article IV consultations “were originally viewed as private matters that were never intended to be made public”. This changed, but even now “only about 70 to 80 per cent of these Article IV reports are made public” annually.
The researchers found “strong support for a link between regime type and transparency, and some support for economic variables shaping transparency decisions”.
They added: “We find strong evidence for regional contexts in shaping country decisions regarding Article IV transparency, and limited evidence linking IMF lending to IMF transparency.”
The IMF was originally created to exercise surveillance over country economies in a world of fixed exchange rates. The report said this mandate was “to ensure that countries adopted economic policies that were consistent with keeping currencies stable”.
Even though the Bretton Woods system has ended the surveillance has continued as the IMF attempts to “ensure that countries are implementing economic and financial policies ‘toward the objective of fostering orderly economic growth with reasonable price stability’”.
“While originally envisioned to focus on the exchange rate, the breadth of issues covered in these consultations touch on fiscal and monetary policy, as well as trade policy and structural reforms,” the paper noted.
Since February 2004, the Article IV report has been published on the IMF’s website unless the country blocks publication. Members like Barbados can refuse to have the staff report published, and they can also prohibit publication of the initial public information notice.
But there is another side to all of this. It has to do with what some analysts see as the IMF’s motives when it does Article IV consultations and the overall value of the assessments. It is also important to note that while members are obligated to have the consultation, they do not have to implement the recommendations.
Samantha Seewoosurrun, a professional consultant from Mauritius, concluded that “in reality, if we look at the IMF’s record over past years, it has been somewhat chequered, mainly because the process has been far more political than it should have been”.
“For example, in the case of China there was a disagreement over exchange rate policy, which meant that no report was completed for 2007 and the 2008 staff report never reached the board. There have also been problems with the completion and publication of reports in relation to Argentina and Brazil,” she said.
Also, former IMF deputy director Desmond Lachman was reported as saying the IMF had emphasised its surveillance role in order to justify its continued existence.
This was after it “failed miserably to remotely anticipate the two largest and systemically most important economic and financial crises of the post-war period”. He was referring to the United States housing market and sub-prime mortgage debacle, and its damaging spillover effects, and the European sovereign debt crisis.